Economic Growth In Nigeria – Impact Of Oil Industry

Performance Of Economic Growth In Nigeria (1970 – 2000) – Impact Of Oil Industry

Economic Growth In Nigeria – Impact Of Oil Industry

Economy is the backbone of any nation. Nigeria, like other developing countries of the world is paying more attention on how to accelerate the rate of her development through the various sectors of the economy.

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Oil, a very versatile and flexible, non-reproductive, depleting, natural (hydrocarbon) resource is a fundamental input to mordern economic activities, providing about 50% of the total energy demand in the world, excluding the former centrally planned economics.

Oil-exporting countries of the developing world depend heavily on oil revenue for foreign exchange earnings and for the government budget, in most cases, reaching 90% or above.

Petroleum or crude oil is an oily, bituminous liquid, consisting of a mixture of many substances mainly the elements of carbon and hydrogen, and thus known as hydrocarbon. It also contains a very small amount of non-hydrocarbon elements, chief amongst which are sulphur, nitrogen and oxygen.

The petroleum industry covers the exploration and production of crude oil as well as petroleum refining, marketing and servicing. Specific policy objective with respect to petroleum and mining can be summed up as follows:

Active government participation in mining operations, diversifications of mineral products, the organization and regulation of the development of mineral reserves so as to optimize their contributions to the overall national development effort; the conservation of the countries mineral resources, research into efficient extraction methods and wider application and use of mineral manpower development and accelerated transfer of technology, achievement of internal self sufficiency in the supply and effective distribution of petrol-industry products, commercialization of gas, and the control of the environmental problems of oil production.

Though oil did not assume its present significant position in the national economy until the early 1970’s, it is not a novel revelation that it has since become the mainstay of contemporary Nigeria’s economy. Petroleum either as petrol , diesel, fuel oil , lubricant or petrochemical makes Nigeria economic wheel go round.

Petroleum has transformed poor nations into rich ones, deserts into watersheds and bankrupts nations into creditors.

Specifically, with regards to Nigeria, there is no gain saying that oil sector has undergone tremendous transformation over the years.

The industry has emerged from being the merely “supportive” economic sector it was in the 60s to the predominant source of foreign exchange and development finance and a most viable access to international investment opportunities in the 1980’s and 1990’s. No other resource in


Nigeria has played such a towering role over the national economy as crude oil. The government of Nigeria has used the revenue derived from oil through tax and royalties to carry out development projects in the country.

This study, therefore, aims to illustrate clearly the impact of the oil industry on economic growth performance in Nigeria.


Since its discovery, petroleum has impacted so much on Nigeria economy, these impacts are both positive and negative. Some scholars have advocated for the shifting of emphasis from oil industry to other sectors owing to their belief in the negative fallouts of the oil industry. Some others opined that the sector should be promoted and developed for its benefits.

These opposing views have created the problem of acceptance or otherwise of the oil industry in Nigeria.

All these and many more questions pose contradiction, hence; the need to investigate on this all-important topic. You have to show enough cause why you have decided to go into this research work.

In view of the controversy with respect to the relative contribution of the oil sector of the Nigeria sector as compared with the other sectors, it is imperative to establish empirically the relative impact of the oil industry in the Nigeria economy.



With the development of petroleum in the Nigerian economy, there has arisen a growing interest and concern towards its contributions to the economic development. By the end of the research the study aims at achieving the following objectives:

 To find out the impact of oil sector (oil revenue) on gross domestic product (GDP)

 To determine the relative impact of the industry vis-à-vis the agricultural and manufacturing sectors.

 To analyze the extent of environmental hazards caused by oil industry.

 To make recommendations based on the findings.



The study will be beneficial to the following :-

 It will be relevant to oil companies operating in Nigeria in many of their operational and investment decisions.

 It will equally, serve as source of information for policy makers and stakeholders in the industry

 It will also, guide the government and its agencies in regulating the industry.

 The study will, as well, be helpful to the general public and any one who might be interested in the oil sector.

 The study will add more literature to the existing ones on this topic, hence; future researchers will benefit immensely from the work.


Based on the objectives of the study, the researcher has formulated the following hypothesis to guide this study:

Ho:b1=0 The output of the oil in industry has not significantly affected Nigeria’s economic growth.

H1:b10 The output of oil industry has significantly affected Nigeria’s economic growth.



This research work is an investigation into the impact of the oil industry on economic growth performance in Nigeria for the period of 1970-2000, specifically, a period of thirty-one years.

In carrying out this research work, the researcher encountered some difficulties. The first of such constraints or difficulties concerns data. There was the problem of data inconsistency as data collected from different sources on one variable showed some discrepancy. Also was the reluctance of some librarians to make data available.

Apart from the above-mentioned constraints, which are capable of adversely affecting the accuracy of the results of this research work, all other errors and omissions are entirely those of the researcher.




Obadan (1987) defined petroleum as a mixture of hydro carbon oils obtained below the surface. He opined that oils in Nigeria, generally occurs at depths below 1,500 meters.

According to him, it is the raw material around which a chain of commercial activities known as the petroleum industry revolves. It is a major source of energy in the world marketed today and has infact, become the bedrock of man’s progress and civilization.

Obadan further stressed that petroleum is the raw materials for a wide range of chemicals for the production of pharmaceuticals, fertilizers, fibers, for the manufacture of textiles and numerous other products essential for human existence.


