THE IMPACT OF CRUDE OIL PRODUCTION ON ECONOMIC GROWTH IN NIGERIA

THE IMPACT OF CRUDE OIL PRODUCTION ON ECONOMIC GROWTH IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1.    Background to the Study

Crude oil is one among other natural resources endowment in a nation by nature. Natural resources are often regarded as free gifts of nature. All over the world, different countries are endowed differently with different resources, both in quality and quantity, to some less and others in abundance. Nigeria is one among these countries that is richly blessed with vast natural resources, such as: forests, lands, fresh and salt water, sands, coal, Iron-ore, natural gas, aluminum, non- mineral energy source of solar, crude oil which is our subject matter among others.

Crude oil was first discovered in united state (US) in 1859, which was sold on a large scale in the 1860s. In Nigeria, the search for crude oil started within 1905 and 1908 by the Nigerian Bitumen Corporation (NBC) who on their search found 16 shallow wells, confirming a line of oil seepage in the Eastern Dohomey Basin in Okitipupa, Western Region of Nigeria. The NBC could not go far with its search due to the outbreak of the First World War in 1914 which distorted their activities.

However, after the war, the Roral/Dutch Company took over and continued with the search from Ondo State to Abia State and finally narrows down their search to Niger Delta Region where they first discovered oil in large commercial quantity in 1956 at Oloibiri specifically in the present Bayelsa State. Nigeria oil hit. The international market in 1958 with approximately 5,000 barrels per day. Nigeria produces about 30% of the total oil production in the Africa region. As of September 2004, she was ranked the largest producer in the sub- Saharan Africa, the 5th largest petroleum exporting country in organization of petroleum exporting countries (OPEC) and the 5th largest oil exporting country to the united state of America, amounting to about 8% of USA crude oil imports. Here current production capacity is over 2 million barrels per day on average.

Although Nigeria for over 30 years has established herself as a leading producer of crude oil, she is known in energy circles as a “gas province with only a little pool of oil”. The oil producing states in Nigeria so far discovered include: (Abia, Akwa Ibom, Bayelsa, Cross River, Delta, Edo, Ondo and Rivers) state, nine in number with a common nomenclature known as the “Niger Delta region”. The formulation and implementation of the Nigerian oil sector is under three actors which are:

1.                   i.        The ministry of petroleum resources, established in 1972 with four departments functioning differently.
2.                  ii.        The Nigeria national petroleum corporation (NNPC),   established in 1977 under decree No. 33 as government owned company together with the petroleum    inspectorates as its integrate part under six directors.
3.                iii.        The private sector, which comprises of multinational oil    companies, which produces about 98% of the total      production and indigenous companies producing about       2%. The oil sector is categorized into up and down     stream, connected with forward and backward linkages.

THE IMPACT OF CRUDE OIL PRODUCTION ON ECONOMIC GROWTH IN NIGERIA