IMPACT OF PERTROLEUM EXPORT ON THE NIGERIAN ECONOMY
ABSTRACT
This study set out to investigate in an empirical pattern, the macroeconomic effects of oil exportation from Nigeria, using a time series data from 1980 to 2011. The ordinary least squared econometric technique (OLS) is employed in the empirical analysis. The results from the empirical analysis show that generally, petroleum exportation has played a critical in Nigeria’s economic processes over the years. More specifically, the study show that oil exportation has a significantly positive effect on economic growth in Nigeria, that oil prices do not significantly affect economic growth in Nigeria, human capital is a strong factor that affects economic growth in Nigeria and that capita accumulation is not a very strong factor in predicting income growth or income changes in Nigeria.
The study recommends among others that In order to further obtain better economic benefits from the oil export and the oil sector in general, a total deregulation of the petroleum sub-sector is recommended. This would minimize free-market distortions and encourage competitive tendencies.
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1 Background to Study
1.2 Statement of the Study
1.3 Objective of the Study
1.4 Hypotheses of the Study
1.5 Organization of the Study
1.6 Significance of the Study
1.7 Scope of the Study
CHAPTER TWO: LITERATURE REVIEW
2.1 History of Crude Oil In Nigeria
2.2 Development of Petroleum Sector In Nigeria
2.3 Structure of The Petroleum Industry In Nigeria
2.4 The Role of NNPC
2.5 The Role of Ministry Of Petroleum Resources
2.6 The Role of OPEC
2.7 What Is Economic Growth
2.7.1 Types of Growth
2.7.2 Types of Gross Domestic Product
2.8 Impact of Oil Revenue on Economic Growth
2.9 Challenges in the Oil Sector
CHAPTER THREE: METHODOLOGY
3.1 Model Specification
3.2 Data and Estimation Issues
CHAPTER FOUR: EMPIRICAL ANALYSIS
4.0 Introduction
4.1 Unit Roots Test
4.2 Regression Analysis
CHAPTER FIVE: SUMMARY OF FINGINGS, RECOMMENDATION AND CONCLUSION
5.1 Summary of Findings
5.2 Recommendations
5.3 Conclusion
References Appendix
CHAPTER ONE
1.1 BACKGROUND TO THE STUDY
Nigeria economy is basically an open economy with international transaction constituting an important proportion of her aggregate economic activities. Over the years, the degree of openess of the economy has grown considerably before Nigeria gain her political independence in 1960, agriculture was the dominant sector in the country, which provide both cash crops and food crops to the economy and accounted for largest part of the country’s foreign exchange. The discovery of crude oil production in commercial quantities changed the structure of the Nigerian economy. This led to the neglect of agricultural product, making. The economy to depend heavy on production of crude oil. In 2000, oil and gas export accounted for more than 98% of export and about 83% of federal government revenue. (Odularu 2008). Nigeria’s proven oil reserves are estimated to 35 billions barrels, Natural gas reserves are 35 billions barrels, Natural gas reserves are 35 billions barrels, natural gas reserves are 1000 trillion fit (2.800kml) and its crude oil production was around 2.2 million barrels (350.00ml) per day. (Odularu 2008). Furthermore; the oil and natural gas export generated huge revenue to the government and have a surplus balance of payment over the years. It was reported that 80% of Nigeria’s revenue goes to the government. 16% spent on administrative expenses and 4% go to investors. The huge revenue from oil export only benefit 1% of the population due to corruption in Nigeria (Odularu 2008).
Mismanagement over the years back hindered economic reforms from achieving its full economic potentials. However, Nigeria Gross Domestic Product at purchasing power parity became more than doubled from $170.7billion in 2005 to $374.3 billion in 2010.
With informal sector putting the actual numbers greater than $374 billion. The Gross Domestic Product per capital doubled from $1.200 per person. In 2005 to all estimated $2.500 per persons in 209, with the illusion of informal sector. The Gross Domestic Product per capita was estimated around $3.50 per persons. (Nigeria economy). Furthermore, the United States remains Nigeria’s largest customers for crude oil export accounting for 40% of the country total fifty-largest source for United State imported oil, (Odularu 2008).
1.2 STATEMENT OF THE STUDY
Owing to both external and internal factors, the growth performance of the Nigeria economy has been less than satisfactory, during the past three decades. Since the first oil price shock of 1974, oil has annually produced over 90% of Nigeria’s export income from 1970 to 1999, oil generated almost $231 billion in rents for the Nigeria economy and these rents have constituted between 21% and 48% of Gross Domestic Product. But yet, these rents have failed to raise Nigeria incomes and done little to reduced poverty.
Since 1970, Nigeria’s per capital income has fallen by about 4% in constant dollars. Also, since early 1970, the government has annually received over half of its revenues from oil sectors which are about 85%. These oil revenues are not only large, but highly volatile and causing the size of government programs to fluctuate accordingly. 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 during the 1970s and 1980s, when oil prices fluctuated sharply. The ability of these governments to spend their funds wisely, and limits corruption has been low. Although large proceeds are obtained from the domestic sales and export of petroleum products. Its effect on the growth of the Nigeria economy as regards returns and productivity is still questionable. Hence, there is need to evaluate the relative impact of oil export on economic growth in Nigeria over time.
1.3 OBJECTIVES OF THE STUDY
The objectives of the study are spelt out into two: (general objective and specific objectives). The general objective of this study is to examine the impact of oil export on economic growth in Nigeria, while the specific objectives are:
1. To examine the relationship between oil export growth and economic growth.
2. To find out if fluctuation in oil revenues also causes a fluctuation in economic growth.
1.4 HYPOTHESES OF THE STUDY
This study is designed to investigate the impact of oil export on economic growth in Nigeria. The hypothesis is therefore postulated as follows:
H0: There is no statistically significant relationship between oil export and economic growth in Nigeria.
H1: There is statistically significant relationship between oil export and economic growth in Nigeria.
1.5 ORGANIZATION OF THE STUDY
This research work has been divided into five chapters as follows:
Chapter one which is the general introduction of the entire study comprises of the statement of problem, objective of the study, significance of the study, hypothesis of the study.
Chapter two deal with the literature review which covers conceptual, theoretical and empirical framework.
Chapter three consists of the research methodology which shows the model specification, sources of data, econometrics techniques and sampling techniques.
Chapter four presents the data and show analysis and interpretation of findings as well as hypothesis testing and discussion of results.
Chapter five which is the last chapter deals with the summary of findings, conclusion and recommendations.
1.6 SIGNIFICANCE OF THE STUDY
As indicated in the statement of problem, the study will be very relevant to the government and the policy makers in developing appropriate policies and programmes for the development of Nigerian oil sector, as well as the entire economy.
Again the study will also be relevant t the Academia, Researchers, students of economics, finance and management sciences – as it will constitute viable data base for them to carryout further research on the subject matter.
Above all, it will provide useful information to all petroleum dealers in the country and as well as all imports and potential investors in Nigeria on the current state of petroleum exports in the country.
1.7 SCOPE OF THE STUDY
The study is a Nigerian specific study, covering a period of 31 years (1981 to 2011) on the impact of petroleum exports on the Nigerian economy over time. Relevant data shall be sourced from the Central Bank of Nigerian Statistical Bulletin and the Nigerian Bureau of Statistics.
