ABSTRACT
The work covers Nigeria economy. The objective of these study is to determine the financial impact/contribution of petroleum in the total growth of the industrial sector and in general growth of the country’s economy, why financial contribution is not fast tracking economic growth in Nigeria’s, to analyze the impact of the petroleum sector on the Nigeria economy, and to offer recommendation to the basis of the findings.
The major source of data used in this study is a secondary data, most of the data were computed from government agencies such as federal office of statistics, Nigeria National Petroleum Corporation (NNPC), the federal ministry of petroleum resources and the central bank of Nigeria (CBN).
The major problem faced in the petroleum sector today is mis-appropriation of funds to meet developmental needs through the maintenance of construction of refineries in Nigeria.
Recommendations based on the findings of the study include:
- Appropriate money sully should be geared towards the improvement of petroleum.
- All OPEC member nations should work together and adopt a cooperative productive strategy based on the concept of mutual understanding of production allocation.
- Oil revenue obtained through crude oil exports that were not always efficiently utilized must be seriously considered.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Nigeria has the largest population in Africa and endowed with a massive wealth of both natural and human resources. Nigeria is also the largest producer of trade petroleum and natural gas in Africa from 1960’s the petroleum sector began to exert its overriding height to the extend that by the mid 1970’s it had anchored itself as the most readily available resources of prosecuting programmes directed at achieving rapid growth and development of the Nigeria economy. During the 1970’s and up to 1981, the Nigerian economy experienced the lives so called which resulted from its swimming in the mean of “oil boom” is not destined to last long. But before the “Oil boom” in 1970’s Nigerian economy could be described basically as an agration economy.
However, agricultural sector which was the main stay of the economy was soon short lied with the advent and consequent boon of Nigeria oil. The petroleum sector in Nigeria has undergone significant changes since oil discovered in commercial quantity in decades ago. The sector has become the main stay of the overall Nigeria economy pivoting other sectors and accounting for about 90 percent of the country’s foreign exchange earners and about 20 percent of the Gross Domestic Product (GDP) and about 85 percent of the federal collectable revenue, it is therefore not surprising that the industry has become very crucial and significant to the economy growth and development of the country.
In 1970, Nigeria became a member of the organization of petroleum exporting countries (OPEC) and it is currently one or the top ten oil exporting countries in the world, and with the oil earnings flowing into the country government could embark or major economic project. Therefore the fact that the oil sector has great impact and significant on the Nigeria economy should not be overemphasized. Having known the indispensable nature of petroleum sector on the economy, it is therefore necessary that the degree of the impact be brought to knowledge. This makes empirically analyze the fortunes of the petroleum industry to the growth and development of the Nigeria economy.
1.2 STATEMENT OF THE RESEARCH PROBLEM
The oil sector at present has suffered from some problem it encountered which has gradually crippled two aspect of the petroleum sector in Nigeria today. According to the oil expect only the exploitation aspect is functioning, the refining and marketing aspect of the sector has been almost completely paralyzed. The crises today are attributing to several reasons and they contribute the problems facing the oil sector. They include:-
- Insufficient financial resources for the maintenance of oil sector in Nigeria.
- Poor financial backing to aliavate the Niger Delta crises (militancy):- the oil sector has suffered a lot recently as a result of the Niger Delta crises.
- Funds are not properly utilize:- for example, most refineries in Nigeria are not functioning as well as low technological capabilities leading to value added in the sector.
The decline has been exacerbated by depletion agency oil fields deteriorating equipment and facilities. Over exploration of the Niger Delta obsolete technology, insufficient financial resources increasing cost of exploration. These impediments have serious implication for the ultimate success of the petroleum sector and this remain an issue to be addressed by the government of Nigeria further more, the over dependence on crude oil by Nigeria government is problematic in such a way that it resulted to “crutch disease” on the economy i.e. allowing other sector of the economy to suffer and not away.
In conclusion therefore, diversification and proper utilization of finance in the Nigeria economy is what should be practicable so as to be firm even in times of problem in oil sector.
1.3 OBJECTIVE OF THE STUDY
The study is designed to analyze the importance and contribution of petroleum sector to economic growth in Nigeria, the emphasis will be on the following areas:
- To determine why financial contribution to petroleum is not fast-tracking economic growth in Nigeria.
- To determine the financial impact/contribution of petroleum in total growth of the industrial sector and in the general growth of the country’s economy.
- To analyze the impace of the petroleum sector on the Nigeria
- To offer recommendation to the basis of the findings
1.4 HYPOTHESIS OF THE STUDY
This study intended to test the hypothesis that:-
Ho: The petroleum sector has no positive impact on Nigeria’s economic growth.
Hi: The petroleum sector has positive impact on Nigeria’s economic growth.
1.5 SIGNIFICANCE OF THE STUDY
Oil is always a justificating and intriguing resources in both local and international context. The petroleum industry is perhaps one of the most important and largest industries in the world. However, the industry has bestowed great financial power on oil producers who are opportuned to posses the scarce natural resources. The importance of the study therefore is to create necessary awareness among economic agents and government agencies about the danger of over dependence on one sector of the economy (oil sector).
Another importance of this study is to throw light on the need for real linkage between the oil industry and the economy of Nigeria.
The study due to its nature will further help in formulating policy that will make the oil sectors performance increased and it also serves as a useful source of information of other researcher who may develops further interest on the activities of the oil industry in relation to the Nigeria economy.
1.6 METHODOLOGY OF THE STUDY
The major source of data used in this study is a secondary data; most of the data were computed from government agencies such as federal office of statistics, Nigeria National Petroleum Corporation (NNPC), and the Central Bank of Nigeria (CBN) etc.
Information shall be gathered from relevant text books magazines, journals, etc.
The econometric model will be formulated to establish the relationship between petroleum revenue (earnings) and industrial growth. The method of estimation that will be used is the Ordinary Least Square (OLS) method of multiple regression equations. Hypothesis will be tested for the possible acceptance or the rejection using relevant test statistics. This will be followed by interpretation and summary of findings.
1.7 SCOPE/LIMITATION OF THE STUDY
Nigeria economy is the foundation upon which this study is built, the study will be looking into the Nigeria leven industry, focusing on the assessment of Nigeria economy in respect to petroleum industry and when the economic boom started in Nigeria, fortunes arising form the sales to present day when oil price has follow. Consequently the period chosen for this research is from the period of 1980-2005.
Some constraints (known or anticipated) would to a large extent limit this research work. Some of them are as follows:-
- The study will be limited to the amount of information made available. Thus the work may not be hundred percent (100%) perfect, but a considerable work would be done and objectivity will be observed.
- Time constraints:- The time available for the research work and the researcher other academic work put some limitations.
- Finance and logistics are also some factors that are likely to limit this research work.
