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THE IMPACT OF
THE PETROLEUM SECTOR ON THE DEVELOPMENT OF THE NIGERIA ECONOMY.
(1980-2006)
ABSTRACT
The purpose of this
project is to assess the impact of the petroleum sector on the development of
the Nigerian economy for the period 1980-2006. This research depends on
secondary date. The ordinary least square method was employed. Data collected
was tabulated analyzed while multiple regression technique was adapted for the
testing of hypothesis. The result showed that there is a significant
relationship between the petroleum sector and the Nigerian Economy. Based on
the results of the study, we recommended that; a) the government should step-up
the production and the revenue contribution of the manufacturing industry and
agricultural sector by investing some part of the oil revenue into the
development of the aforementioned sub-sectors. B) There should be true
federalism and resource control etc.
TABLE
OF CONTENTS
Title Page i
Certification ii
Dedication iii
Abstract iv
Acknowledgment v
Table of Contents vi
CHAPTER
ONE: INTRODUCTION
1.1 Background
of the study 1
1.2 Statement
of the study 4
1.3 Objective
of the study 5
1.4 Research
hypothesis 5
1.6 Method
of study 6
1.7 The
significance of the study 6
1.8 Scope
and limitation of the study 6
CHAPTER
TWO: LITERATURE REVIEW
2.0 Introduction 7
2.1 The
origin of oil in Nigeria 8
2.2 The
Nigeria national petroleum company 9
2.3 The
state of the Nigeria oil sector 10
2.4 The production and consumption of petroleum
product in Nigeria 11
2.5 The consumption of petroleum products in
Nigeria 13
2.6 The oil industry and the agricultural sector 15
2.7 The impact of oil on the oil sector
industrial and other sectors
16
2.8 The contribution of the oil sector of the
Nigeria GDP 18
2.9 The contribution of crude oil to the Nigeria
total export 19
2.10 The effect
of oil production on policy makers 21
2.11 Revenue contribution
of the sector 22
2.12 Excess crude
oil revenue, petroleum pricing and subsidy 23
2.13 The Nigeria oil industry and unemployment 25
2.14 The environmental impact of the oil industry 27
2.15 The oil industry and conflict in Nigeria 28
2.16 The mismanagement of oil wealth 29
2.17 Deregulation of the downstream oil sector 31
2.18 Constraints on the petroleum sub-sector 32
2.18.1 Public control
and lack of autonomy 33
2.18.2 Inefficiency 34
2.18.3 The distribution
of problem of petroleum products in Nigeria
35
CHAPTER
THREE: RESEARCH METHODOLOGY
3.0 Introduction 36
3.1 Source
of data 37
3.2 Method
of data analysis 38
3.3 Model
specification 39
3.4 Prior
expectation 39
CHAPTER
FOUR: PRESENTATION AND ANALYSIS OF DATA
4.0 Introduction 40
4.1 Data
presentation 44
4.2 Regression
result and discussion 47
CHAPTER FIVE: FINDINGS, SUMMARY, CONCLUSION AND
RECOMMENDATION
5.0 Introduction 48
5.1 Discussion
of findings 49
5.2 Summary 50
5.3 Conclusion 52
5.4 Recommendations 55
Bibliography 56
Appendix 57
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Historically
before the exploration of petroleum product in commercial quantity in 1956,
agriculture was the mainstay of Nigerian economy. By the time Nigeria gained
independence in October 1960, the agricultural sector was the dominant sector
of the economy contributing about 70 percent of the gross domestic product
(GDP) employing about the same percentage of the working population and
accounting for about 90 percent of the total foreign exchange earnings and
federal government revenue.
The
early period of the post-independence up to the mid-1970s saw a rapid growth in
the industrial capacity and output. The contribution of the manufacturing
sector to the GDP rose from 48 percent to 8.2 percent. The structure changed
when oil suddenly became of strategic importance to the world economy through its
supply price nexus. According to Moro (1995):
The
picture changed dramatically by 1965 when petroleum share of the total exports
amounted to 25.4 percent in the 1960s rose to 57.676 percent 1970 and 92.6 in
1974.
