THE PERFORMANCE OF THE OIL SECTOR ON ECONOMIC GROWTH IN NIGERIA 1980 – 2021
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THE PERFORMANCE OF THE OIL SECTOR ON ECONOMIC GROWTH IN NIGERIA 1980 – 2021
Chapter one
Introduction
Background of the study.
After crude oil was discovered in Nigeria in 1956 at Olobiri in the Niger Delta, the country began producing oil in 1958, with its first oil field producing 5,100 barrels per day.
Crude oil exports have historically provided a significant source of foreign exchange earnings and government revenue for the economy. This reliance on the oil industry has had both beneficial and harmful outcomes.
In reality, the oil and gas industry provides approximately 10% to the GDP, and nearly 86% of all export revenues come from the sale of petroleum (OPEC, 2018).
Nigeria’s primary energy source is oil. Oil, as the foundation of the Nigerian economy, is critical to deciding the country’s economic and political future. Although Nigeria’s oil business was formed at the turn of the century, it was not until the end of the country’s civil war (1967-1970) that it truly took centre stage in terms of the nation’s economy (Odularu, 2008).
According to the history of Nigeria’s petroleum sector, oil was discovered in the Niger Delta at Olobiri in 1958. Shell-BP is the one who made the discovery. When Nigeria’s first oil field began producing 5,100 barrels per day in 1958, it became an oil producer.
Following 1960, several foreign companies were granted exploring rights in onshore and offshore areas adjacent to the Niger Delta. (Onwe, 2012).
Oil has remained the foundation of Nigeria’s economy since 1956, when the first oil well was sunk in Oloibiri, until mid-2013, when the commodity’s price dropped beyond explanation and common reason, and continues to this day.
In Nigeria, policymaking appears to be a reaction to an attempt to capitalise on the oil situation. Typically, this takes the form of raising spending when oil revenues grow, staying steady when revenues decline, and looking for a last-ditch solution when a crisis arises (Biodun 2004).
It has become critical to assess the impact of oil revenues on the Nigerian economy. According to Alley, Asekomeh, Mobolaji, and Adeniran (2014), Nigeria received $390 billion in fiscal revenue from oil between 1971 and 2005.
Nigeria is Africa’s most populous country, with 173.6 million people in 2014. Nigeria has Africa’s largest economy, with a GDP of $522.6 billion in 2013 (www.populationaction.org).
Nigeria also makes the most oil in Africa. The Nigerian economy has seen tremendous modifications since agriculture was replaced as the primary source of income by the petroleum industry fifty years ago (Aigbedion & Iyayi, 2007).
Since early 1970, the oil sector has generated the majority of federal government revenue and foreign exchange profits, dominating Nigeria’s economy and accounting for the lion’s share of the country’s GDP.
The oil and gas sector is critical to Nigeria’s overall growth and development. Oil and gas provide for approximately 90% of Nigeria’s foreign exchange revenue and 83% of its GDP (Ogbeifun, 2008).
Despite its massive oil endowment, Nigeria remains one of the world’s poorest countries. The insurgency in the North, the Niger-Delta Avengers in the South, ransom kidnappings, and the ravaging Fulani herdsmen have all exacerbated Nigeria’s issues.
The country’s economic issues are blamed on previous governments’ inability to efficiently use oil earnings and excess crude oil profits to build other sectors of the economy (Yakub, 2008).
Indicators of low human development and economic health, including as unequal income distribution, militancy and oil-related violence in the Niger Delta, widespread corruption, unemployment, and relative poverty, demonstrate that the economy has suffered from chronic underdevelopment (Nwezeaku, 2010).
Nigeria’s oil industry is critical to the country’s sustenance, fueling not only economic and development activity but also sociopolitical life. The sector has been commonly labelled as the nation’s live wire, which explains the literature that abounds on its role and significance in Nigeria.
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