TOPIC : THE DISCOVERY OF OIL IN NIGERIA, THE BEGINNING OF OUR ECONOMIC WOES
SUBMITTED BY – Oyetunji Ridwan
Nigeria and Crude Oil
Crude oil has had serious impact on the civilization of the world compared to any single natural resource in recorded history. Throughout the world, people’s lives are affected and the nations’ destinies are determined by oil exploration results. Hence, it has become the concern of governments, a vital ingredient of their politics and a crucial factor in the political and diplomatic strategies.
Nigeria, a giant West African nation with a provisional population of about 140 million (according to 2006 National Census), is the 6th largest producer of crude oil in the world and the largest producer in Africa.
Nigeria before Oil
Before independence in 1960, the Nigerian economy was popularly dominated by exportation and commercial activities. No viable industrial sector; agriculture was the dominant sector in the economy, which provides both cash crops and food crops to the economy and accounted for the largest part of the foreign exchange of the nation.
Same obtained after independence. In spite of irregularities in world prices, agricultural sector contributed about 65% to Gross Domestic Product (GDP) and represented almost 70% of total exports. Raw materials, comprising agricultural produce and minerals were exported to the industrialised nations. Various consumer items, food and cash crops, which are now being imported, were produced domestically. Also, rates of inflation, unemployment and productivity remained relatively acceptable and prices reasonably stable.
The Discovery of Oil
Oil in commercial quantity was first discovered in Nigeria in 1956 at Olobiri in Niger Delta, after about half century of exploration, by Shell-BP. As of today, Nigeria’s proven oil reserves are estimated to be 25 billion barrels; natural gas reserves are well over 100 trillion cubic feet. As a member of the Organization of Petroleum Exporting Countries (OPEC), the country produces about 2.46m barrels of oil per day, though about 33m liters per day is imported into the country.
Aftermath of the Discovery of oil
Nigerian economy is basically an open economy with international transactions constituting an important proportion of her total economic activities. This includes a variety of private freedom, combined with centralized economic planning and government regulation.
Advent of oil in commercial quantities in Nigeria signaled the beginning of a profound transformation of Nigeria’s political and economic landscape. Oil boom resulting from the embargo placed on the USA by the Arab in 1973, affected the agricultural sector adversely. It led to enormous wealth creation which made other sectors of the economy take back seat. The economy became heavily dependent on oil. By this time, about 90% of the foreign exchange earnings was from oil revenue and the same accounts for about 85% of total exports.
Apparently, the ascendancy of oil to the prime position in Nigeria has made her wealthier, it has also led to the neglect of all other non-oil sector and gave Nigeria a mono-cultural economy.
There has been a great reduction in the production of agricultural commodities for export. As expected, prices of foodstuffs have skyrocketed and food production has become a problem such that the nation is now a net importer of basic foods. Even government policies such as increased involvement in direct food production; provision of subsidies to peasant farmers and creation of more commodity boards for various agricultural and food products, could not reverse the deteriorating situation.
Another apparent menace is oil spillage. Since 1958, there have been several cases of oil spillages reported especially in the Niger Delta Region – a region where all of Nigeria’s oil and gas resources come from. For instance, the major NNPC spill in 1992, Oshaka oil spill in 1993, and Ibeno spill in 1998. Consequently, the Niger Delta has faced one calamity to another as a result of poor management continuous criticisms over multinational oil companies’ management in the Niger Delta Region.
Rural to urban migration rates has also escalated, as people attempted to reap or benefit from the windfall from oil. Migrants are always in search of perceived oil-related white cola jobs among others, hence the traditional occupations of the people have been neglected.
Nigeria today is one of the poorest countries of the world as measured by the United Nations Development Programme (UNDP) Human Development Index (HDI). Unemployment rates has increased exponentially as there has been loss of indigenous occupation among local communities, with no concrete efforts on the part of the Federal or State Government to put an end to the menace.
Another problem created by the unwanted mismanagement of this resource is crude oil theft. This came into force few years ago and is majorly spearheaded by youths in Niger Delta region who are desperate for wealth. They devised a way of affecting a hole in the crude pipelines thereby siphoning crude oil and selling them at a giveaway price to international rogues. Money from this illegal business is part of what is being used to militarize the region and in turning themselves into ethnic militia to champion the cause of their community and vent their anger on the oil companies and Nigerian nation for not meeting their aspirations.
The industrial sector also depends on imported inputs, machinery and raw materials from countries like China and the USA. Despite the oil revenues, the private and industrial sectors have remained weak. The economy is now heavily dependent on imports; with almost everything imported, from toothpicks to toothpaste and even dispensers.
Conclusively, it’s worthy of note that nothing lasts forever. Our crude oil is sure to finish one day as it is not a renewable energy. Nigeria only has a window of between 10-20 years to make good planning for renewable energy sources in the future, encourage research which will in turn promote our industries and manufacturing sectors. Our future and that of the world now rest on proper knowledge and planning as they are the only ways to prevent the nation from being engulfed by more deteriorating oil-induced woes.