of the Study
economy is basically on open economy with international transactions
constituting on important proportion of her aggregate economic activities. Over the years, the degree of openness of the
economy has grown considerably. Before Nigeria gains her political independence
in 1960, agriculture was the main stay of Nigeria economy, which provides both
cash crops and food crops to the economy and accounted for the largest part of
the foreign exchange of the country.
the beginning of early 80s ushered in a new direction for overall economic
activities. The now ever-growing oil
sector led to the new direction witnessed.
This led to the neglect of agricultural products, making the economy to
depend heavily on the production of crude oil.
this study, we shall be using these terms to refer to oil sector, such as
petroleum, crude oil, gas and so on. Oil
has been known to exist in the ancient time of Pharaohs and Babylonians. It seeped from the earth in Persia, Iraq,
Indonesia and other parts of the world.
Since it was discovered, it has been used in medicine and some places it
created huge fires which people worshipped.
Oil usage was varied but limited and by the middle of the 17th
century, a few street lumps in Bucharist were lit by oil extracted from coal.
universally neither the first nor the only primary sources of energy. The properties of oil shows that it possesses
distinct advantages over other sources of energy, mainly coal. Modern oil exploration began by the
applications of those theories when “Colonel” Edwin Drake provides that oil
does exist beneath the earth’s crust.
Drake discovered the first underground oil near Titusville in
Pennsylvania on August 27th 1859, after drilling a well 70 feet
deep. Drake’s well produced about 30
barrels of crude oil.
are four technical methods for a less developed country like Nigeria to tap a
potential extractive export reserve.
foreign concessionaries to form local industries and therefore supply
management and technological, capital and markets.
joint venture in which foreign investors supply management and technological
and market as well as a portion of the capital furnished by the host country.
management contracts, whereby experienced foreign firms offer management and
foreign participation altogether and furnish management and technology. Capital and market itself.
Basically, it could be argued that there was
little real choice of discovering petroleum in Nigeria before the mid
1950s. For example, L Dudley stamp, the
noted British geographer wrote in 1953 that “Apart from the yard along the
shores of the Gulf of Suez in Egypt and a small yard from three thing fields in
Algeria and four in morocco, Africa has no oil.
The search of oil in Nigeria began in 1908, when a
German company called Nigeria Bitumen Corporation (NBC) which was granted a
license to exploit. Bitumen deposits
located at Ijabu Ode and Okitipupa the present Ondo State. After the war 1914-1919, their work was
terminated due to the colonial-entrepreneurship for legitimate commercial
activities, which were meant to replace the oppressions and inhuman slave trade
that reigned in the eighteen and early period of the nineteen century.
Geological research work conducted showed that
Nigeria’s petroleum potential was towards the southern part of Nigeria. After shifting focus to the tertiary area of
Delta, shell BP, made Nigerian’s first discovery of oil in 1956 after 19 years
search of petroleum at Oloibiri in Ogbia Local Government Area is now the
present Bayelsa State. There were other
companies that joined the Nigeria petroleum, such as American Oversea Petroleum
Company. (TEXACO), Mobil Tennessee’s
Nigeria incorporated (JENNECO), Gulf Oil, Satrap (ELF), Nigeria Agip Oil
Company (NAOC), Philips Petroleum and ESSO exploration. All these were joined latter, such as Japan
petroleum, American occidental company, Deminex Nigeria Limited, Union Oil,
etc. However, not all these companies
were successfully explored.
As government interest in oil industry continues
to grow, a license was granted to Nigeria Agip Oil Company in 1962. This license was optionally in favour of the
government to purchase about thirty percent (30%) of the share capital of the
company if and when discovered oil in commercial quantity.
In 1977, the Nigeria National Petroleum
Corporation (NNPC) formerly known as Nigeria National Oil Corporation (NNOC)
was established by Act of No 18 which was charged with the responsibility of
exploring and producing oil and gas, transporting, refining, processing,
marketing and converting petroleum products into useful products (Attamah; 2000
p. 25). NNPC therefore, performed dual
functions according to Quinlan (1980), it performs one as a state-owned right
as well as in partnership with International Oil Companies, it is playing a
part and reaping the reward for Nigeria Oil.
As a result of economic transformation of the country through the
Structural Adjustment Program (SAP) which was imposed by the Federal Government
in 1986, the NNPC, according to Akinnusi (1990). Adopted a new mission in January 1987 that was intended to be realized by April 1st
From modest production of 5000 barrels per day
(b/d) in 1958 by shell BP, the volume of the production in the country has
multiplied impressively over years (Nigeria Oil Directory 1987 p. 60).
of the Problem
With Nigeria’s oil sector, accounting for almost
all the country’s exports, she has earned billions of dollars from this sector
in years back. As a young nation, with
oil wealth, coming almost unexpectedly immediately after her independence. Nigeria no doubt has its developmental growth
problems to cope with. The oil wealth
brought about growth opportunities as well as problems for the nation (Quinlan;
1980). There is lack of infrastructural
facilities; her educational system is at the verge of collapse because of under
findings. The health sector has nothing
good to write home about; the cost of life and standard of living are becoming
more difficult nowadays in Nigeria.
Industrial and Agricultural sector were neglected. Inefficiencies and operating problems in the
oil sector are causing financial looses.
Owing to both external and internal factors, the
growth performance of Nigeria economy has been less than satisfactory during
the past three decades. Since 1970,
Nigeria per capita income has fallen by about 4% in constant dollars. More over, since then the government has
annually received over half of its revenues from oil sector which were about
85%. These oil revenues are not only
largely but highly volatile and causing the size of government programs to
From 1972 to 1975, government spending rose from
8.4% to 22.6% of GDP, by 1978, it dropped back to 14.2% of the economy. This fluctuation has made the government
unable to adhere to wise fiscal policies.
Although large sales are obtained from oil sector
but it’s effect on the growth of Nigerian economy as regards to returns and
productivity is still questionable, hence there is a need to evaluate an
economic analysis of the impact of oil sector on Nigeria economy.
of the Study
The objectives of the study are split in to two
that is, the general objectives and specific objectives. The general objective of this study is to
examine the impact of oil sector on economic growth of Nigeria. While the specific objectives are as
To evaluate the
impact of oil sector on economic growth in Nigeria.
To examine the
relationships between oil sector and economic growth.
policy recommendations based on the result of the study.
of the Study
This study is designed to investigate and analyze
the impact of oil sector on economic growth.
The hypothesis is therefore postulated as follows:
Ho: Oil sector has no significant impact on economic growth in Nigeria.
H1: Oil sector has significant impact on economic
growth in Nigeria.
of the Study
In fact, this research is very significant in the
developmental pace of any economy. This
is more so in developing countries such as Nigeria where the public sector
appears to be more or less concerned with mere policy formulation,
infrastructural development and servicing of both.
The significance of this research, believing that
the resultant findings and recommendations would be duly considered cannot be
over emphasized specifically, the project will be of great benefit to the
of the various governmental organs in Nigeria who formulate and issue the
regulatory economic guidelines.
It will also
help government to access the extent to which the oil sector has impact on the
economy of Nigeria within the given time frame and thus, providing ground for future
It will be of
help to real and potential private industrialists and or investors, especially
with regard to sourcing of raw materials and cost.
particularly of the business/Engineering school who might be future research in
a related field on the ground already established or covered.
public particularly the stakeholders (suppliers and consumers) who stand to
benefit from the informal knowledge of the performance of oil sector. The researcher holds the strong belief that
the findings of this study will reasonably serve the respective interest of
these groups mentioned above.