Ijeh

ASSESSING THE IMPACT OF OVERDEPENDENCE ON
OIL REVENUE TO NIGERIA ECONOMY
BY
IJEH CHUKWUEMEKA ANTHONY
PG/MBA/07/46774
DEPARTMENT OF MANAGEMENT
FACULTY OF BUSINESS ADMINISTRATION
UNIVERSITY OF NIGERIA, ENUGU CAMPUS
NOVEMBER, 2010
1
TITLE PAGE
ASSESSING THE IMPACT OF OVERDEPENDENCE ON OIL

REVENUE TO NIGERIA ECONOMY
BY
IJEH CHUKWUEMEKA ANTHONY
PG/MBA/07/46774
A PROJECT SUBMITTED TO THE DEPARTMENT OF

MANAGEMENT, FACULTY OF BUSINESS ADMINISTRATION,
UNIVERSITY OF NIGERIA, ENUGU CAMPUS IN PARTIAL
FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF
MASTER OF BUSINESS ADMINISTRATION (MBA) IN
MANAGEMENT
SUPERVISOR: DR. C.A. EZIGBO
NOVEMBER, 2010
2
APPROVAL PAGE
The project has been approved for the Department of Management.
.. ..
Dr. C.A. Ezigbo Date
(Supervisor)
. ..
Prof. U.J.F. Ewurum Date
(Head of Department)
3
CERTIFICATION
Ijeh, Chukwuemeka Anthony a postgraduate student in the
Department of Management with Registration Number
PG/MBA/07/46774 has satisfactorily completed the requirements
for the course and research work for the award of Master of
Business Administration (MBA) in Management.
The work embodied in this project is original and has not been
submitted in part or full for any degree of this or any other
university.
.
Dr. C. A. Ezigbo Date
(Supervisor)
.. .
Prof. U.J.F. Ewurum Date
(Head of Department)
. ...
IjehChukwuemeka Anthony Date
(Student)
4
DEDICATION
This project is dedicated to God Almighty and my beloved parents
Sir and Lady E.U. Ijeh for their prayers and financial support
throughout the duration of the programme.
5
ACKNOWLEDGEMENT
An excellent and successful academic work would not have been a
reality without the unalloyed support, aid, advice and
encouragement of well meaning individuals in the society.
My immense thanks first go to the Almighty God for his enabling
grace and love in making the entire programme a success.
My gratitude goes to my project supervisor Dr. C.A. Ezigbo whose
guidance, tolerance, constructive criticisms and understanding
provided the basis for the successful completion of this project.
My thanks also go to the Head of Department Prof. U.J.F. Ewurum
and all the lecturers and Non-academic staff of the Department of
Management for their academic support.
My sincere and special thanks also go to my parents Sir and Lady
E.U. Ijeh for their prayers, efforts as well as their moral and
financial support throughout the duration of the programme. I also
appreciate my siblings, Emmanuel Ijeh (Jnr), Robinson Ijeh,
Christopher Ijeh and my beloved sister Vivian AdaoraIjeh including
Mr. Paul Ijeh, Mr. Wale Ijeh, Mrs. Igba and Mrs. Menye for their
assistance and moral advice.
6
Worthy of recognition are my close friends and course mates,
Richard Ngatu, TerveshimaIgba, Betty, IfeomaIfejika, Nkechi,
Kingsley and Cyril Ukwueze and others who are of assistance in my
academic victory.
Finally, I thank God to whom all the glory is due for his faithfulness.
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ABSTRACT
The research is on Assessing the Impact of Overdependence on Oil

Revenue to Nigeria Economy. The main objective of this study is to
assess the impact of overdependence on oil revenue to Nigeria
economy. Data for this research were obtained from both primary
and secondary sources. The questionnaire served as the main
instrument for data collection. Interview was also conducted so as to
obtain more data. Data analyses were done through the use of
tabular presentation and percentages. Hypotheses were tested
through Chi-square (X2).
The major findings of this study are as follows:
1. Overdependence on oil revenue has more positive impact than
negative impact on Nigerias economic development.
2. Agriculture, Tourism, Taxation & Solid minerals are factors
that could minimize Nigerias overdependence on oil revenue.
On the basis of the above findings, the study concludes that
Nigerian economic growth is highly depended on the oil revenue.
Hence, if there is a glut and fall in oil price in international market,
it may be a great disaster on the economy and to the citizenry of the
country.
From the findings of this study, the following are recommendations:
1. The Nigerian government should focus on the need for
diversification into other sources of revenue in order not to be
affected by fall of oil price in the international market.
2. The government should develop other sectors of the economy
such as agricultural sector, and industrial sector by providing
incentives such as tax concession, provision of facilities needed
by these sectors in order to boost more production.
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TABLE OF CONTENTS
Title page - - - - - - - - - - i
Approval page - - - - - - - - - ii
Certification - - - - - - - - - iii
Dedication - - - - - - - - - iv
Acknowledgements - - - - - - - - v
Abstract - - - - - - - - - - vii
Table of contents - - - - - - - - viii
CHAPTER ONE: INTRODUCTION

1.1 Background of the Study - - - - - - 1
1.2 Statement of the Problem - - - - - - 5
1.3 Objectives of the Study - - - - - - 5
1.4 Research Questions - - - - - - - 6
1.5 Research Hypotheses - - - - - - 7
1.6 Significance of the Study - - - - - - 8
1.7 Scope of the Study - - - - - - - 9
1.8 Limitation of the study - - - - - - 9
1.9 Definition of Terms - - - - - - - 10
References
CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1 History of Crude Oil in Nigeria - - - - - 13
2.2 The Performance of the Oil Sector in Nigeria - - 15
9
2.3 The Impact of Petroleum Sub-Sector on
the Nigerian Economy - - - - - - 20
2.3.1The Negative Impact of Petroleum Sub-Sector
on the Nigerian Economy - - - - - - 21
2.3.2The Positive Impact of Petroleum Sub-sector on
the Nigerian Economy - - - - - - 28
2.4 Impact of Overdependence of Budget on Oil Revenue - 38
2.5 The Need for Independent Revenue Mobilization
for Nigerian Economy - - - - - - 40
2.5.1 State Government and Internal Revenue Mobilization 42
2.5.2 Local Government Revenue Mobilization - - - 42
2.6 Challenges in the Oil Sector - - - - - 44
2.7 Attempts Made by Government to Improve Non-Oil
Sectors - - - - - - - - - 46
2.8 The Level of Importation of Petroleum Products in
Nigeria - - - - - - - - - 48
2.9 Factors that Could Minimize Nigerias Over-
dependence on Oil Revenue - - - - - 51
References
CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Sources of Data - - - - - - - 59
3.2 Population and Sample Size Determination - - 60
3.3 Description of Research Instrument - - - - 61
3.4 Data Analysis Technique - - - - - - 62
10
3.5 Validity of the- Research Instrument - - - - 64
3.6 Reliability of the Research Instrument - - - -
64 References
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS

AND INTERPRETATION
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSIONS AND