Oil
exploration exercise in Nigeria is younger compared to other western nation
like America etc. exploration oil in the country could be traced back to 1980,
when the first Nigerian Bitumen Corporation (NBC) was licensed to explored
bitumen around the Araromu area of Ondo State. Through, it was interrupted by
the outbreak of the First World War in 1914.
Shell
D. Archy the fore runner of shell petroleum development company (SPDC) was
awarded the sole concessionary right in 1935 under the mineral ordinance No. 17
of 1914.
Nigeria
successfully explored oil on the 3rd of August 1955 at Olobiiri and
Bormu of Bayelsa and Rivers state respectively by shell Bp and first attained
its peak in 1994 at the rate of 2.44 million based per day.
The
nation has proven reserves of about 32 billion barrels of predominantly low
sulphur light crude which at current rate of exploitation could last another 38
years. The intension is to expand the reserves to 40 Billion barrel and
production capacity of four Million barrels.
Oil
exploitation takes place in both onshore and offshore areas in the country. The
petroleum industry is divided into two (the upstream and downstream)
subsectors. The industry includes all registered organizations that are
involved in the mining, refining, marketing, distributing etc of petroleum products.
The sector is regulated by the Nigeria National petroleum company (NNPC).
The
revenue of the sector stems from incomes from petroleum profit tax, rent, and
loyalty and NNPC earnings.
1.2 STATEMENT OF PROBLEM
The
overdependence on oil revenue by the federal government for the execution of
development programmes has caused the sideline of the contribution of other
sectors of the economy.
According
to Moro (1995.75):
Due
to oil wealth there is decline in the agricultural production which is closely
linked to the pad of industrialization, urbanization and public development
efforts in the country.
The
neglect of other viable sectors like the agricultural, manufacturing etc and
viable sources income like the tax system because of oil wealth have resulted
in increased unemployment, food crises, poor infrastructural development,
increase inequality, youth restiveness in the oil bearing regions (Niger Delta)
delay or alteration of development programmes etc. upon these premised, this
study is predicated.
1.3 OBJECTIVES OF THE STUDY
This
study shall appraise the impact of the petroleum industry on the development of
the economy of Nigeria. It will specifically:
1. Identify
the of oil industry on other sectors of the economy like the agricultural and
manufacturing sectors.
2. Assess
the contribution of petroleum aggregate export and gross domestic product
(GDP).
3. Evaluate
the contribution of the industry to the total government revenue.
1.4 RESEARCH HYPOTHESIS
Aggregate
export and gross domestic product (GDP) are functions of oil revenue.
1.5 METHOD OF STUDY
The
study shall rely largely on the data from the central bank of Nigeria
statistical bulletin. Other sources will include libraries and publication from
the federal office of statistics.
Multiple
regression analysis shall be adopted to specify the functional relationship
between oil revenue and the hypothesized variables (aggregate export and gross
domestic product (GDP).
1.6 METHOD OF ANALYSIS
T-values
of the parameter estimate shall be computed to determine wealth the estimate is
significance or not.
1.7 THE SIGNIFICANCE OF THE STUDY
The
results of this research will enable use understand the effect of the oil
industry on other sectors of the economy. It will also determine the impact of
the oil industry on the revenue of the federal government and overall
development of the Nigeria economy. It will as well suggest solutions to the
mono-economic structure of the Nigeria.
1.8 SCOPE AND LIMITATION OF THE STUDY
The
scope of this study has been restricted to the assessment of the impact of the
petroleum sector on the development of the Nigeria economy within the period
1980-to 2006, due to some difficulties in the areas of finance, time limit
within which this work is expected to be completed, the problem of scarcity of
relevant literature etc.
In
spite of these hindrances, the validity of the research findings still remains
reliable.
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