THE CONTRIBUTIONS OF THE OIL INDUSTRY TO NIGERIAN ECONOMIC GROWTH AND DEVELOPMENT

ABSTRACT

The aim of this study is to identify the contributions of the oil industry to Nigerian economic growth and development with a view to project their socio-economic and technological contributions. Oil industries in the course of   their operations move capital, create employment opportunities, skills acquisition, know-how, goods  and services and other resources to their various host countries. In order to aggravate the foregoing objectives, the survey method of research was employed in this study.  Both primary and secondary source of data were used in collecting relevant data.  The primary sources consist of the questionnaire and  oral interview while the secondary sources  were gathered from existing literature on the subject matter of this study.  Tabular presentation of data analysis were used whereby the effects and relationships of one data with another was being quantified by simple percentage presentation.  This study has proved that the oil industries are contributing to the socio-economic and technological growth and development of Nigeria. It further recommends that the oil industries should beef up their level of social responsibilities and commitments to their host countries as well as establish a platform that would place the repatriation of profits at par with their host countries.   The study made a case for the development   of   proper   technology   transfer   mechanism.   Finally,   the problems of Niger Delta region of the country with the oil industries should be given serious attention and the effort of the present administration should be supported to sustain it.

CHAPTER ONE INRODUCTION

1.1  BACKGROUND OF THE STUDY

Oil is a major source of energy in Nigeria and the world in general. Oil being the mainstay of the Nigerian economy plays a vital role in shaping the economic growth and development of the country. Although Nigeria’s oil industry was founded at the beginning of the century, it was not until the end of the Nigeria civil war (1967 – 1970)  that the oil industry began to play a prominent role in the economic life of the country.  According to Genova (2003:133), Nigeria can be categorized as a country that is primarily rural, which depends on   primary product exports (especially oil products). Robinsoll (1964:219) assert that since the attainment of independence   in

1960 Nigeria has experienced ethnic, regional and religious tensions, magnified by the significant disparities in economic, educational and environmental development in the south and the north. These could be partly attributed to the major discovery of oil in the country which affects and is affected by economic and social components.

According to Falola (1999:145), oil exploration in Nigeria dates back to

1908 with the appearance of oil at Araromi in the present Ondo State. A German company – Nigeria – Butmen Corporation started this pioneering effort that was short-lived as a result of the outbreak of the 1914-1918 First World War. Another exploratory activity took off in 1937 by an Anglo- Dutch consortium that served as a forerunner of the present-day Shell D’Arcy. The exploratory activity started in 1937 after Shell D’Arcy had been awarded the sole concession rights that covered the whole territory of Nigeria. The company operated under the Mineral Oil Ordinance of No. 17 of 1914 and its amendments of 1925 and 1950 which allowed only companies registered in Britain or  any of its  protectorates the  rights to prospect for oil in Nigeria and further provided that the principal officers of such companies must be British

Odeniyi (2005:15), asserts that oil was first discovered in Nigeria in 1908, and exploration proceeded during the 1930s in the form of the Shell-BP Petroleum Development Company of Nigeria Ltd. (Shell-BP), under the control of Shell and British Petroleum (BP). Commercial exploitation of the country’s reserves, however, did not begin until the late 1950s. According to Madujibeya (1976:284), the Nigerian government introduced its first regulations governing the taxation of oil industry profits in 1959 whereby

profits would be split 50-50 between the government and the oil company in question, and the industry grew during the 1960s as export markets were developed, predominantly in the United Kingdom and Europe. By the mid-

1960s, Nigeria began to consider ways in which the resources being exploited  by  Western  oil  companies  could  better  be  harnessed  to  the country’s  development, and  formulated its  first agreement for taking an equity stake in one of the companies producing there, the Nigerian Agip Oil Company, jointly owned by Agip of Italy and Phillips of the United States. The option to take up an equity stake–in effect the first step toward the creation of the NNPC–was not, however, exercised until April 1971.

All crude oil produced before the mid sixties were exported because of non- availability  of  local  refineries;  while  domestic  demand  of  petroleum products was met by imports. However, the need to conserve foreign exchange,  create  job  opportunities  to  some  extent  and  other  benefits derivable from setting up refineries locally prompted the government of Nigeria to establish and commission a refinery in Port Harcourt in 1965. The refinery had a processing capacity of 35,000 barrels per day, which was later increase to 60,000 bpd to meet increasing domestic demand while excess fuel oil was exported.

The demand for oil products continued to outstrip supply, which made the government  to  officially  open  the  Warri  refinery  in  1978  with  a  total capacity of 100,000 bpd, thereby giving the country its present day potential capacity of 260,000 bpd. The refinery was designed to refine 50 percent Nigerian light crude and 50 percent medium crude. As the output from all the refineries will then exceed demand, there will be a surplus available for export.

Given the fact that the oil sector is a very crucial sector in the Nigeria economy, there is the dire need for an appropriate and desirable production and export policy for the sector. In Nigeria, though crude oil has contributed largely to the economy,   the revenue has not been properly used. Dickie (1966:27) asserts that  considering the fact that there are other sectors in the economy, the excess revenue made from the oil sector can be invested in them to diversify and also increase the total GDP of the economy.