RECOMMENDATIONS
5.1 Summary of Findings - - - - - - 94
5.2 Conclusions - - - - - - - - 95
5.3 Recommendations - - - - - - - 95
Bibliography
Appendix
11
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Oil is a major source of energy in Nigeria and the world in general.
Before the advent of oil (Crude oil), agriculture used to be the
mainstay of the Nigerian economy which plays a vital role in shaping
the economic and political destiny of the country (Abolaji1985:2).
In 1960s, agricultural products provided about 80% of the total
export earnings and the main cash crops were cocoa, palm oil,
groundnut etc. In 1962, agriculture accounted for about N229.8
million or 82% of the nations total values of export. Moreso, in 1964
a total of N356.4 million was realized which represented 85% of the
countrys total export for that year.
According to Ezeagu (1979:9), the exportation of agricultural
products was really thriving during these years. However, by 1976
out of N274.2 million that came from export, agriculture
accountedonly for 4% of the nations earnings, even with the take-
over of export financing by the Finance Development House, the
earnings from the non-oil export (which agriculture products
12
dominated) have not improved by the end of 1991. It only managed
to provide 3.8% out of the total revenue. This was as a result of the
oil boom and excess dependence on its revenue or earnings.
During this time, the need and consumption pattern shifted and
became import oriented. Thus, the insatiable desire for importation
of goods became widespread in the nation with its attendant
economic problems.
According to the Statistical Bulletin 1997:60 of the Federal Bureau
of Statistics, the 1970s witnessed a drastic change of Nigeria
economy from one share of agriculture to Gross Domestic Product
(G.D.P) which drastically dropped from about 40% in the early
1970s to about 20% in the 1980s and even 16% in the 1990s. Since
the oil sector assumed a wider dimension to account for about 20%
of Gross Domestic Product (G.D.P), it also accounted for 81% of
government revenue and 96% of export earnings.
Sequel to the oil boom of the 1970s, spectacular change that crept
into the Nigerian economy with devastating effect still lingers on till
today.
13
The heavy dependence on oil as the main source of revenue to the
economy was highly vulnerable. Agriculture was completely
neglected to the extent that Nigeria began to import agricultural
products which were previously exported. The oil revenue kept
declining and the celebrated boom of 1970s became a doom for
the country.
Following the glut in the international oil market from 1982 to date,
the countrys projected revenue has never been attained due to
instability in the price of oil, for instance as at September 1985, the
total federally collected revenue was N20.287 billion. Arene
(1985:25).
In 1987, N29.44 billion was projected as federally collected revenue,
out of which N28.53 billion was envisaged to come from the oil
sector. This raises the question of how successful or to what extent
can this sum be realized when the vagaries of oil market are
considered?
To this end, President Olusegun Obasanjo buttressed his optimism
in which he stated, As a nation, we should be sensitive to oil but
not panic at the falling process rather we should pursue vigorously
14
the current programme already put in place to diversify revenue
sources (Statistical Bulletin 1999:80).
To all intents and purposes, the strengths and weaknesses of Nigeria
economy are tremendously being subjected to the dictates of oil
revenue. It could easily be seen that Nigeria virtually has no control
on the foreign exchange which is in high demand in the country
because of excessive importation of foreign goods which is as a
result of underdevelopment on the part of our industries, for
example, cottage industry.
Furthermore, there is optimism on the part of the federal
government inspite of the instability of the oil market, that the
selling price of the crude oil would be $14 per barrel with the
production base of 1.355 million barrels per day. It is imperative on
the part of the government to seek alternative source to supplement
oil as the major source of revenue.
Moreover, some major areas have been suggested by the experts as a
possible solution that can help salvage the present economic
situation. These are agriculture, mining, deregulation and promoting
manufacturing industries.
15
1.2 STATEMENT OF THE PROBLEM
Crude oil discovery has had certain impacts on the Nigeria economy
both positively and adversely. On the negative side, this can be
considered with respect to the surrounding communities within
which the oil wells are exploited. Some of these communities still
suffer environmental degradation, which leads to deprivation of
means of livelihood and other economic and social factors. Although
large proceeds are obtained from the domestic sales and export of
petroleum products, its effect on the growth of the Nigerian economy
as regards returns and productivity is still questionable. Thus the
study focuses on the impact of overdependence on oil revenue to
Nigeria economy.
1.3 OBJECTIVES OF THE STUDY
The specific objectives of the study include the following:
1. To assess the impact of overdependence on oil revenue to
Nigeria economy.
2. To determine the factors that could minimize Nigerias
overdependence on oil revenue.
16
3. To assess the level of importation of petroleum products in
Nigeria.
4. To evaluate the problems encountered by the Nigerian oil
sector.
1.4 RESEARCH QUESTIONS
The research questions postulated for this study include the
following:
1. What is the impact of overdependence on oil revenue to
Nigeria economy.
2. What are the factors that could minimize Nigerias
overdependence on oil revenue.
3. What is the level of importation of petroleum products in
Nigeria.
4. What are the problems encountered by the Nigerian oil
sector.
17
1.5 RESEARCH HYPOTHESES
For the purpose of this study, the following research hypotheses will
be tested.
1. Ho: Overdependence on oil revenue has more negative impact
than positive impact on Nigerias economic development.
H1 : Overdependence on oil revenue has more positive impact
than negative impact on Nigerias economic development.
2. Ho: Agriculture, Tourism, Taxation and Solid minerals are not
factors that could minimize Nigerias overdependence on oil
revenue.
H1 : Agriculture, Tourism, Taxation and Solid minerals are the
factors that could minimize Nigerias overdependence on oil
revenue.
3. Ho: The level of importation of petroleum products in Nigeria
is high.
H1: The level of importation of petroleum products in Nigeria is
low.
18
4. Ho: Poor funding of investments, Communal disturbances,
Smuggling and diversion of petroleum products and Products
adulteration are not problems encountered by the Nigerian oil
sector
H1: Poor funding of investments, Communal disturbances,
Smuggling and diversion of petroleum products and Products
adulteration are the problems encountered by the Nigerian oil
sector.
1.6 SIGNIFICANCE OF THE STUDY
The study is significant because it assesses the impact of Nigerias
overdependence on oil revenue. Also, the study will help direct
attention of the federal government and the oil sector on the need for
diversification into other sources of revenue like agriculture, for
economic growth.
It will also serve as a reference for future researchers in the same
field.
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1.7 SCOPE OF THE STUDY
The study is on assessing the impact of overdependence on oil
revenue to Nigeria economy. The study focuses on the impact of
overdependence on oil revenue to Nigeria economy, factors that
could minimize Nigerias overdependence on oil revenue, the level of
importation of petroleum products in Nigeria and problems
encountered by the Nigerian oil sector.
However, the study will be carried out in the Federal Ministry of
Finance, Abuja.
1.8 LIMITATION OF THE STUDY
The main constraints of the study include the following:
a. Time
Due to the limited time given for the study, the researcher
could not get all the required information needed for the study.
20
b. Finance
The researcher has not got enough money to embark on the
study and therefore could not visit places where information
relevant to the study could be obtained.
c. Attitude of the Respondents
The attitude of the respondents affected the research work
because some of the respondents were unwilling to co-operate
with the researcher. They felt they have nothing to benefit from
the study.
1.9 DEFINITION OF TERMS
a. Crude Oil
Mixture of naturally occurring hydrocarbon that is refined into
diesel, gasoline, heating oil, jet fuel, kerosene, and literally
thousands of other products called petrochemicals.
b. Gross Domestic Product (GDP)
This refers to the total value of all the goods and services produced
in a country in a year. It is concerned with domestic production and
does not, include net income from abroad.
21
c. Petroleum Products
These are useful materials derived from crude oil (petroleum) as it is
processed in oil refineries.
d. Downstream Sector
The downstream sector of the petroleum industry is a part of the
industry that is responsible for final processing, product distribution
and marketing.
e. Deregulation
This is an act by which the government of a particular industry is
reduced or eliminated in order to create and foster a more efficient
market place.
22
REFERENCES
Abayomi, Y.O. (1977), Revenue Diversification. C.B.N. Bullion:
12(3).
Ugwuanyi, W. (1999), Agricultural Financial Management and Food
Marketing. (1st Edition), Lagos: John Kens and Willy
Publication, Ltd.
23
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 HISTORY OF CRUDE OIL IN NIGERIA
According to C.B.N Bullion Vol.3(13), Oil exploration started in
Nigeria in 1908 by the German Company, Nigeria Bitumen
Corporation, in the Araromi area of the present Ondo State. Their
pioneering effort ended due to the out break of the First World War
in 1914.
In 1937, oil prospecting was resumed by Shell DArcy (forerunner of
the present Shell Petroleum Development Company of Nigeria). The
company was awarded the sole concessionary right covering the
whole territory of Nigeria.
As it was in the beginning, their activities were again interrupted by
the Second World War but resumed in 1947. It was only in 1956
however that oil was discovered in commercial quantities at Oloibiri
in the Niger Delta Area. And in 1958, oil production and export
started from this field by 1961, other companies such as Mobil,
Chevron (formally Gulf), Agip, Safarap (Elf) e.t.c had commenced
exploration activities for oil in on-shore and off-shore area of Nigeria.
24
Consequently, the exploration rights formally granted shell alone
was extended to these new comers.
From an initial quantity of 5,100 barrels per day from the Oloibiri
field, the quantity doubled the following year and by 1972, crude oil
exports from Nigeria rose to 2.0 million barrel per day and reached a
peak of 2.4 million barrel per day in 1979. Consequently, Nigeria
attained the status of a major oil producer, ranking sixth in the
world.
In the early period, Government interest in oil exploration was only
limited to the collection of royalties from the companies and making
rudimentary laws to regulate the activities of the oil industry. This
low interest was partly due to the insignificant contribution of the
commodity to Nigerias economy before the late sixties and the
relatives lack of trained personnel and expertise. By 1971 however,
oil had assumed a different dimension in terms of importance to the
economy. To strengthen and establish government control in the
industry, the Nigerias National Oil Corporation (NNOC) was
established by Decree in 1971. Also in that year Nigeria joined the
OPEC as the 11th member nation.
25
The NNOC was accorded the responsibility for both upstream and
downstream activities in the oil industry. But the regulatory
functions were vested in the Ministry of Petroleum Resources.
As a result of all these developments, Government had acquired a
new stature and so decided to participate actively in the industrys
activities.
In April 1, 1977, a merger was effected between the NNOC and the
Ministry of Petroleum Resources which gave birth to the Nigerian
National Petroleum Corporation (NNPC). NNPC combined the
commercial functions of the NNOC with the regulatory functions of
Ministry of Petroleum Resources. This was to prevent unnecessary
duplication of effort and possible unhealthy rivalry that could be
inimical to the national economy.
2.2 THE PERFORMANCE OF THE OIL SECTOR IN NIGERIA
Odularu(2008), asserts that the Nigerian oil sector can be
categorized into three main sub-sectors, namely, upstream,
downstream and gas. The most problematic over the years has been
the downstream sector, which is the distribution arm and
26
connection with final consumers of refined petroleum products in
the domestic economy. The incessant crisis in supply of products
culminated in the decision by Government in 2003 to deregulate the
downstream sub-sector. However, the manner of its implementation
has been controversial because it ignores the economic realities in
Nigeria.
Oil production by the joint venture (JV) companies accounts for
about 95% of Nigerias crude oil production. Shell, which operates
the largest joint venture in Nigeria, with 55% Government interest
(through the Nigerian National Petroleum Corporation, NNPC),
produces about 50% of Nigerias crude oil. ExxonMobil, Chevron
Texaco, Eni/Agip and TotalFinaElf operate the other JVs, in which
the NNPC has 60% stake.
The overdependence on oil has created vulnerability to the vagaries
of the international market, as observed in the proceeding section
that show the contribution of oil to some macro-economic variables.
In particular, the place of oil in the mind of the average Nigerian has
become more profound since the deregulation of the downstream
segment of the Nigerian oil industry in 2003.
27
The contradiction is more glaring now with the recent rise in crude
oil prices at the global markets, which meant more external earnings
for Nigeria, but also increased the expense burden on imported
refined petroleum products. It is such contradictions that make the
