THE IMPACT OF OIL INDUSTRY ON THE PERFORMANCE OF ECONOMIC GROWTH IN NIGERIA (1970 – 2000)
This research work was conducted to investigate the impact of the oil industry on the economic growth performance of Nigeria. In the process of the research, the ordinary least squares (OLS) regression technique was employed. Considering the impact of time on changes in economic variables, the analysis was carried out using the multiple regression method in which Gross Domestic Product (GDP) , a proxy for economic growth was used as the dependent variable, while oil Revenue (OREV) and time appeared as regressors.
A two-tailed test of 5% significant levels were conducted indicating that the two explanatory variables did not have any significant impact on the growth performance of the Nigerian economy within the sample period. The researcher therefore recommends the government should formulate appropriate policy mix that would motivate the firm in the oil industry to enhance improved performance and contribution of the sector.
1.1 BACKGROUND OF THE STUDY
The economy is the backbone of any nation. Nigeria, like other developing countries of the world is paying more attention on how to accelerate the rate of her development through the various sectors of the economy. Oil, a very versatile and flexible, non-reproductive, depleting, natural (hydrocarbon) resource is a fundamental input to mordern economic activities, providing about 50% of the total energy demand in the world, excluding the former centrally planned economics. Oil-exporting countries of the developing world depend heavily on oil revenue for foreign exchange earnings and for the government budget, in most cases, reaching 90% or above.
THE IMPACT OF OIL INDUSTRY ON THE PERFORMANCE OF ECONOMIC GROWTH IN NIGERIA
Petroleum or crude oil is an oily, bituminous liquid, consisting of a mixture of many substances mainly the elements of carbon and hydrogen, and thus known as hydrocarbon. It also contains a very small amount of non-hydrocarbon elements, chief amongst which are sulphur, nitrogen and oxygen. The petroleum industry covers the exploration and production of crude oil as well as petroleum refining, marketing and servicing. Specific policy objective with respect to petroleum and mining can be summed up as follows:
Active government participation in mining operations, diversifications of mineral products, the organization and regulation of the development of mineral reserves so as to optimize their contributions to the overall national development effort; the conservation of the countries mineral resources, research into efficient extraction methods and wider application and use of mineral manpower development and accelerated transfer of technology, achievement of internal self sufficiency in the supply and effective distribution of petrol-industry products, commercialization of gas, and the control of the environmental problems of oil production. Though oil did not assume its present significant position in the national economy until the early 1970’s, it is not a novel revelation that it has since become the mainstay of contemporary Nigeria’s economy. Petroleum either as petrol , diesel, fuel oil , lubricant or petrochemical makes Nigeria economic wheel go round.
Petroleum has transformed poor nations into rich ones, deserts into watersheds and bankrupts nations into creditors. Specifically, with regards to Nigeria, there is no gain saying that oil sector has undergone tremendous transformation over the years. The industry has emerged from being the merely “supportive” economic sector it was in the 60s to the predominant source of foreign exchange and development finance and a most viable access to international investment opportunities in the 1980’s and 1990’s. No other resource in Nigeria has played such a towering role over the national economy as crude oil. The government of Nigeria has used the revenue derived from oil through tax and royalties to carry out development projects in the country.
This study, therefore, aims to illustrate clearly the impact of the oil industry on economic growth performance in Nigeria.
1.2 STATEMENT OF PROBLEM
Since its discovery, petroleum has impacted so much on Nigeria economy, these impacts are both positive and negative. Some scholars have advocated for the shifting of emphasis from oil industry to other sectors owing to their belief in the negative fallouts of the oil industry. Some others opined that the sector should be promoted and developed for its benefits.These opposing views have created the problem of acceptance or otherwise of the oil industry in Nigeria.All these and many more questions pose contradiction, hence; the need to investigate on this all-important topic. You have to show enough cause why you have decided to go into this research work.In view of the controversy with respect to the relative contribution of the oil sector of the Nigeria sector as compared with the other sectors, it is imperative to establish empirically the relative impact of the oil industry in the Nigeria economy.