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21 Jan 2017

The discovery of oil in Nigeria, the begining of our economic woes as a country – FEMI FALOLA

TOPIC : The discovery of oil in Nigeria, the begining of our economic woes as a country


Oil was discovered in Nigeria in 1956 at Oloibiri in the Niger delta after half century of exploration. The discovery was made by shell -Bp, at the time the sole concessionare. Nigeria joined the ranks of oil producers in 1958 when it first oil field came on stream producing 5100bpd. After 1960, exploration right in onshore and offshore areas adjoining the Nger Delta were extracted to the foriegn company in 1965, the EA field was discovered by shallow water south east of Warri. Nigeria joined the organisation of petroleum exporting countries (OPEC) in 1971 and established the Nigerian National petroleum company (NNPC) in 1971 a state owned and controlled company, which is a major player in both the upstream and downstream sector. By the late sixtees and early seventies, Nigeria had a production level of over 2million barrells of crude oil a day.  Today Nigeria is the largest oil producer in sub-sahara Africa, this make it the world’s sixth largest oil producer, since 1960, Nigeria has reaped an estimated US$600bilion in oil revenue.

Nigeria has the third highest number of poor people in the world, after China and India with a per capital income of about US$350, around 70m nigerians are living on less than one US Dolar per day. Low human development level, social conflict and enviromental degradation are just a few problem which characterize the current state of development in Nigeria . The question to be asked is why a country such as Nigeria which is highly endowed with one of the most valuable resources has faired disproportionally badly in economic and social terms?  why has so little been done in terms of human development ? Besides, the Niger Delta region-the main producer of oil in Nigeria, being the engine of nigeria economy, also present a paradox because the vast oil revenue have barely touched the Delta’s own pervasive local proverty.

Their is general agreement that their is extreme poverty in Niger Delta. In deed,1995, World bank observe that despite vast oil resource in the region, people there remain poor, GNP per capital is below the national average of US$280. There are varied definition of poverty some of which are; Poverty is defined as “dynamic process of socio economic and political deprivation, which affect individual, household or communities resulting in lack of access to basic amenities of life” (natural policy  on poverty eradication of the federal Republic of Nig. Dec., 2000). Poverty as a “state of marginalization and exclusoion that has economic, structural or relational and personal or psychological dimensions” (Engbe. Pederson 2002). Poverty is also defined as a “state of deprivation in the means needed to sustain life at some level of human digity” (Ijayi 2005). The definition  by ijayi stresses that poverty is caused rather than self imposed and it also  provides insight to basic roots of poverty classified into natural and social. The former describes the extent to which nature endows a people with the means for meeting their needs and the later descibe the condition that created  in the course of human interactions in the society.  The social root of poverty embodies injustice and exploitation is the root cause of poverty in the Niger Delta in particular and in Nigeria general. The people of Niger Delta have been exploited since 1958 till date without adequate provison to cushion the hardship imposed by the production in the region

Decline in agricultural activities and hence reduction in employment. Agriculture was the main foriegn exchange earners for Nigeria before the advent  of petroleum. Agriculture has suffered total neglect and patronage by government. A world Bank report indicated that Nigeria had tremendous agricultural potential, enough to produce crops for itself and for export. But now, with a rapidly declining rate in agricultural industry, Nigeria must imoprt many of the crops it used to export, such as groundnuts, palm oil and cocoa. The world bank state that in 1990, Nig had 43% of its population working in agriculture, 25%in 2010. Nig economy is heavily dependent on oil, accounting for 95% of govt foriegn revenue. This has resulted in Nigeria being a mono economy depending on revenue from oil to her development activities.

In practise, it has proven to be etxremely difficult  to convert natural resources wealth into broad based improvenments in economic performance  and human development. In fact, heavy dependence on the export of natural resources has been shown to negatively affected a country’s economic, social and political development. Nigeria lack sustainable over all economic development due to the failure of government to use oil funds to transform other sectors of the economy and this leaves the country in a greate state of foriegn dependence. Effort and attention is concentrated on oil industry, the non-oil industry has been under utilized, and their full capacity for contribution to the national coffers has not been developed. The absence of downstream sector and consequent dependence on oil multi-nationals and their inafastructure. Huge oil revenue flows countries tends  to de-emphasize income taxes as a source of government revenue. Besides, low tax rates and high consumption expenditures, (typically imported goods) reinforce inflationary tendencies with regards to expenditure, no effort is made for diversifying the economy, enhancing infastructure or expanding education systems.

The problem of the dutch disease effect of mineral reasource production on the one hand, resource booms tends to cause real exchange rates to rise due to large inflows of foriegn exchange generated by the increased resource exploits on the other hand labour and capital tend to migrate to the booming resource sector from other productive sectors. These two effects result in higher cost and reduced competitiveness for domestically produced goods and services thereby reducing agriccultutral and manufacturing export.

Nigeria  government should unerstand that, diversificatin is  very important in develping the economy all round, when there is great accomplishment in other sector apart from oil, the pressure on oil sector will reduce, hence, even development of the economy will be achieved leading to  increased in the standard of living of the citizen in all sectors and reducing poverty level at the same time.

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