Nigerian economy appear strange at times, as policies seem to ignore
what appears obvious to do. As such, policies designed to address
the deficiencies and defects in the structure end up being poorly
articulated and/or implemented because of regional, political or
rent-seeking selfish interests.
Obviously, it is the same rent-seekers that continually sabotage the
reinvigoration of the domestic refineries, making Nigeria to depend
on importation of refined products to meet the domestic need. At
present, Nigeria has four refineries, with a combined installed
refinery capacity of 445,000 barrels per day (bpd). Theses four
refineries are:
The first Port Harcourt Refinery was commissioned in 1965
with an installed capacity of 35,000 barrels per day and later
expanded to 60,000 barrels per day.
28
The Warri Refinery was commissioned in 1978 with an
installed refining capacity 100,000 barrels per day, and
upgraded to 125,000 barrels per day in 1986.
The Kaduna refinery was commissioned in 1980 with an
installed refining capacity of 100,000 barrels per day, and
upgraded to 110,000 barrels per day in 1986.
The second Port Harcourt refinery was commissioned in 1989
with 150,000 barrels per day processing capacity, and
designed to fulfill the dual role of supplying the domestic
market and exporting its surplus.
The combined capacities of these refineries exceed the domestic
consumption of refined products, chief of which is premium motor
spirit (gasoline), whose demand is stated at 33 million litres daily.
The refineries are however, operating far below their installed
capacities, as they were more or less abandoned during the military
era, skipping the routine and mandatory turn around maintenance
that made products importation inevitable. Importation
notwithstanding, there have been persistent product shortages that
29
gave strength to the argument for deregulation of the downstream oil
sub-sector in Nigeria.
The monetization of oil revenue has been a major factor in liquidity
management in Nigeria. Measuring liquidity as the narrow and
broad money definitions by the CBN, the early 1990s saw increases
that were dampened in 1995 up until the civilian administration
came on board in 1999.
The new Government maintained disciplined fiscal operations for
about one year and thereafter, the floodgates were opened. Since
then, the CBN has been battling to keep liquidity in check, in order
to ensure that it does not create adverse effects on the three key
macroeconomic prices (i.e. interest rate, exchange rate and inflation
rate).
The greatest challenge is when Nigeria generates more revenue from
crude oil sales than it budgeted, like now. Such excesses have
always been monetized, creating marketing distortions and
inflationary pressure. Adedipe (2004).
The same argument goes for deficit fiscal operations in comparison
to the GDP. The pattern of this ratio indicates the optimism that
30
accompanies increase in oil revenue and makes government to
engage in frivolous spending or unnecessary projects. Deficit
spending invariably makes government resort to borrowing from the
Central Bank through the instrument of Ways and Means Advances,
which later convert into short-term debt instruments that are quite
expensive to service at market rates.
2.3 THE IMPACT OF PETROLEUM SUB-SECTOR ON THE
NIGERIAN ECONOMY
According to Ikem (1979), the simple measure of any economy is the
Gross Domestic Product (GDP) which is defined as the value of all
goods and services produced in a given year. One of such sector is
the petroleum sector. The economy is made up of not only the
sectors but also the institutions and operators of both sectors and
the resources (natural and human). The Federal, State and Local
governments, through their annual budgets, operate the economy
and various sectors of the economy. It is conceivable that the
operation of the sectors such as Petroleum has some impacts on the
economy, the performance of the economy also has impacts on the
31
operation of the sector. Each sector is funded in the national budget
and the contribution of all the sectors in any year makes up the
annual budget.
According to Ikem (1979:2), the petroleum industry has had both
positive and negative impacts on the Nigeria economy and there has
been more negative than positive impacts due to poor
implementation of government policies. His position was not shared
by ProfessorAluko who argued that Niger Delta areas have gained
more from petroleum development than Non-Niger Delta areas of the
country.
2.3.1 The Negative Impact of Petroleum Sub-Sector on the
Economy
According to Ikem (1979:2), there is one school of thought, which
holds that the development of petroleum in Nigeria was more a curse
than a credit to the economy. The reasons advanced by this school
are based on the following:
1. Over-dependence on Crude Oil
This has a number of implications, neglect of non-oil sector, a
monoculture economy which is vulnerable to the vagaries of
32
international oil market, among others. Government dependence on
crude oil is reflected on crude oil contribution to gross domestic
product, total government revenue, total level of external reserves
and foreign exchange earnings. This indicated that the economy
since 1975, following the quadrupling of crude oil prices in the world
market in 1973/74, depended on the crude oil sector for more than
80% of foreign exchange earning and value of export, and over 60%
for total revenue. In real terms, the petroleum sector has accounted
for 13 to 22% of the country gross domestic product. In 1980 when
crude oil price of Nigerias Bonny Light was close to $41,000 a
barrel, the sector accounted for 22% of the gross domestic product.
The only sector which accounted more than the petroleum sector in
Nigerias gross domestic product in the 1980s and 1990s is the
agricultural sector. Before 1970 the contribution of the petroleum
sector to the gross domestic product was less than 4%, les than 20%
in value of exports, less than 27% in total revenue and foreign
exchange earnings.
Thus, before 1970 the non-oil sector contributed more to the
economy than the oil sector. The reverse is true in the 1980s and
33
1990s. Hence, Nigerias overdependence on the petroleum sector for
revenue for meeting expenditure needs is borne out by available
statistics.
According to McPherson (2000:9), he wrote that overdependence on
oil causes excessive credit expansion, i.e. when oil revenue get into
the domestic banking system, they are likely to restructure
excessive credit expansion, threatening financial stability. He also
noted that oil development can take resources and investment away
from other sectors of the economy.
2. Neglect of Other Sectors of the Economy
So much has been written on the poor performance of the non-oil
sectors of the economy particularly in their contribution to value of
exports included in non-oil sector made up of roadside economic
activities, including market activities, which are not captured in the
calculation of the gross domestic product, because gains from
petroleum development came from exertion of government and joint
venture oil companies, there was the temptation to go for the fast
tract rather than for slow process of revenue generation in the
agricultural sector, compared with other sectors like manufacturing
34
and solid minerals. Moreover the gestation period between
investment and returns on investment was quicker in the petroleum
sector than other sector. Financiers of projects found the petroleum
sector more promising for realizing returns on their investments
than non-petroleum sector. The markets for petroleum and
petroleum products were more attractive and world wide than the
market for non-petroleum products.
Available statistics shows that Nigeria has proven oil reserves of up
to 25 billion barrels, about 2.2% of total world crude oil reserves, it
also has as much gas reserves and deposits of bitumen. In addition,
it has ample reserves of coal, hydropower, and renewable energy
resources. Over the years the concentration of the government has
been the exploitation of crude oil to the neglect of other non-oil
energy resources with the exception of coal, the exploitation of which
suffered neglect due to Nigerian Civil War.
Another sector that suffered serious neglect is the solid minerals.
Studies carried out by the Geological Survey Department of Ministry
of Solid Minerals, the Raw Materials and Development Council, the
Nigerian Mining Council and the National Steel Council, shows that
35
Nigeria has several mineral resources of commercial quantity and
which could be exploited for export and for domestic uses as a way
to diversify away from the petroleum sector.
However, policy focus in the past was towards crude oil until
Ministry of Solid Minerals was created in 1995.
Even so, due to funding constraints, not much progress has been
made by the ministry to exploit the large deposit of bitumen found in
four states of the federation excluding Enugu were the exploitation
was concentrated in the past.
3. The Negative Impact of the Petroleum Sub-Sector on the
Niger Delta Areas
The Niger Delta, largely made up of Rivers, Edo, Delta, Bayelsa and
Akwa-Ibom States, has had the reputation of being the heart of
petroleum development in Nigeria. In fact the impact of petroleum
on the Nigerian economy cannot be separated from the impact of the
sector on the Niger Delta and the impact of the Niger Delta on the
economy. The government, oil companies and communities have had
36
conflicts and confrontations arising from petroleum exploitation in
the Niger Delta.
However, the negative impacts which development of petroleum has
had on the Niger Delta can be summarized as follows:
Oil population which endangers the plant and animal lives
especially in swampy areas and wetlands.
Gas flaring which makes life uncomfortable at night and
causes excessive heat in areas near the flare.
Inadequate compensation for the destruction of economic
crops especially when corrupt officials prevent the
compensation from reaching the target communities and
individuals.
Unfair share from revenue allocation, particularly the
revenue that came largely from petroleum development.
Marginalization in the development process, poor
infrastructure in the form of roads, electricity, pipe-borne
water particularly in non-urban areas.
37
Limited employment of Niger Delta Citizens in the activities
of petroleum companies and government, petroleum related
projects, like refineries and petrochemical complexes.
Low level of stake holding in all aspects of petroleum
development from exploration to marketing. Loses in lives
and property from violence, from unrest in the Niger Delta.
The above negative impacts are normally listed by the people in the
Niger Delta. The government and oil companies do not always agree
with the allegations. Government over the years has set up panels
and commissions to look into the companies of the Niger Delta and
even set up the organizations like Oil and Mineral Producing Areas
Development Commission (OMPADEC), the Clean Nigeria
Association (CAN), the NigerDelta Development Commission (NDDC)
among others to tackle some problems identified by the people.
It is the poor implementation of the recommendations to improve the
lots of the Niger Delta people rather than the policy that has caused
the negative impact of petroleum development on the economy of the
Niger Delta in particular and that of Nigeria in general.
38
4. Downstream Problems
The production of petroleum products and their distribution are at
the root of energy crises in Nigeria beside the erratic electricity
generation and transmission. Nigeria has four refineries of combined
capacity utilization of 445,000 barrels per day but they operate
below 57% capacity due to corrupt management, poor maintenance,
vandalisation activities, strikes by workers and disruption by irate
youths of some communities. Moreover, downstream is public sector
dominated and riddled with inefficiency, poor funding and low
commitment.
2.3.2 The Positive Impact of Petroleum Sub-sector on the
Economy
This review on the effects of oil will not be complete without
mentioning some of its positive impacts on the economy.
Abolaji (1986:3),pointed out that the best way to assess the positive
impact of petroleum (crude oil) on Nigerian economy is to imagine
Nigeria without crude oil. This would imply that such contribution to
gross domestic product, revenue employment, foreign investment,
39
transfer of technology, returns on investment, balance of payments
etc. would have to come elsewhere.
1. Contribution to Gross Domestic Product
Since 1970, the total revenue of government has been predicted on
the proportion coming from the petroleum sector. This proportion
ranges from 62.4 to 79.8% from 1990-2004.
The extent of realizing this contribution of the petroleum sector has
been dictated by price of oil in the world market, the exchange rate,
the rate of inflation and capacity of Nigeria to meet its share in crude
oil market. Since 1985, the petroleum sector has accounted for an
average of 14% of the gross domestic product in real terms. Thus, it
is easy to predict the level of Nigerias GDP from the revenue from
petroleum sector.
2. Revenue Generation and Utilization
Petroleum revenue comes from petroleum profit taxes, royalty, direct
crude sales by NNPC, penalty for gas flaring and rents. Non-oil
revenue comes from government revenue from its assets, value
added tax, customs and excise tax, company income tax and others
including petroleum special trust fund and accretion to reserves.
40
The impact of government revenue is the support of government
expenditures, composed of recurrent expenses (foreign and domestic
interest payments and other non-debt payment) and capital
expenses (foreign, domestic and non-debt). Any surplus of revenue
over expenditure is used to finance foreign and domestics debts.
Domestic debt include those owed to banking and non-bank
financial institutions and other funds such as net deductions for
loans made to State, Local governments and Parastatals. Over 50%
of debt, owed to the Central Bank of Nigeria. Total domestic debt
was 11.5% and 18.9% of nominal gross domestic product in 1997
