THE ROLE OF OIL COMPANIES IN THE NIGERIAN DEVELOPMENTAL PROCESS (A CASE STUDY OF NNPC)

CHAPTER ONE

INTRODUCTION

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 nations revenue sources. Its significance in the nations economy cannot be explained solely in terms of barrels produced and sold. Other important variables such as the dynamics of international energy markets the role of organization of petroleum exporting countries (OPEC) the political realities country, are all significant aspects.

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 unfavorable 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 affect 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 member 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 for 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 oil 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 it’s 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 shell D’Avcy (now shell BP) continued as the sole concessionaire in Nigeria until 1959 when exclusive exploration right became available to companies of other nationalities.  In 1961, other companies Gulf, Agip, Safrep (now Elf) Tennnesco and Amoseas (now Texaco Nig. Ltd) Mobil.  Ap etc, started jointly the explorers for oil in the on share areas of 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.

1.1            STATEMENT OF PROBLEM

Oil is a commodity like no other.  It is a prime source of energy that cannot be quickly replaced.  It’s production is held in few hand.  It’s 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 demostic consumption of 300,00 mbd.  Since the oil boom, one would expect a reasonable level in growth, development and industrial listen but evidence has provide other wise.

Although Nigeria’s 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’s oil industry has operated with minimum linkage with the ret of the economy.  For instance, 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 succeeded in keeping foreign farmers employed and in keeping foreign industries working.  In this manner, the evidence of substantial growth in the economy has neither resulted 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 Nigerian 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 activities in areas where cost of distribution was lowest 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. Intermittent and abrupt wide spread saturates of petroleum product, lack of adequate road tempers and uneasy access to spare parts.

Others on the other hands, hold he view that the major constraints lie with the international bottlenecks; the shady oil deals smuggling and bunkering, crude oil price glut and the Nigeria membership in Organization of Petroleum Exporting Countries (OPEC).

Perhaps, the root of all the bottlenecks lies in cure role of oil companies in the Nigerian economic development process.

It is therefore, the purpose of this study to examine the roles the oil companies play in our economic development process and then equally fish out other defects, institutional, productive and distribution defects that form stumbling blocks to our economic development.

1.2            Research objective

Having defined the problem of the project study and concluded by bringing 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 roles of oil companies in the Nigerian economic development process.

2.                 To asses the extent to which they have achieve the roles.

3.                 To examine he effects 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 Nigerian economic development process, and give recommendations of the acquirement of the required roles.

1.3            RESEARCH 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:-

1.                 The contribution of oil sectors in Nigeria justifier the huge investments being committed to sector by federal government.

2.                 The erratic nature of the world oil prices has been a great influence on the trend of the Nigerian economic development efforts.

3.                 Domestic consumer of petroleum petrol diesel, kerosene, etc are satisfied with the present level of distribution of the products.

1.4            SIGNIFICANCE OF STUDY

This work is significant in exposing the intricacies in he oil industry with the view to making strategic the position this sector holds in Nigerian economy public the main 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 jas and uranium.

Information and recommendation given in this work will not only be useful to the oil companies in formulating 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 increase or decrease with the attendant social economic unrest.

1.5            LIMITATION OF THE STUDY

Besides Lagos, Port-Harcourt and Warri in the Southern part of Nigeria, this work also cover 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 products.  Some of their answers were biased but the biases was 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 lectures had to be missed.