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THE IMPACT OF OIL COMPANIES IN THE
NIGERIA DEVELOPMENT PROCESS
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
The amount of the
producer’s wealth is a guess depending on price, method, and level of out put
and peace of production. Nigeria is an Oil producing nation, and oil occupies a
very important position among the nation’s revenue sources. Its significance in
the nation’s economy cannot be explained solely in terms of barrels produced
and sold.
Other important variables such as the
dynamics of international energy marketers the role of organization of
petroleum exporting countries (OPEC) the political realities. With the very strategic position oil revenue
occupies in the Nigerian economy, accounting for over three quarters of
government revenue from all sources, Nigeria has always dreaded unfavourable
changes from oil prices in general and from OPEC’s holds the you and the knife.
This phenomenon has earned the popular saying that “when OPEC’s oil polices in particular
as these changes severely and jointly effects our national development process,
OPEC determines the number of barrels of oil to be produced and sold per day by
any member country. In this pragmatic position. OPEC holds the yam and the
knife. He determines whatever portion any members nations eats. This phenomenon
has earned the popular saying that when OPEC sneezed, member nation economy
cried out”
Presently, revenue from oil is trying to
wake up from a deep slumber it fell into so many years now. With the current
OPEC production, export volume, domestic consumption level, Nigeria expects a
brighter future and has based the budgets on the proceeds. these show not only
Nigerian economy on oil revenue for instance the majority of the estimated
federally collectable revenue comes from oil source while non-oil source are
expected to yield a minority of total estimated revenue.
At the time ol was discovered in
commercial quantity in Nigeria in 1956 up to the time production and
exploration took place in 1958, the country had relied on imported petroleum
products to meet its domestic requirements. As oil had not started to occupy
the commanding height of the national economy, exploration and production were
in the hands of a British company (shell D’AVCY 9 Shell BP). The emphasis of
the government dividing this period was to provide a roper advisory an
regulatory body to supervise the activities of the foreign oil companies. This
company shall D’AVCY (now shall BP) continued as the sole concessionaire in
Nigeria until 1959 when exclusive exploration right become available to
companies of other nationalities . in 1961, other companies Gulf, Agip, Safrep
(Now EIF) Tennesco and Amoseas (now Texaca Nig. Ltd0 Mobile, AP etc, started
jointly the explorers for oil in the on share areas on Nigeria.
As the years went by, petroleum policy
was geared towards direct and active participation in the three phases of the
industry, namely, exploration and drilling, refining,. Distribution and
marketing. Hence after reacting a production level of 1.531 mbd in 1973
representing about 31 of total world oil production and the establishing
herself as an oil province, Nigeria
joined the organization of petroleum exporting countries (OPEC). With the
Nigerian enterprises promotion decree 1977, this figure had gone up to about 60
in some of the oil companies. Similarly the Nigerian national oil corporation (Nnod
was established in 1971 to give effect to direct exploitation of the countries
strategic resources.
1.2
STATEMENT OF PROBLEM
Oil is a commodity like no other; it is
a prime source of energy that cannot be quickly replaced. Its production is
held in few hands. Its producers can chosen at the turn of value either to
increase its flower to reserve it in the ground. In the further, in it stores
value of 1.291 mbd and atterage domestic consumption of 3000,00mbd. Since the
oil boom, one would expect a reasonable level in growth, development and
industrial listen but evidence has provided otherwise.
Although Nigerian oil industry has
contributed largely to the growth effort in the country and has provided
enhanced revenue to the government especially during the oil boom 1970’s the
full benefits of the industry have been realized. Indeed. Nigeria’s oil
industry has operated with minimum linkage. Indeed, Nigeria oil industry has
operated with minimum linkage with the ret of the economy. For instances for
over thirty years of commercial
discovery, production and exploitation of crude oil, petroleum technology for
your industrialization and development will our oil revenue has been virtually
impossible. The bulk of our oil revenue is therefore spent on the importation
of various-consumer goods capital goods and other agriculture produce which
could be cultivated in Nigeria in reasonable quantity thus our hard-earned oil
revenue has only successes in keeping foreign farmers employed and in keeping foreign
industries working. In this manner the evidence of substantial growth in the
economy has either resulted neither into much development nor into significant
transformation of the economy.
The marketing and distribution of
petroleum products were entirely in the private hands. This lasted up to 1975 when the private companies cold no
longer meet the domestic demand for the product. This was as a result of the
expansion of economic activities and the unprecedented explosion in the demand
for the products owing to the quick recovery from there Nigeria civil war
(1967-1970).
Prior to this time, there was lack of
uniformity throughout the country in the price of petroleum products. The pump
price system, depending on the point of sale. The oil marketing companies
naturally concentrated heir lower and profit were highest. Lagos and
Port-Harcourt areas were well served while the hinterlands were process of
economic growth and development of all nations. Majority of people hold the
vent that oil has not played a crucial role in the process of economic growth
and development of Nigeria due to advance domestic bottlenecks of petroleum
product, lack of adequate road tempers and uneasy assess to spare parts.
