THE ECONOMIC EFFECT OF PETROLEUM SCARCITY IN NIGERIA

CHAPTER ONE

INTRODUCTION

       Oil exploration in Nigeria could be traced back to 1908 when a German company [Nigerian bitumen corporation started chilling of cretaceous sands of Niger  Delta. Shell Darchy , the pioneer oil exploration and producing company was incorporated and granted concession  right to prospect for oil in 1936.production and export of crude oil took effect in 1959 at a rate of 5100 barrels per day.

    The success of shell spurred many other multinational oil company to join in the scumble  for Nigeria crude oil. Among these were MOBIL, NIGERIA AGIP OL COMPANY , NIGERIA GULF OIL COMPANY SATRAP [ NOW ELF].others are TEXACO,PAN OCEAN, PHILP OIL ESSO AAND ASHLAND.

       Major activities of these oil companies are centered in Delta , Rivers , Cross Rivers , and Imo state .

 These include the off shore and on shore  locations. Some of the on shore fields which produce most Nigeria crude oil are located at Bonu, Obigbo north , and east , elenwa ,umuechem, in rivers state , oguta and izombe in Imo state . off shore are located in aqua- Ibom in cross rivers rennington , forcados and escravos in Delta  state.

    The Nigeria economy can largely be described as one with a strong petroleum industry superimposed over an underdeveloped industrial base. Presently Nigeria is growing into a more economic country by depending Marjory on oil revenue. The dominance of oil in the Nigeria economy because a reality after the resumption of oil production at the end of the civil war, [1967-1970] it virtually because predominant after the fuel price increase of 1973 /74. Most recently is the one about to struck the nation now , take from Daily Champion News Paper. Monday march 17, 2003, “fuel price        like :NLC threatens showdown with  FG” was the capital. I wounded were we are leading to, I wounded if the federal government understands that the comfort of new citizen is the price of a government revenue of about 90% of the federal government revenue.

     Fuel scarcity that struck the nation in recent times appears to be continuing without end. Disturbing as the picture might be the situation on the ground shows that a petroleum endowed nation which is one world’s major producers and a member of the organization of petroleum exporting countries [OPEC] with a daily quota of 1.865 million barrels and also one whose four vetira have combined production of 445,000 barrels per day is in the throes of a domestic oil shortage. Petroleum scarcity is usually characterized by the emergency of long queue of vehicle queue for about four days to obtain fuel at exorbitant price. Taking a critical view of this problem one would discover that ‘there is a long list of players from the supply of petroleum product through the refineries to the end users. Some of the participant in this chain of distribution have acquired the role of middlemen adults. Mr Chamberlin  oyibo , the managing director of the Nigeria National Petroleum Corporation [NNPC].

      These middlemen operate from a sewing lack of control. The cause of petroleum scarcity could be trace to a complex process where many people and actions contribute, from crude oil through refining to the PPMC [pipeline and product market company ] the tanker drivers and owners. Independent marketers , retailers and consumers all collectively contribute knowingly or unknowingly to petroleum scarcity by their acts of omission or commission.

       This ugly development in which roadside peddlers have abundance of petrol while the filling stations are empty also cries for critical attention

 

1.1  STATEMENT OF PROBLEM

This research work is motivated by an interest in finding a solution to the unending fuel scarcity in our filling stations. This fear of petroleum scarcity  ought not to exist in our oil producing country with massive investment in four petroleum refineries [Wari, Port Harcourt , kaduna , and Elema]. It is puzzling and tragic that the country’s major source of income has become the harbinger of incoherence to the citizens.

However the problem  is to find out the extent to which fuel shortage has affected the entire economy. What are the option left for the government in solving the problems left?. How has it affected the common man in the street.

In view of these complexities government needs to consider with utmost urgency. Other arrangement for managing it’s oil sector efficiency as a catalyst for national development rather than a source for easy money and personal interest. It is quite obvious from what we see day to day about the random rise of fuel price. If I may say the problem is highly affecting the massive in their economic life’s.

The essence of good government is the interest of the masses which fuel scarcity has turned up-side down .