and 1998 respectively.
Currently, Nigerias external debts is put out $30.99 billion, made
up of 81.9% to Paris club, 9.6% to London club, 3.8% promissory
notes and 4.7% to non-Paris club bilateral creditors. Debt services,
compromising of principle repayment and other charges is rather
high and gets higher as the country delays in making payments on
schedule or engages in re-scheduling and refinancing. Thus, the
revenue from petroleum is used to meet several governmentsdebt
obligations among others.
41
3. Employment Generation
The petroleum industry is capital technology and skill intensive,
hence it is not considered labour intensive like agriculture, trade
and commerce or manufacturing. However, given the multiplicity of
activities from exploration to marketing, labour requirement for the
petroleum industry including workers in petroleum ministry and
parastatals could be substantial. Labour force in the industry
includes executives and professionals in oil and gas companies,
senior staff, junior staff, service contractors and part time day-job
workers. Both NNPC and oil companies provide professionals and
intermediate technical level training for their workers.
The petroleum industry has produce engineers for various petroleum
operations, geologists, geophysicists, top level administrators who
current provide their services to the industry. NNPC and companies
also provide employment to people from the communities where they
operate, although occasionally some communities complain of
marginalization on the employment of their youths especially restive
ones.
42
To improve the quantity of labour in the petroleum industries, oil
companies offer scholarships to students entering tertiary
institutions to study petroleum and petrochemical engineering,
geology, physics, mathematics, finance, administration and related
subjects. The preponderance of these scholarships goes to student
from the areas where the companies operate, particularly the Niger
Delta. The Petroleum Training Institution Efurum was established in
1973 and it has since trained several technical and intermediate
staff working in NNPC and oil companies. A center for petroleum
studies is being set up in Kaduna for offering courses that will
enhance the knowledge of people interested in the petroleum
industry.
4. Foreign investment
The activities of multinationals in the petroleum sector, Shell, Mobil,
Chevron, Agip, Elf, Texaco involve inflow of foreign investment in the
form of expertise, plant and equipment used in the petroleum
industry, inflow of funds and finance for meeting expenses.
Investments in industrial core projects that use petroleum as inputs
fertilizers, aluminum, cement and steel plants.
43
In the 1970s the oil boom affected the pattern of investment.
Foreigners were falling over each other to lend to Nigeria. According
to one assessment, the oil boom allowed the public sector to become
the prime mover of the economy through investment of the growing
oil revenue in social, physical and economic infrastructure.
These include huge and expensive manufacturing projects such as
steel mills and papers rolling mills considered by many today as
drain pines. Besides, government investment activities were largely
urban based resulting in the focus of economic activities shifting
sharply to construction commerce and service sectors.
In the mid 1980s crude oil projects suffered capacity under-
utilization due to lack of funds for maintenance and purchase of
spare parts. In the 1990s government took some bold steps to make
the country investment friendly. These steps included the
promulgation of the Nigerian Investment Promotion Decree of 1995
and the Foreign Exchange (Monitoring and Miscellaneous
Provisions) Decree 17, of 1995. In addition government set out to
privatize several public sector enterprises especially in the power
and petroleum sectors.
44
In the petroleum sector there are several investment opportunities
some of which have already attracted significant foreign
investments. These include:
Improvement in the reserve additions which ensures the
investor profit margin of $2.30 a barrel.
Service contracts to provide specialized services like seismic
surveys, data acquisition, processions and interpretation,
wire logging and core analysis.
Bitumen development, pipeline development for natural gas
projects.
Acquisition of routing for bulk liquefied petroleum gas
transportation.
Production fabrication and project financing for
petrochemical industry
Compressed natural gas cylinder manufacturing
Refining, distribution and marketing of petroleum products
and crude oil transportation by Nigeria flagged ocean going
vessels now dominated by foreign vessels.
45
5. International Trade
No other sector of the economy has brought the gains from
international trade to Nigeria since 1975 more than the petroleum
industry.
The sector accounted for 85.6 to 97.7% of total value of exports
between 1975 and 1999. This means that non-petroleum exports
could manage 2.3 to 14.4% of total export during the same period.
The destination of Nigerias trade in petroleum is principally the
United States and Western Europe which accounted for 49.3% and
20.1% of the total in 1998. Nigerias membership and active
participation in the Organization of Petroleum Exporting Countries
(OPEC) is due to the petroleum sector. Nigeria accounts for 7 to 8%
of total OPEC crude oil production and 3.2% of total OPEC proven
crude oil reserves. In accounts for a significant proportion of OPEC
gas reserves having recently joined the club of liquefied natural gas
exporters. Nigeria has the potential to play a major role in
international energy-petroleum issues, but optimal harnessing of the
potential is the question.
46
6. Balance of Payment
A countrys position in terms of favourable or unfavourable balance
of payment determines its strength in international trade with any
other country and with the rest of the world. The principal
contribution of increase in revenue from crude oil is to improve the
countrys balance of payment positions.
The impact of foreign exchange proceeds from the petroleum sector
is traceable to foreign exchange that accrues to economy vis-a-vis to
oil companies. Oil companies are allowed to keep the foreign
exchange earned from crude oil and only to bring back to Nigeria the
portion necessary to pay for local expenses. It was only recently that
non oil exporters were allowed to keep foreign exchange earned from
exports and repatriate some to Nigeria via domiciliary accounts. The
financial arrangements between the government and oil companies
had placed the government at a disadvantage because it appeared
that foreign exchange earnings are not maximized. This statement
was made as far back as 1973. It appears to be still true judging by
the receipts coming to government by ways of unstable petroleum
profit tax, royalties and penalty from gas flaring.
47
Overall, however it is the foreign exchange earning from oil and non-
oil sectors that enhance Nigerias balance of payment. Surpluses in
balance of payment are associated with those years when crude oil
prices were high and increasing. The reverse is true of those years
when there were deficits and low oil prices especially when non-oil
exports were not substantial.Balance of payments is recorded in
current, capital and services accounts.
Over the years, especially in periods of high crude oil prices, the
surplus in current account of oil sector is used to moderate the
deficit in non-oil sector. The result is a swing from balance of
payment deficit to surplus. Available statistics since 1990 shows
balance of trade was in surplus except for the year 1998 when crude
oil prices fell to as low as $10,00 a barrel.
The best suggestion for the future is to minimize the negative
impacts through credible policy reform and judicious
implementation of policy measures for example, the development of
the Niger delta and other sectors of the development of the Niger
Delta and other sectors of the economy. In addition the positive
48
contribution should be maximized also through enlightened policy
reforms.
2.4 IMPACT OF OVERDEPENDENCE OF BUDGET ON OIL
REVENUE
According to the Statistical Bulletin of the Federal Bureau of
Statistics, over 80% of total federally collectable revenue is expected
every year from oil sector. In addition large proportions of estimated
budget deficit are always financed from excess crude oil revenue. In
a situation where government expenditure depends solely on a
revenue derived from a resources with a volatile price, the objectives
of the budget may not be fully realized if prices fall.
For instance, the budget of 2000 which was the firstfull budget to be
formulated and implemented by the civilian administration in
Nigerias third republic, which the initial conditions of the budget
were one, in which the external front, the economy was
characterized by the notorious and lingering problems of high
external debts overhang, heavy import dependence, high export
49
concentration in favour of petroleum oil, and the related problem of
low level of non-oil export competiveness.
On the domestic front, economic growth was still stunted as the
Gross Domestic Product (GDP) grew at the rate of 2.7%, both the
private sector and the industrial base were weak, agricultural
productivity remained low, the incidence of poverty was
outrageously high, at more than 60% of the population, the rate of
unemployment was yet to abate, but inflationary pressures had been
successfully contained as the rate of inflation was about 6.6% at the
end of 1999. All this shows that the performance of the Nigerian
economy was lackluster and needed to be salvaged, it was on this
basis that 2000 budget was drawn. But the government failed to
achieve the aim of this budget due to overdependence on oil revenue
and poor implementation.
So in this case, there is a dire need for a fundamental restructuring
of the economy away from the petroleum sector, good governance is
the only condition for economic recovery and development, and the
economy should remain open within the frame work of globalization
and liberalization of trade and exchange.
50
2.5 THE NEED FOR INDEPENDENT REVENUE MOBILIZATION
FOR NIGERIAN ECONOMY
Independent revenue is defined as revenue accruable to federal,
state or local government other than revenue paid into the
Federation Account. This literature review will attempt to examine
what proportion of revenue collected by the federal, state and local
government is derived from independent sources and how the three
tiers of government can enhancetheir development programmes
instead of depending solely on oil revenue.
In a federal system of government, financial relation shop among the
different tiers of government, as pointed out by Olaku (1979) in the
most if not alI federal countries, one of the most constant sources of
inter-governmental wrangles center on the part of the lower levels of
government to discharge essential political and constitutional
responsibilities, thus in the case of Nigeria, almost all regimes from
colonial period to the present have been facing the problem of how to
distribute revenue from Federation Account among the different
levels of government to the satisfaction of all concerned.
51
According to the report of the political bureau (1987) as many as
thirteen different attempt have been made at devising an acceptable
revenue allocation formular (for the country) each of which is more
remembered for controversies it generated than issues settled.
Perhaps the contentions, conflicts and controversies generated by
revenue allocation would have been minimized if the different tiers of
governments had adequately mobilized all the sources of internal
revenue available to them. An examination of the years for which
figures are available on the mobilization of independent sources of
revenue by the different levels of government has revealed that very
little efforts have been made to mobilize revenue internally.
The Federal Government independent revenue accounted for a very
insignificant part of the non-oil revenue.
The major sources of internal revenue available to the Federal
Government include Company Income Tax, which is levied on profit
of companies, Capital Gain Tax and Personal Income Tax from
Armed Forces, Police and Foreign Affairs.
52
2.5.1 State Government and Internal Revenue Mobilization
The sources of independent revenue available to state governments
include personal income tax, motor vehicle license, educational
development tax, school fees, fees derived from pools promoters,
property tax, registration of business, premises, economic
development levy paid by business concerns in the states, company
tax, sales of agricultural produce, etc. In order to generate enough
revenue through independent sources, it is necessary for the state
government to establish tax offices not only in local government
areas but also at clan ward and village levels. Popoola (1993:9).
2.5.2 Local Government Revenue Mobilization
According to Popoola (1993:9), the situation regarding local
government revenue is not different from what is obtainable in the
states. Prior to the 1979 local government reforms, which made
provision for local governments to have allocation from Federation
Accounts, Local Governments used to derive a great part of their
revenue from independent sources. However, after 1976 reforms
53
almost all the local governments in the country become complacent
and depended almost entirely of Federal allocation.
The above situation where the Federal, State and Local Government
depend entirely on the revenue from Federation Account a great part
of which comes from oil and customs and excise revenue is
dangerous.
Oil is not an inexhaustible source of revenue and it is not good to
depend on a commodity whose price fluctuates depending on events
in the other parts of the world.
Moreover, Nigeria membership of many international trade
organizations may in future reduce her revenue from Customs and
Excise Duties. Efforts must therefore be made to tap the various
sources of internal revenue available to the Federal, State and Local
Governments as we have examined.
Finally, revenue collection is a national service, which calls for