1.2     STATEMENT OF THE PROBLEM

The  crude oil  discovery and  emergence of oil  industry has  had  certain impacts on the  Nigeria economy both positively and adversely. On the negative side, this can be considered with respect to the surrounding communities  within  which  the  oil  wells  are  exploited.  Some  of  these

communities still suffer environmental degradation, which leads to deprivation of means of livelihood and other economic and social factors. Although large proceeds are obtained from the domestic sales and export of petroleum products, its effect on the growth of the Nigerian economy as regards returns and productivity is  still questionable, hence, the need to evaluate the relative contributions of the oil industry on the Nigerian economy.

1.3     OBJECTIVE OF THE STUDY

The broad objective of this study is to assess the contributions of the oil industry on he Nigerian economic growth and development.

The specific objectives of this study are:

(a)     To  ascertain  whether  the  oil  industry  is  contributing  to  the economic growth and development of Nigerian.

(b)     To ascertain whether the oil industry respond to their expected responsibilities in Nigeria.

(c)     To   ascertain   whether   they   contribute   to   the   technological development of Nigeria.

(d)     To   determine   the   environmental   factors   that   influence   the operations of the oil industries in Nigeria.

(e)     To evaluate the general performance of the oil sector in Nigeria.

1.4     RESEARCH QUESTION

The research question for this research are:

a)       Are  oil  industries  contributing  to  the  economic  growth  and development of Nigeria.?

b)      Does the oil industry respond to their expected responsibilities in

Nigeria.?

c)       Are oil industries contributing to the technological development of

Nigeria?

d)      What are the environmental factors that influence the operations of the oil industries in Nigeria?

e)       What is the general performance of the oil industry in Nigeria?

1.5     RESEARCH HYPOTHESIS

The research hypothesis formulated for this work are as follows:

1        H0      The oil industry is contributing to the economic growth and development of Nigeria

H1      The oil industry is not contributing to the economic growth and development of Nigeria.

2.       H0      The oil industry responds to their expected responsibilities in

Nigeria.

	H1	The oil industry does not respond to their expected
3.	H0	responsibilities in Nigeria.     The oil industry contributes to the technological development of

Nigeria.

H1      The oil industry does not contribute to the technological development of Nigeria.

4.       H0     Environmental factors influences the operations of the oil

industry in Nigeria.

	H1	Environmental factors does not  influence the operations of the     oil industry in Nigeria.
5.	H0     H0	The oil industry generally performs well in Nigeria.     The oil industry does not generally perform very well in Nigeria.

1.6     SIGNIFICANCE OF THE STUDY

This study will be of great significance because, it will put in proper focus and will create awareness on the contributions of the oil industry to the economic growth and development of Nigeria. It will show whether they are helpful or harmful to the national economy. The findings will be useful to both government and the management of oil industry in future development planning.  Also,  it  will  be  beneficial  not  only  to  social  researchers,

environmentalist, but students, in international business management environmental studies, oil industries, governments and academicians, generally.   It brings   into focus, the contributions of oil companies to the economic development and growth of Nigeria, the study of which is inexhaustible and therefore provides for further research and studies.

1.7     SCOPE OF THE STUDY

For obvious reasons, it will be difficult for a single researcher to study the activities of oil industry   in Nigeria. This research therefore, covered some  of  the  socio-economic  and  technological contributions  of  the  oil industry to the economic growth and development of Nigeria.

It is the intention of this researcher to arouse the interest of the future researchers, students and other interesting groups in the areas in question. This  is  so  because,  the  researcher  was  not  able  to  give  an  exhaustive coverage of this interesting and wide topic.

1.8     LIMITATIONS OF THE STUDY

An exhaustive and more detailed research on this topic would have been carried out but for some obvious constraints of time, distance and finance.

Moreover,  some staff of the oil industry was very uncooperative in respect of giving out information. Either the information sought is in a file with the inscription “TOP SECRET” or in the room with the inscription “OUT OF BOUNDS”. Some either said they were too busy to respond to questions or they were not allowed to.

1.9     DEFINIION OF TERMS

For the sake of clarity, some technical terms used in this work are defuned as stated under:

Oil Industry:   This is a group of firmjs that specialises in the refining, marketing and distribution of petroleum products in Nigeria.

Economy:   This is the phenomenon for the control and managaement of money, goods and other resources of a community, society or household.

NNPC – Nigerian National Petroleum Corporation.  This is the holding company that overses the Nigerian state’s interest in the country’s oil industry

The Upstream Sector.  This is the sub-sector of the Nigerian oil industry that  specialises  in  the  production and  refining  of  crude  oil  products  in Nigeria.

Downstream sector:  This is the distribution arm and connection with final consumers of refined petroleum products in the domestic economy.

MEND:   This  means the Movement for the Emancipation of the Niger

Delta.

Economic Development:  This is the sum total of all socio-economic and technological indicators used to measure the advancement of society and inviduduals’ sate in the society: Standard of living, life expectancy, self regulating social sinstitutions, industrial base etc.

Economic Growth:  This means an increase in the Gross National Product of a country over a particular year, usually a year.

Niger Delta.  This is an area in Nigeria that has one of the largest known reserves of oil in the world.

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