1.2    PURPOSE OF THE STUDY

The purpose of this study is to -:

  1. Find the root cause of fuel scarcity
  2. To analysis critically the effect of oil scarcity in our economy.
  3. To offer meaning suggestion as to find a lasting solution.

         The need for this study emanated as a result of a persistent  fuel scarcity in the nation. This work will no doubt cover the smuggling of petroleum products , problems of our four major refineries do not produce up to full capacity. It will indeed look into the major effects on the growth of the economy.

     Finally this work will create the awareness and give insight  of actual picture of fuel scarcity and the associated danger it will create if not checked .

 

1.3  SIGNIFICANCE OF THE STUDY

This study will check -:

  1. Effects of fuel scarcity in transportation
  2. Unemployment
  3. Agriculture
  4. Oil revenue

Recently the [NLC] National Labour Congress threatens show down with the federal government over fuel price like, [daily champion march 17] the fuel scarcity has gone a long way affecting every expect of our economy.

Talk about transportation a part of economic sector has increase that many people as usual , some resort to walking to the office which will take a long time and will affect their ability to work. The problem of fuel scarcity  is practical.

Fuel scarcity has as well created unemployment when there is acure , scarcity , must energy source industries would close down , thereby throwing a lot of workers to the unemployment market. This will also affect the road transport workers and their drivers ,which eventually led to serious disorder. Demand for oil is a derived demand. Motor spirit for example is demanded chiefly for the service it renders in the engine. Because of the importance of oil in our economic life. It’s shortage has brought untold hardship and powerful effect on labour force.

An economy in cries of low capacity utilization might lay off workers and in the long run increase unemployment.

Agriculture which is one of the most vital requirement for existence of man was adversely affected by the scarcity of petrol products. Production is not complete until it gets to the final consumer. During the period of scarcity farmer found it hard to covered their farm product to market which resulted to a large loss as most of adequate preservative method and lack of warehouse , this development was not unconnected with the exorbitant cost of transportation which emanated from the scarcity of fuel .

Oil revenue the federal government lost about 150million dollars [about #3.3million] from oil export during the NUPENG/PENGASSON strike in July and August 1994. This show that petroleum scarcity has really done much to our economy. This shortage still happens almost every time there is fuel shortage of strike. It is no gainsaying that oil is the main stay of Nigeria economy  hence an acute shortage is bound to ground the economy. As a result there has been a considerable fall on the accruing to Nigeria which will definitely lead o budget deficit. Project stated for completion may not get government support since the government would be battling it’s balance  of payment deficit.

 

   1.4   SCOPE OF THE STUDY

       There are some indispensable constraints that affect research works. Most importantly is the non availability of financial resource to be used in traveling to the head quarter of major oil companies like  chevron , shell BP and Golf oil all situated in Lagos.  Much as the study is not aimed at discrediting any individual or group or any constituted authority. Most people in possession of relevant information find it difficult to release them suspecting that to do so would lead to their being believed of their post.

 

1.5 LIMITATION OF THE STUDY

   To enquire information from NNPC is like chasing a white elephant. It was made clear that feels and figures about oil were guarded secret. The study is limited to news papers , past literature , test books and questionnaire from filling station managers , where we get practical facts.

 

1.6 FORMATION OF HYPOTHESIS

   To asses whether the strategy for attaining each of the indicant of performance was well implemented , two hypothesis are stated for testing these are-:Ho: petroleum scarcity has no effect in the economic

                H1: : petroleum scarcity has  effect in the economic development.

 

1.7 DEFINITION OF TERMS

Petroleum – is mineral oil which originated from forest I prehistoric time found underground and obtained from wells , used in various forms.

Scarce – is not available in sufficient quantity not to the demand .

Effect – is a degree or extent result , outcome of the heat upon metals.

 Economics – is a science of the production distribution and consumption of gods condition of a country as to material prosperity.

Unemployment – is the state of being unemployed.

Resources – is the wealth, supplies of goods, raw materials, which a person, country or state has or can use.

Agriculture – is the science or practice of farming, cultivation of man to the soil.

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