Others on the other hands hold he view
that major constraints lie with the international bottlenecked. The shady oil
deals smuggling and bunkering, crude oil price glut and the Nigeria membership
in organization of petroleum Exporting Countries (OPEC).
1.3
OBJECTIVE OF THE STUDY
Having defined the problem of the project
study and concluded by brining our the overall aim of the research, it is
necessary at this juncture, to present the specific objectives which this work
intends to achieve.
1. To examine the exact impacts of oil companies
in the Nigerian economic development process.
2. To assess the extent to which they have
achieve the roles.
3. To examine he effect of the organization of
petroleum exporting countries (OPEC) on the price, demand and supply of the
Nigeria crude oil.
4. To examine the effects of the uniform pricing
policy of the government on the domestic consumption of petroleum products.
5. To search for the problem that confront the
expected role of oil industry as a whole in the Nigeria economic development
process, and give recommendations of the acquirement of the required roles.
1.4
HYPOTHESIS
In other to
carry out this study and in view of the stated objectives of this work, there
hypothesis have been formulated they are:
Ho: The
contribution of oil sectors in Nigeria justifies the huge investments being
committed to the sector by federal government.
Hi: The
contribution of oil sectors in Nigeria justifies the huge investments being
committed to the sector by federal government.
Ho: The
erratic nature of the world oil prices has no influence on the trend of the
Nigerian economic development efforts.
Hi: The
erratic nature of the world oil prices has been a great influence on the trend
of the Nigerian economic development efforts.
Ho: Domestic
consumers of petroleum petrol diesel, kerosene, etc are not satisfied with the
present level of distribution of the products.
Hi: Domestic
consumers of petroleum petrol diesel, kerosene, etc are satisfied with the
present level of distribution of the products.
1.5 RESEARCH
QUESTION
The
following research questions were formulated in the course of this research
work.
1. What are the roles of Oil Company’s ion the
Nigerian economic development process?
2. To what extent have the companies achieve
their impact in Nigerian development goal.
3. What are the effects of the organization of
petroleum exporting countries (OPEC) on the price, demand and supply of the
Nigeria crude oil?
4. What are the effects of the uniform pricing
policy of the government on the domestic consumptions of petroleum products?
5. What are the problems that confront the
expected role of oil industry as a whole in the Nigeria economic development
process, and give recommendations of the acquirement of the required impacts?
1.6
SIGNIFICANCE OF THE STUDY
This work is significant in exposing the
intricacies in oil industry with the view to making strategic the position this
sector holds in Nigerian economy public the mina stay of the economy.
It will equally make laudable the need
diversify the Nigerian economy and pay attention to other revenue source
especially agriculture source is said that, two good heads are beer than one.
In the same avian, oil is never and will remember be the only source of energy
Nigeria is endowed abundantly with other energy source, namely coal, natural
gas and uranium.
Information and recommendation given in
this work will not only be useful to the oil companies in formatting better
polices to improve their distribution system but will also be useful to the
government in checking the undue excesses of hoarding, bunkering and smuggling
of petroleum products, and more importantly the dwindling of the crude oil
prices.
Finally the result from this study will
be useful for further studies into this aspect of our economy especially the
inefficiencies associated with the oil industry arising from wide spread
stratagem, tendencies toward price increased or decrease with the attendant
social economic unrest.
1.7 SCOPE OF
THE STUDY
Besides Lagos, Port-Harcourt and Warri
in the Southern part of Nigeria, this work also covers four states in the
North. They are Sokoto, Bornu, Kano and Kaduna. The financial constraints and
time suffered in transporting the researcher to those places were enormous. The
questionnaires for domestic purpose cover literate and illiterate consumer of
petroleum product. Some of their answers were biased but the biases were to
infinitesimal to affect the result of the findings.
On the part of the executives, some,
felt to big to give full information required where as some, due to the
competitive nature of the industry, were reluctant in releasing all the
information needed.
Lastly but most importantly adjustment
to a change in the school system is not so easy. The semester system recently introduced
in the universities of Nigeria from the trimester system greatly affected he
amount of time spent and adjustment in certain areas especially where lecturers
had to be missed.
1.8
LIMITATION OF THE STUDY
This
research work was however, hampered, by the following unavoidable constraints.
1 Time: The battle of carrying out
this research with the semester academic work was enormous and tedious. The
researcher could only manage any available time at her disposal that would not
disturb her own academic works.
2 Resource Constraint: The financial need of the research work is
also enormous. The fact the researcher is prone to only a paltry fixed a salary
at the end of every month were daily bread, is met has actually limited the
research work because of the cost of data collection.
3 Respondents: The information used
was based on that provided by top management staffs that are given as actual
participants in the keeping and disbursement of funds.
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