dedication, honesty, patriotism and hard work.
One controversial issue in the mobilization of internal sources of
revenue by the various tiers of government is that the contractors
are better equipped to collect revenue for them. It is doubtful
54
whether these contractors have performed better than state and
local government employees since the introduction of the
contractors.
Moreover, the use of the contractors is illegal since the constitution
grants the powers of revenue collection to the different levels of
government and not to the contractors.
It is recommended that State and Local governments should train,
motivate and equip their personnel properly for tax collection and
stop depending on federal government allocation from oil revenue.
2.6 CHALLENGES IN THE OIL SECTOR
Ezeagu (1979:9), pointed out that the oil sector has been plagued by
various problems which undermined its optimal development over
the years.
In general terms, the oil sector of the Nigerian economy in the 1990s
faced (and still faces some of) the following problems.
1. Public control and Bureaucracy
The Nigerian National Petroleum Corporation (NNPC) is controlled by
the Ministry of Petroleum Resources. It lacks autonomy, as a result
55
of which decision taking is often bureaucratic and unnecessarily
delayed. Therefore, the operation of the NNPC is characterized by
inefficiency, especially in refinery operations, distribution and
marketing.
2. Poor Funding of Investments
Frequent delays in the payment of cash calls to the joint venture
operators have tended to discourage increase in the level of
investment by the oil companies. Insufficiency of funds has also
constrained adequateequipment maintenance and efficient refinery
operations by the NNPC. The Federal Governments delays in the
paymentof cash calls for its JV operations in the upstream sub-
sector, focusing more on maintenance rather than growth.
3. Communal Disturbances
There had been frequent communal disturbances which disrupts
crude production as oil communities clamour for higher stake in oil
operations.
4. Smuggling and Diversion of Petroleum Products
There are reported cases of massive smuggling of petroleum
products across the borders in quest for foreign exchange and to
56
take undue advantage of the lower domestic prices vis--vis
neighbouring countries prices.
5. Fraudulent Domestic Marketing Practices
Some marketers hoard products in periods of scarcity in order to sell
in the black market at higher prices.
6. Products Adulteration
This is encouraged largely by price differential of some products and
the proliferation of illegal sales outlets where some adulterations
occur.
2.7 ATTEMPTS MADE BY GOVERNMENT TO IMPROVE NON-OIL
SECTORS
According to Ezeagu (1993:99), the government has made different
attempts to improve the non-oil sector such as the Green Revolution
(GR), Operation Feed the Nation (OFN), Structural Adjustment
Programme (SAP) and Family Support Programme (FSP).
In consonance with this, Emekekwe (1997:504) added that Nigeria
Export and Import Bank (NEXIM) is also one of the attempt
measures taken to improve non-oil sector. It was meant to support
57
farmers and other small scale exporters to have direct access to
international market. Other attempts introduced by government to
improve the non-oil sector are the protection of domestic industries
against unfair competition from imports and dumping enhancement
of capacity utilization in agriculture, manufacturing and mining
industries, economic empowerment of both rural and urban
dwellers, and upgrading of social and economic infrastructure.
Others are the increase on budgetary allocation to the Education,
Health, Energy and Agricultural Sectors, incentive for investments in
manufacturing, agriculture and mining.
And not forgetting the greater one, which is Poverty Alleviation and
Equity, the Poverty Alleviation Programme (PAP) was launched in the
year 2000 to address the problem of high incidence of poverty in the
country. This programmewas geared towards socio-economic
empowerment of the people. Socio-economic empowerment was to
be achieved through programme targeting and direct provision of
employment opportunities.
Ezeagu (1993:107), still went ahead to maintain that all these
attempts failed due to poor implementations and mismanagement of
58
funds, by those in charge, given the poor performance of agriculture
in recent years and rapid growth of import substituting industries.
He also maintained that the manufacturing sectors have been
experiencing shortage of raw materials, and that the Operation Feed
the Nation (OFN) and its successors, have largely become conduit
pipes for wasting public funds, for they have not made any
meaningful impact on agricultural output nor to other sectors of the
economy.
2.8 THE LEVEL OF IMPORTATION OF PETROLUEM PRODUCTS
IN NIGERIA
According to newswatch magazine of 1st April 2001, federal
government decides on massive importation of petroleum products
to forestall scarcity that could be triggered by the shut down of
refineries for repairs. These may not be the best times for Nigerian
refineries. The Kaduna refinery has been shut down, barely six
months after it resumed production. Before then, both Kaduna and
Warri refineries had suffered inactivity for two years, following the
59
blow up of Chanomi Creek pipeline, which is a feeder pipeline to the
two refineries.
Consequently, the refining capacity would be below expectation. The
nations refining capacity had fallen below 30 percent. At full
capacity, all the refineries can refine 445,000 barrels of petroleum
products daily. But Nigerias petrol need is said to be about 30
million litres per day, and has been projected to hit 40 million litres
in a few years time. Before February 2006, Nigeria was spending
between $3million and $5million daily on importation of petroleum
products. With the almost non-production of petroleum products in
the country, the federal government has decided to import, to
forestall scarcity.
Ajuonuma, group general manger, public affairs of the Nigerian
National Petroleum Corporation, NNPC, said that fears of any
scarcity were erroneous, because the federal government has put in
place a comprehensive plan to increase the level of products, so as
to meet local consumption need.
Ogun, President and Natural Gas Senior Staff Association of Nigeria,
PENGASSAN, said that the federal government has no reason to
60
import fuel given the status of Nigeria as an oil producing country.
It does not make sense that we have oil and yet import the same
product from abroad. It tells us the need to have more refineries,
especially private ones, because the earlier it is for us to stop
importation, the better for this country, he added that to guard
against further importation of petroleum products, the major oil
companies should be given a mandate to construct refineries within
a time frame or be made to face sanctions.
Korodo, Zonal Secretary National Union of Petroleum and Natural
Gas Workers said There is an urgent need for the government to
allow private sector to run the plants because the situation at
present shows that government is not competent to mange the
refineries efficiently, he said, adding, with that situation right now,
it means government would spend over $5million on daily
importation of petroleum products to meet domestic demands.
Nigeria regarded as one of the major exporters of crude oil in the
world, does not have functional refineries, but depends totally on
importation of petroleum products for domestic consumption.
61
2.9 FACTORS THAT COULD MINIMIZE NIGERIAS
OVERDEPENDENCE ON OIL REVENUE
Abayomi (2006),stated that it is necessary that a number of factors
should be considered if success is to be achieved in a bid to diversify
revenue. The factors are:
1. Agriculture
Agriculture used to be the mainstay of the Nigerian economy which
plays a vital role in shaping the economic and political destiny of the
country. Agriculture has been the foundation of industrialization
throughout the world because without agriculture, there would have
been no industrial revolution in the first place. Agriculture provided
the raw materials for the manufacturing industries. The industries,
in turn, fuelled the expansion of agriculture to meet their raw
materials needs and the food needs in industrialized nations.
A report of the economic survey of Nigeria conducted in 1959 at the
instance of the Federal Government, showed that we earned 95.4
million pounds from yam exports and 86.1 million pounds from the
export of cassava and garri. On the other hand, only 30 million
pounds& 25 million pounds came from agriculture and cocoa
62
respectively. A recent report released by the Food and Agriculture
Organisation, FAO, of the United Nations showed that in 2008,
Nigeria earned N56 billion naira from yam export. Nigeria is
regarded as one of the biggest poultry producer in Africa, corporate
poultry as increased from 40 million birds annually to about 70
million.
Agriculture is said to be a surer and more lasting source of revenue
and a mighty grass root empowerment tool while our oil revenue is
applied to complement agricultural & other viable sources of
revenue (Isah, 2009).
2. Tourism
Tourism is also a factor thatcan aid less reliance on oil revenue for
economic development and also a source of revenue for the country.
The reality on ground is that tourism has become one of the most
important global industries of today. With the increasing ease of
travel and smoothness of movement across international boundaries
the Nigeria tourism sector boasts of being one of the worlds biggest
export earner generating enormous foreign exchange earnings and
employment. It is no longer in doubt that tourism has become a
63
catalyst for growth in Nigeria and in many countries like Australia,
Cyprus, Kenya, etc, as it brings in substantial revenues for
governments whilst stimulating greater investments in
infrastructure which ultimately contributes to improved living
conditions for the people.
Between the years 2000-2006, tourism was the second largest
foreign exchange earner after manufacturing for the Malaysian
Government. 2006 saw a 6.8% growth rate in tourist arrivals in
Malaysia with a 13.5% increase in receipts. In terms of employment,
it is estimated that this industry accounts for remarkable 1,344,000
jobs of which 492,320 are direct employment.
Nigeria and indeed Africa is well known for their more than the
usual hospitality. The traditional Nigerian society dwells richly in
welcoming guests, strangers and visitors using various approaches
and means. Locations such as beaches ideal for different kinds of
games, unique wildlife, vast strips of unspoiled nature ranging from
tropical forest, magnificent waterfalls and great artworks showcasing
lifestyle and creativity of the Nigerian people.
64
Some of these natural locations, sights and sounds of the people
have been developed into tourism sites widely sought after by local
and foreign tourists.
The tourists sites which have attracted good number of visitors
include Obudu Cattle Ranch in Calabar, Mambilla Plateau in Taraba
State, Yankari Game Reserve in Bauchi State, Oguta Lake in Imo
State, Lagos Sunburn Yatch Hotel. Beautiful festivals include, the
OsunOsogbo Festival, The Argungu Fishing Festival, Ine Festival in
Delta State, and the Iwa-Akwa Festivals in Imo State.
Ward (2008), an experienced hospitality consultant, and currently
the award winner of African Investors 2008 Tourism Investor
Adviser of the year in one of his article positioned that tourism is a
potential growth sector and a source of revenue for Nigeria.
(Ogene.wordpress.com/2009/02/04/vision-20-2020-developing-
sustainable-tourism).
3. Taxation
Taxation is a tool for economic growth and has been proven to be a
veritable source of revenue for sustenance of most economies,
including Nigeria. Nigeria derives its budgetary revenue from
65
taxation primarily from petroleum profit taxation, import and excise
duties, and mining rents and royalties. Petroleum taxation accounts
for 65 percent of the budgetary revenues. As of May 2000 the tax
rate for assessable petroleum profit was 85 percent. In March 1995,
the government established a new tariff structure levying taxes on
imported goods, ranging from 5 to 60 percent. Import tax is non-
preferential and applies equally to all countries. Import duties are
either specific or advalorem (value-added tax, VAT) depending on the
commodity. In 2000 the VAT rate was 5 percent.
Other sources of revenue from taxation include companies income
tax (30 percent of assessable profit), capital gains tax (10 percent of
capital gains), various types of licenses, and personal income tax.
Employees pay as they earn. Such taxes are deducted at monthly
pay periods by employers for the federal treasury.
(www.nationsencyclopedia.com/2009/economicsandtaxation).
In 2000 the tax rate varied from 5 to 25 percent of cumulative or
total taxable income. The government sought to collect the taxes by
introducing tax clearance certificates. Individuals had to produce
such certificates proving that they had paid their taxes, before
66
receiving government benefits, holding public office, or receiving
passports for foreign travel.
Many countries around the world have built their economies mainly
on a well organized tax system & these economies have succeeded
without any natural resources.
4. Solid Minerals
Sustainable development of the solid minerals sector has been
identified as fundamental to the diversification of the nations
economic dependence on oil and gas. President Yaradua noted
hatthe Ministry of Mines and Steel Development have embarked on
coal to power project and also the development of the nations
bitumen resources through competitive bidding as provided for
under the Nigeria Minerals and Mining Act 2007 stressing that
eleven strategic coal clusters have been identified across the country
to generate electricity of at least 600 mega watts over the next 20 to
30 months and beyond under the Independent Power Project to
ensure that operators with the financial & technical ability are
attracted to the sector.
(www.mmsd.gov.ng/Newsletter/solid_minetrals)Dev_Key.asp)
67
REFERENCES
Abayomi, Y.O. (2006), Revenue Diversification, C.B.N. Bullion: Vol.

2(3).
Abolaji, M.E. (1986), The Role of Banking Sector in Agricultural

Financing. C.B.N. Bullion: 3(13).
Adenikinju, A.F. (1998), Productivity Growth and Energy

Consumption in Nigeria Manufacturing Sector.A Panel Data
Analysis Energy Policy 26(3).
Alade, S.O. (2001), Analysis of the Year 2001 Federal Government

Budget. C.B.N Bullion: 25(1).
Anyanwu, J.C. et al: (1997), Structure of Nigeria Economy.

Onitsha:Hybrid Publication.
Chinemelu, C.A. (1994), Macro Economic Concept and Applications.

Onitsha: Published by Communication Ltd.
Emekekwue, P. (1977), Corporate Financial Management (3rd

Edition), Zaria, A Publication of Base/OAU.
Ikem, A.A. (1990), The Impact of Oil on a Developing Country: The

Case of Nigeria. New York: Praeger Publishers.
Maclean, M. (1958), Concentration of Export and Import

Comparison. Economic Journal: Vol. 68(60) Lagos: Nigeria
Economic Society Publication.
Popoola, S.A. (1993), Nigeria Energy Resources Endowment and

Principles of Revenue Allocation.Energy Policy Agenda for
Nigeria. Ibadan: Evans Brothers Publication Ltd.
68
Marketing (1st Edition), Lagos: John Kens and Willy
Publication Ltd.
Isah. (2009), www.leadershipnigeria.com)
Obasi, S. (2008), Newswatch Magazine Respondent

www.newswatchngr.com
Ogene.wordpress.com/2009/02/04/vision-20-2020-developing-
sustainable-tourism.
www.mmsd.gov.ng/newsletter/solid_minerals_dev_key_key.asp.
www.nationsencyclopedia.com/2009/economicsandtaxation.
69
CHAPTER THREE
RESEARCH METHODOLOGY
The aim of this chapter is to discuss the methods and procedures
adopted by the researcher in carrying out the research work. The
chapter contains sources of data, population and sample size
determination, description of research instrument, data analysis
techniques, validity of the research instrument and reliability of the
research instruments.
3.1 SOURCES OF DATA
The sources of data for this study include:
a. Primary source
b. Secondary source
Primary Source of Data
These are first hand information. The primary data collected are
from personal interview and questionnaire.
Copies of the questionnaire were given to the staff of Federal
Ministry of Finance, Abuja.
70
Secondary Source of Data
Secondary data are facts that the researcher collected from already
existing sources. The secondary sources from which data is
generated are text books, journals, newspapers, magazines, lecture
notes and articles.
3.2 POPULATION AND SAMPLE SIZE DETERMINATION
The staff strength of Federal Ministry of Finance, Abuja stand at
640. Based on the population of Federal Ministry of Finance, Abuja
the sample size was determined at 5% error tolerance and 95%
degree of confidence, using the Yamane formular:
n = N
1 + Ne2
Where:
n = The relevant population size.
N = Total number of staff.
e = Sampling error (5%)
71
From the study, the sample size is computed as
n =
= 399.3
3.3 DESCRIPTION OF RESEARCH INSTRUMENT
The following instruments were used to collect data for this research
work.
1. Questionnaire.
2. Interview.
QUESTIONNAIRE
This is a set of questions designed to help the researcher get the
necessary information needed for the study. The questionnaire
72
contains seventeen questions (17) consisting of multiple choice
questions and open ended questions.
INTERVIEW
Key staff of the organization were interviewed orally. The response
from the interview were used to complement the questionnaire.
3.4 DATA ANALYSIS TECHNIQUES
The data collected was subjected to simple statistical treatment.
Firstly, they were organized and presented in tables. Also, Chi-
square X2 statistical test method was used to test the hypotheses.
The formular for Chi-square is given as:
Where X2 = Chi-square
0 = The Observed frequency.
E = Corresponding Expected Frequency.
K = Level of significance.
73
= Degree of freedom.
= Summation sign.
The Chi-Square Test (X2)
X2 test provides the basic for testing whether more than one
population may be considered equal. X2 provides a means of
comparing a set of observed frequencies with a set of expected
frequencies. The calculated X2 will be compared with the critical
value of the X2. The difference will form the basis for accepting or
rejecting the null hypothesis.
Decision Rule
The rule is to reject the (Ho) null hypothesis if the calculated X2 is
greater than the critical value of X2, otherwise do not reject. This
means that if the (Ho) null hypothesis is rejected, the alternative
hypothesis (H1) will be accepted.
74
3.5 VALIDITY OF THE RESEARCH INSTRUMENT
To ensure that the research instruments applied in the work are
valid, the researcher ensured that the instruments measure the
concepts they are supposed to measure. The questionnaire was
properly structured and a pre-test was conducted on every question
contained in the questionnaire to ensure that they are valid. Also,
the design of the questionnaire was made easy for the respondents
to tick their preferred choice from the options provided. Response
validity was obtained by re-contacting the individuals whose
responses appear unusual or inconsistent.
3.6 RELIABILITY OF THE RESEARCH INSTRUMENT
A reliability test was also conducted on the instrument to determine
how consistent the responses are. Reliability is defined as the degree
to which similar outcomes are produced by a measuring instrument
when used in different situations. Onwumere (2009:68).
The researcher utilized the test/retest method of reliability testing
whereby the questionnaire was administered at two different times
to the same group of respondents. A time lag of 3 weeks was allowed
75
to ensure that the respondents do not have their earlier responses in
memory.
A correlation of the two sets of observations was conducted and it
reveals a high degree of association which indicates that the
measure is very reliable.
76
REFERENCES
Akuezuilo, E.O. (1993), Research Methodology and Statistics.

Awka: NuelCenti Publication Ltd.
Nwabuokei, P.O. (2001), Fundamentals of Statistics.

Enugu: Koruma Publication Ltd.
Onuh, MO. (1998), Applied Statistical Techniques for Business and

Sciences: Owerri: CRC Publication Ltd.
Robert, G.O. (1996), Principles and Procedures of Statistics. New

York: McGraw Hill Book Publishing Company.
Tinuke, L.J. and Adami, S.O. (1985), Statistics for Beginners.

Ibadan: Evans Brothers Publishers Ltd.
77
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.0 INTRODUCTION
This chapter is aimed at presenting, analyzing and interpreting the
responses obtained from the questionnaire administered.
TABLE 1:
4.1 QUESTIONNAIRE DISTRIBUTION
Category Questionnaires Percentage Questionnaires Percentage Questionnaires Percentage
distributed distributed returned returned not returned not Returned
Management 5 1.25 5 1.25 - -
staff
Senior staff 96 24.06 94 23.56 2 0.50
Junior staff 298 74.69 288 72.18 10 2.50
Total 399 100 387 97 12 3
It was observed that out of 399 questionnaires distributed, 12
representing 3% were not returned while 387 representing 97% were
returned.
78
Table 2: Question 7
Overdependence on oil revenue has more positive impact than
negative impact on Nigerias economic development?
Option Responses Percentages (%)
Agree 183 47.29
Strongly agree 189 48.84
Disagree 8 2.06
Strongly disagree 7 1.81
Total 387 100
From the table above, 183 representing 47.29% of the respondents
indicated Agree, 189 representing 48.84% of the respondents
indicated Strongly agree, 8 representing 2.06% of the respondents
indicated Disagree, while 7 representing 1.81% of the respondents
indicated Strongly disagree.
This shows that overdependence on oil revenue has more positive
impact than negative impact on Nigerias economic development.
79
Table 3: Question 8
What are the negative impact of petroleum sub-sector on the Niger
Delta areas?
Oil pollution 103 26.61
Gas flaring 102 26.36
Inadequate compensation for the 80 20.67
destruction of economic crops
Limited employment of Niger 102 26.36
Delta citizens in the activities of
petroleum companies.
Total 387 100
indicated Oil pollution, 102 representing 26.36% of the respondents
indicated Gas flaring, 80 representing 20.67% of the respondents
indicated Inadequate compensation for the destruction of economic
crops, while 102 representing 26.36% of the respondents indicated
80
Limited employment of Niger Delta citizens in the activities of
This shows that the negative impact of petroleum sub-sector on the
Niger Delta areas include:
1. Oil pollution.
2. Gas flaring.
3. Inadequate compensation for the destruction of economic
crops.
4. Limited employment of Niger delta citizens in the activities of
81
Table 4: Question 9
What are the positive impact of petroleum sub-sector on Nigerias
economy?
Contribution to Gross Domestic 109 28.17
Product
Revenue generation & utilization 97 25.06
Employment generation 88 22.74
Foreign investment 93 24.03
Total 387 100
The table above shows that 109 representing 28.17% of the
respondents indicated Contribution to Gross Domestic Product, 97
representing 25.06% of the respondents indicated Revenue
generation & utilization, 88 representing 22.74% of the respondents
indicated Employment generation, while 93 representing 24.03% of
the respondents indicated Foreign investment.
This shows that the positive impact of petroleum sub-sector on
Nigerias economy include:
82
1. Contribution to Gross Domestic Product.
2. Revenue generation & utilization.
3. Employment generation.
4. Foreign investment.
Table 5: Question 10
Do you think that Nigerias overdependence on oil revenue could be
minimized?
Yes 377 97.4
No 10 2.68
Total 387 100
respondents indicated Yes, while 10 representing 2.68% of the
respondents indicated No.
This shows thatNigerias overdependence on oil revenue could be
minimized.
83
What are the factors that could minimize Nigerias overdependence
on oil revenue?
Agriculture 187 48.32
Tourism 70 18.1
Taxation 80 20.67
Solid minerals 50 12.91
Total 387 100
respondents indicated Agriculture, 70 representing 18.1% of the
respondents indicated Tourism, 80 representing 20.67% of the
respondents indicated Taxation, while 50 representing 12.91% of the
respondents indicated Solid minerals.
This shows that the factors that could minimize Nigerias
overdependence on oil revenue include:
1. Agriculture.
2. Tourism.
84
3. Taxation.
4. Solid minerals.
Sustainable development of the solid minerals sector has been
economic dependence on oil and gas?
Agree 182 47.03
Disagree 7 1.81
Total 387 100
respondents indicated Agree, 194 representing 50.13% of the
respondents indicated Strongly agree, 7 representing 1.81% of the
85
respondents indicated Disagree, while 4 representing 1.03% of the
respondents indicated Strongly disagree.
This shows that sustainable development of the Solid minerals
sector has been identified as fundamental to the diversification of
the nations economic dependence on oil and gas.
Would you say that oil sector of the Nigerian economy faces some
problems?
Yes 380 98.2
No 7 1.80
Total 387 100
indicatedYes, while 7 representing 1.80% of the respondents
indicated No.
This shows that the oil sector of the Nigerian economy faces some
problems.
86
What are the problems faced by the Nigerian oil sector?
Public control & bureaucracy 194 50.13
Poor funding of investments 79 20.41
Communal disturbances 64 16.54
Products adulteration 50 12.92
Total 387 100
respondents indicated Public control & bureaucracy, 79
representing 20.41% of the respondents indicated Poor funding of
investments, 64 representing 16.54% of the respondents indicated
Communal disturbances, while 50 representing 12.92% indicated
Products adulteration.
This shows that the problems faced by the Nigerian oil sector
include:
1. Public control & bureaucracy.
2. Poor funding of investments.
87
3. Communal disturbances.
4. Products adulteration.
Federal government decides on massive importation of petroleum
products to forestall scarcity?
Agree 183 47.29
Disagree 9 2.33
Total 387 100
88
This shows that federal government decides on massive importation
of petroleum products to forestall scarcity.
What is the extent of importation of petroleum products in Nigeria?
High 9 2.33
Very high 8 2.06
Low 189 48.84
Very low 181 46.77
Total 387 100
indicatedHigh, 8 representing 2.06% of the respondents indicated
Very high, 189 representing 48.84% of the respondents indicated
Low, while 181 representing 46.77% of the respondents indicated
Very low.
This shows that the extent of importation of petroleum products in
Nigeria is low.
89
Nigeria regarded as one of the major exporters of crude oil in the
world, does not have functional refineries but depends totally on
importation of petroleum products for domestic consumption?
Agree 182 47.03
Disagree 8 2.06
Total 387 100
This shows that Nigeria regarded as one of the major exporters of
crude oil in the world, does not have functionalrefineries but
90
depends totally on importation of petroleum products for domestic
consumption.
4.2 Hypothesis Testing
In this section, the hypothesis associated with the study will be
tested. The data already presented in this chapter will be used in
testing the hypothesis.
Hypothesis 1
Ho: Overdependence on oil revenue has more negative impact than
positive impact on Nigerias economic development.
H1: Overdependence on oil revenue has more positive impact than
negative impact on Nigerias economic development.
91
TABLE 2: QUESTION 7
Overdependence on oil revenue has more positive impact than
Agree 183 47.29
Disagree 8 2.06
Total 387 100
Tools of computation
Using Chi-square X2 = (Fo Fe)2

Fe
Where;
Fo = Observed frequency
Fe = Expected frequency
= Summation sign
Level of significance = 0.05 or 5%
Degree of freedom = (Row 1) (Column 1)
92
= (4 -1) (2 1)
= (3) (1)
= 3
At 1 degree of freedom, 0.05 level of significance
X2 = 7.815
Decision Rule:
The null hypothesis (Ho) will be rejected if the computed X2o, is
greater than the critical value X2. i.e. if X2o > X2. If the critical value
of X2 is greater than the computed value of X2o, the null hypothesis
(Ho) will be accepted and alternative hypothesis will be rejected.
Test of Hypothesis 1
Using X2 = (F0 Fe)2

Fe
Using Fo = Observed frequency = (183 + 189 + 8 + 7)
Fe = Expected frequency = (183 + 189 + 8 + 7)

4
= 96.75
Expected frequency = 96.75
93
Chi- square calculated equal to:
X20 = (183 96.75)2 + (189 96.75)2+ (8-96.75)2+(7-96.75)2
96.75 96.75 96.75 96.75
X20 = (86.25)2 + ( 92.25)2+ (-88.75)2 + (-89.75)2

96.75 96.75 96.75 96.75
X20 = 7439.06+ 8510.06 +7876.56 +8055.06

96.7596.75 96.75 96.75
X20 = 76.889 + 87.959 + 81.411 + 83.256
X20 = 329.515
Decision Rule:
Since calculated X20 of 329.515 is greater than the critical X2 of
7.815, the null hypothesis (Ho) is rejected. The alternative
hypothesis (H1) which states that overdependence on oil revenue has
more positive impact than negative impact on Nigerias economic
development is accepted.
94
Hypothesis 2
Ho: Agriculture, Tourism, Taxation & Solid minerals are not factors
H1: Agriculture, Tourism, Taxation & Solid minerals are the factors
What are the factors that could minimize Nigerias overdependence
on oil revenue?
Agriculture 187 48.32
Tourism 70 18.1
Taxation 80 20.67
Solid minerals 50 12.91
Total 387 100
Using Chi-square = X2 (Fo Fe)2

Fe
95
Where;
= Summation sign
= (4 -1) (2 1)
= (3) (1)
= 3
X2 = 7.815
Decision Rule:
The null hypothesis (Ho) will be rejected if the computed X20, is
greater than the critical value X2.i.e. if X20> X2. If the critical value of
X2 is greater than the computed value of X20, the null hypothesis
(Ho) will be accepted and the alternative hypothesis rejected.
96
Using X2 = (Fo Fe)2

Fe

4
= 96.75
Chi-square calculated equal to:
X2o = (187-96.75)2 + (70-96.75)2 + (80-96.75)2 + (50 96.75)2

96.75 96.75 96.75 96.75
X2o = (90.25)2 + (-26.75)2 + (-16.75)2 + (-46.75)2

96.75 96.75 96.75 96.75
X2o = 8145.06 + 715.56 + 280.56 + 2185.56

96.75 96.75 96.75 96.75
X2o = 84.18 + 7.395 + 2.899 + 22.58
X2o = 117.054
97
Decision Rule:
Since the calculated X2o of 117.054 is greater than the critical X2 of
hypothesis (H1) which states that Agriculture, Tourism, Taxation and
Solid minerals are the factors that could minimize Nigerias
overdependence on oil revenue is accepted.
Hypothesis 3
Ho: The level of importation of petroleum products in Nigeria is
high.
H1: The level of importation of petroleum products in Nigeria is low.
What is the extent of importation of petroleum products in Nigeria?
High 9 2.33
Very high 8 2.06
Low 189 48.84
Very low 181 46.77
Total 387 100
98

Fe
Where;
= Summation sign
= (4 1) (2 1)
= (3) (1)
= 3
X2 = 7.815
Decision Rule:
99
Using X2 = (Fo Fe)2

Fe

4
= 96.75
Chi square calculated equal to:
X2o = (9 96.75)2 + (8 96.75)2 + (189 96.75)2 + (181 96.75)2

96.75 96.75 96.75 96.75
X2o = (-87.75)2 + (-88.75)2 + (92.25)2 + (84.25)2

96.75 96.75 96.75 96.75
X2o = 7700.06 + 7876.56 + 8510.06 + 7098.06

96.75 96.75 96.75 96.75
X2o = 79.59 + 81.41 + 87.96 + 73.36
100
X2o = 322.32
Decision Rule:
Since the calculated X2o of 322.32 is greater than the critical X2 of
hypothesis (H1) which states that the level of importation of
petroleum products in Nigeria is low is accepted.
Hypothesis 4
Ho: Poor funding of investments, Communal disturbances,
Smuggling & diversion of petroleum products & Products
adulteration are not problems encountered by the Nigerian oil
sector.
H1: Poor funding of investments, Communal disturbances,
Smuggling & diversion of petroleum products & Products
adulteration are the problems encountered by the Nigerian oil
sector.
101
What are the problems encountered by the Nigerian oil sector?
Public control & bureaucracy 194 50.13
Poor funding of investments 79 20.41
Communal disturbances 64 16.54
Products adulteration 50 12.92
Total 387 100

Fe
Where;
= Summation sign
= (4 1) (2 1)
102
= (3) (1)
= 3
X2 = 7.815
Decision Rule:
Using X2 = (Fo Fe)2

Fe

4
= 96.75
Chi square calculated equal to:
X2o = (194 96.75)2 + (79 96.75)2 + (64 96.75)2 + (50 96.75)2

96.75 96.75 96.75 96.75
103
X2o = (97.25)2 + (-17.75)2 + (-32.75)2 + (-46.75)2
96.75 96.75 96.75 96.75
X2o = 9457.56 + 315.06+ 1072.56 + 2185.56

96.75 96.75 96.75 96.75
X2o = 97.75 + 3.256 + 11.09 + 22.59
X2o = 134.69
Decision Rule:
Since the calculated X2o of 134.69 is greater than the critical value
X2 of 7.815, the null hypothesis (Ho) is rejected. The alternative
hypothesis (H1) which states that Poor funding of investment,
Communal disturbances, Smuggling & diversion of petroleum
products & Products adulteration are the problems encountered by
the Nigerian oil sector is accepted.
104
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSIONS &
RECOMMENDATIONS
5.1 SUMMARY OF FINDINGS
The major findings of this research investigation are as follows:
1. Overdependence on oil revenue has more positive impact
than negative impact on Nigerias economic development.
2. Agriculture, Tourism, Taxation & Solid minerals are the
factors that could minimize Nigerias overdependence on
oil revenue.
3. The level of importation of petroleum products in Nigeria
is low.
4. Poor funding of investments, Communal disturbances,
Smuggling and diversion of petroleum products and
Products adulteration are the problems encountered by
the Nigerian oil sector.
105
5.2 CONCLUSIONS
Nigerian economic growth is highly depended on the oil revenue.
Hence, if there is a glut and fall in oil price in international market,
it may be a great disaster on the economy and to the citizenry of the
country.
There is no doubt that the upstream sector of the oil industry in
Nigeria is the most developed and it has attracted considerable
foreign capital inflows.
5.3 RECOMMENDATIONS
Based on the findings of this study, the following are
recommendations:
1. The Nigerian government should focus on the need for
diversification into other sources of revenue in order not to be
affected by fall of oil price in the international market.
2. The government should develop other sectors of the economy
such as agricultural sector, and industrial sector by providing
incentives such as tax concession, provision of facilities
needed by these sectors in order to boost more production.
106
3. The government should build more refineries to complement
the existing ones that will go a long way to satisfy domestic
consumption and generate more revenue for the country.
107
BIBLIOGRAPHY
Abayomi, Y.O. (1977), Revenue Diversification, C.B.N. Bullion: 2(3).
Abolaji, M.E. (1986), The Role of Banking Sector in Agricultural

Financing. C.B.N. Bullion: 3(13).
Adenikinju, A.F. (1998), Productivity Growth and Energy

Consumption in Nigeria Manufacturing Sector.A Panel Data
Analysis Energy Policy 26(3).
Akuezuilo, E.O. (1993), Research Methodology and Statistics.

Awka: NuelCenti Publication Ltd.
Alade, S.O. (2001), Analysis of the Year 2001 Federal Government

Budget. C.B.N Bullion: 25(1).
Anyanwu, J.C. et. al: (1997), Structure of Nigeria Economy.

Onitsha: Hybrid Publication.
Chinemelu, C.A. (1994), Macro Economic Concept and Applications.

Onitsha: Published by Communication Ltd.
Emekekwue, P. (1977), Corporate Financial Management (3rd

Edition), Zaria, A Publication of Base/OAU.
Ikem, A.A. (1990), The Impact of Oil on a Developing Country: The

Case of Nigeria. New York: Praeger Publishers.
Maclean, M. (1958), Concentration of Export and Import

Comparison. Economic Journal: 68(60) Lagos: Nigeria
Economic Society Publication.
Nwabuokei, P.O. (2001), Fundamentals of Statistics. Enugu:

Koruma Publication Ltd.
108
Garba, A.G. (1999), Revenue and Appraisal of the 1998 Budget,
C.B.N. Bullion: 24(1).
Gali, C.D. (1997), The Nigeria Experience in National Economic

Planning, Design Implementation and Monitoring. C.B.N.
Bullion: 4(2).
Obioma, G.O. (1987), Research Methodology. Ibadan: Heinemann

Publishers.
Onuh, O. (1998), Applied Statistical Techniques for Business and

Sciences. Owerri: CRC Publication Ltd.
Osuala, E.C (1982), Introduction to Research Methodology.

Onitsha: Africa-Feb Publication Ltd.
Obadan, M.I. (1998), Non-Oil Exports in Nigerias Changing Policy

Dispensation. NCEMA Policy Analysis Series, 4(2)
Popoola, S.A. (1993), Nigeria Energy Resources Endowment and

Principles of Revenue Allocation.Energy Policy Agenda for
Nigeria. Ibadan: Evans Brothers Publication Ltd.
Robert, G.O. (1996), Principles and Procedures of Statistics. New

York: McGraw Hill Book Publishing Company.
Tinuke, L.J. and Adami, S.O. (1985), Statistics for Beginners.

Ibadan: Evans Brothers Publishers Ltd.

Marketing (1st Edition), Lagos: John Kens and Willy
Publication Ltd.
109
INTERNET SOURCES
Isah.(2009), www.leadershipnigeria.com).
Obasi,S.(2008),NewswatchMagazineRespondent
www.newswatchgr.com
Ogene.wordpress.com/2009/02/04/vision-20-2020-developing-
sustainable-tourism.
www.nationsencyclopedia.com/2009/economicsandtaxation.
www.mmsd.gov/newsletter/solid_minerals_Dev_Key.asp.
110
APPENDIX 1
Department of Management,
Faculty of Business Administration,
University of Nigeria,
Enugu Campus.
Dear Respondent,
I am a postgraduate student of the Department of Management,
Faculty of Business Administration, University of Nigeria, Enugu
Campus.
I am undertaking a research project on the topic: Assessing the
Impact of Overdependence on Oil Revenue to Nigeria Economy.
You are kindly requested to answer the questionnaire.
However, this research work is simply for academic purposes. Any
information supplied by you will be treated with utmost confidence.
Thanks for your co-operation.
Yours faithfully,
Ijeh,Chukwuemeka Anthony
(Project Researcher)
111
QUESTIONNAIRE
SECTION A
Please tick () in the boxes provided for the answer you consider
appropriate.
1. Sex:
A. Male [ ] B. Female [ ]
2. Age:
A. 18 25yrs [ ] B. 26 35yrs. [ ]
C. 36 45yrs [ ] D. 46yrs and above [ ]
3. What is your educational qualification?
A. WASC/GCE [ ] B. OND/NCE [ ]
C. HND/BSc [ ] D. MSc/MBA [ ]
4. How long have you been working in the organization?
A. 1 5yrs [ ] B. 6 10yrs [ ]
C. 11-15yrs [ ] D. 16 20yrs [ ]
E. 21yrs and above [ ]
5. What category do you belong in the organization?
A. Management staff [ ] B. Senior staff [ ]
C. Junior staff [ ]
112
6. What is your income grade level?
A. 01-04 [ ] B. 05 08 [ ]
C. 09 12 [ ] D. 13 16 [ ]
SECTION B
7. Overdependence on oil revenue has more positive impact than
A. Agree [ ]
B. Strongly agree [ ]
C. Disagree [ ]
D. Strongly disagree [ ]
8. What are the negative impact of petroleum sub-sector on the
Niger Delta areas?
A. Oil pollution [ ]
B. Gas flaring [ ]
C. Inadequate compensation for the destruction of
economics crops.[ ]
D. Limited employment of Niger Delta citizens in the
activities of petroleum companies. [ ]
113
9. What are the positive impact of petroleum sub-sector on
Nigerias economy?
A. Contribution to Gross Domestic Product [ ]
B. Revenue generation &utilization [ ]
C. Employment generation [ ]
D. Foreign investment [ ]
10. Do you think that Nigerias overdependence on oil revenue
could be minimized?
A. Yes [ ] B. No [ ]
11. What are the factors that could minimize Nigerias
overdependence on oil revenue?
A. Agriculture [ ]
B. Tourism [ ]
C. Taxation [ ]
D. Solid minerals [ ]
12. Sustainable development of the solid mineral sector has been
economic dependence on oil and gas?
A. Agree [ ]
114
C. Disagree [ ]
13. Would you say that the oil sector of the Nigeria economy faces
some problems?
A. Yes [ ] B. No [ ]
14. What are the problems encountered by the Nigerian oil
sector?
A. Public control and bureaucracy [ ]
B. Poor funding of investments [ ]
C. Communal disturbances [ ]
D. Products adulteration [ ]
15. Federal government decides on massive importation of
petroleum products to forestall scarcity?
A. Agree [ ]
C. Disagree [ ]
115
16. What is the extent of importation of petroleum products in
Nigeria?
A. High [ ]
B. Very high [ ]
C. Low [ ]
D. Very low [ ]
17. Nigeria regarded as one of the major exporters of crude oil in
the world, does have functional refineries, but depends totally
on importation of petroleum products for domestic
consumption?
A. Agree [ ]
C. Disagree [ ]
116
117

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ASSESSING THE IMPACT OF OVERDEPENDENCE ON

OIL REVENUE TO NIGERIA ECONOMY

ASSESSING THE IMPACT OF OVERDEPENDENCE ON OIL

A PROJECT SUBMITTED TO THE DEPARTMENT OF

SUPERVISOR: DR. C.A. EZIGBO

The project has been approved for the Department of Management.

Ijeh, Chukwuemeka Anthony a postgraduate student in the

Department of Management with Registration Number

PG/MBA/07/46774 has satisfactorily completed the requirements

Business Administration (MBA) in Management.

submitted in part or full for any degree of this or any other

This project is dedicated to God Almighty and my beloved parents

throughout the duration of the programme.

An excellent and successful academic work would not have been a

reality without the unalloyed support, aid, advice and

encouragement of well meaning individuals in the society.

My immense thanks first go to the Almighty God for his enabling

grace and love in making the entire programme a success.

My gratitude goes to my project supervisor Dr. C.A. Ezigbo whose

guidance, tolerance, constructive criticisms and understanding

provided the basis for the successful completion of this project.

My thanks also go to the Head of Department Prof. U.J.F. Ewurum

and all the lecturers and Non-academic staff of the Department of

Management for their academic support.

My sincere and special thanks also go to my parents Sir and Lady

financial support throughout the duration of the programme. I also

appreciate my siblings, Emmanuel Ijeh (Jnr), Robinson Ijeh,

Christopher Ijeh and my beloved sister Vivian AdaoraIjeh including

assistance and moral advice.

Richard Ngatu, TerveshimaIgba, Betty, IfeomaIfejika, Nkechi,

Kingsley and Cyril Ukwueze and others who are of assistance in my

The research is on Assessing the Impact of Overdependence on Oil

CHAPTER ONE: INTRODUCTION

CHAPTER TWO: REVIEW OF RELATED LITERATURE

CHAPTER THREE: RESEARCH METHODOLOGY

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSIONS AND

1.1 BACKGROUND OF THE STUDY

Oil is a major source of energy in Nigeria and the world in general.

Before the advent of oil (Crude oil), agriculture used to be the

mainstay of the Nigerian economy which plays a vital role in shaping

the economic and political destiny of the country (Abolaji1985:2).

In 1960s, agricultural products provided about 80% of the total

groundnut etc. In 1962, agriculture accounted for about N229.8

million or 82% of the nations total values of export. Moreso, in 1964

a total of N356.4 million was realized which represented 85% of the

countrys total export for that year.

According to Ezeagu (1979:9), the exportation of agricultural

products was really thriving during these years. However, by 1976

out of N274.2 million that came from export, agriculture

accountedonly for 4% of the nations earnings, even with the take-

over of export financing by the Finance Development House, the

earnings from the non-oil export (which agriculture products

oil boom and excess dependence on its revenue or earnings.

became import oriented. Thus, the insatiable desire for importation

of goods became widespread in the nation with its attendant

According to the Statistical Bulletin 1997:60 of the Federal Bureau

of Statistics, the 1970s witnessed a drastic change of Nigeria

economy from one share of agriculture to Gross Domestic Product

(G.D.P) which drastically dropped from about 40% in the early

of Gross Domestic Product (G.D.P), it also accounted for 81% of

government revenue and 96% of export earnings.

economy was highly vulnerable. Agriculture was completely