More so, he added that petroleum jelly for the body, candles for lightning and bitumen for tarring roads are some of the many by-products of petroleum.

The bulk of Nigeria’s reserves occurs between two thousand and three thousand meters (i.e. 1.25 to 2 miles) depth. Oil is usually found associated with gas and water in the pore spaces between the grains of sand and make up the oil bearing rock body (reservoir), it is usually found in areas where thick columns of sedimentary rocks (about 2000 meters minimum thickness of sands, sand stones, limestone, evaporates and shales) of mostly marine origin occur like in the Niger Delta, Anambra and Chad basins.

However, the Bemue trough and Sokoto Basin are also being investigated for oil:

Speaking on a seminar organized in Delta State University, Iyoha (2000) Stated that the “white products” namely premium motor spirit (P.M.S) , Dual purpose kerosene (D.P.K), Automatic Gas Oil (A.G.O), and Aviation Turbine kerosene(A.T.K) for the bulk of the petroleum products.

The major types of products concerned at depot, according to him are the first three mentioned above.

The other A.T.K is being transported through pipeline from the misimi depot to Murtala Mohamed airport Lagos. Other products include the following:

L.P.G- Liquefied petroleum gas

L.P.F.O –Low pour fuel oil

H.P.F.O – High pour fuel oil

He further suggested that there are others referred to as special product which are not being loaded at the depot, but are still petroleum products; such include Boseoil, Bitumen and wax etc. With respect to the uses of the products he outlined that:


P.M.S- Is used as fuel for car.

A.G.O-Is used for fuelling compression, ignition engines, boats, heavy road transport vehicles and small generating plants.

D.P.K – Is used for domestic purposes and aviation uses (aviation fuel).

L.P.G- Is used for cooking and lightning, bitumen for road surfacing.

L.P.F.O and H.P.F.O – are both used f or boilers, heaters and sailing of ships.

Wax – are used for making candles, polishes for wood, leather, linoleum and automobiles.

The development of oil industry in Nigeria began in the first decade of this century. According to Anyanwu (1997), it started with exploration activities by the German bitumen corporation. He stated that, in 1937, an oil prospecting license was granted to shell D’ Archy exploration parties and in 1955, mobile exploration, Nigeria incorporated obtained concession over the whole of the former northern region of the country.

Anyanwu added that this company carried out some geological work, drilled three deep wells in the former western region and abandoned concession in 1961.

However, Anyanwu noted that the first commercial discovery of crude oil in Nigeria was in 1957 by shell. He also added that the company started production in 1958. And that in 1961, the federal government of Nigeria issued ten oil prospecting licenses on the continental shelf to five companies, each license covered an area of 2,560 squares kilometers and was subject to the payment of N1 million with these generous concession, according to him, full scale One-shore and off-shore oil exploration began.Oil was found in commercial quantities at Oloibiri in the Niger Delta (ukwu I. Ukwu 2000).

Further discoveries at Afam and Boma established the country as an oil producing Nation. By April 1967, Oil from Nigeria had reached 2 million Barrels per day.(Anyanwu Etal 1997) p. 32

The first oil well on the Nigeria continental shelf was struck by the Gulf oil company at Okam field, off the coast of Bendel State. (Ukwu 200) p 71. More off-shore well have been drilled by other companies (ELF, Mobile, Agip. Texaco etc) and production rate rose steeply year after year though the global oil glut of the 1980’s steamed the trend.

It is also important to note that because of the need to conserve foreign exchange, create job opportunities to some extent, in addition to other multiplier effects locally, the federal government in 1962 awarded a contract for the construction of a refinery at Alesa-Eleme, Porthar-court ; Rivers State. The refinery was commissioned in 1965 with an initial designed production capacity of 35,000 barrels per day. This volume was considered sufficient to meet domestics consumption of products for many years to come.

However, between 1970 and 1978,the nation experienced an upsurge in demand for petroleum products averaging a yearly increase of 23.4 percent.

Thus, in 1978, the warri refinery was officially opened with a total capacity standing at 100,000 barrels per day.

By 1979, Nigeria’s refinery capacity stood at 160,000 barrels. Continual demand pressure led to the building of a third refinery at Kaduna in 1980 with limited capacity of 100,000 bd with a potential capacity of 260,000 bd.

A fourth refinery has been constructed near Port Harcourt. The federal governments intends to use some of the end products from the refineries as feedstock in its petro chemical projects which are being implemented in 3 phases at Ekpan, Warri, and Kaduna.(Anyanwu etal 1997: p. 101 ).

commenting on opec and Nigeria, Agbejule (1987) noted that Nigeria is the 11th member of the organization of petroleum exporting countries (OPEC). . He stressed that the organization has 13 member countries and its geared towards the development of the economies of its members through effective utilization and control of the petroleum resources of the nations.

As a member of Opec, Nigeria .jointly with other members determines at what minimum price level various member countries should sell their crude oil,

Opec now determines the level of crude oil production for its member countries in order to prevent a collapse in the crude oil price. The price oil is sold for is largely determined by the organization of petroleum exporting countries (OPEC).

On the birth of NNPC, Anyanwu (1997) noted that the presence and activities of the oil companies in Nigeria had led to government involvement in the oil industry as well as the birth of NNPC.

He explained that the role of government in the oil industry as gradually progressed from regulatory to direct involvement in oil exploration. Initially, government interest was only limited to the collection of royalties and other dues offered it from the oil companies and making rudimentary laws to regulate the activities of the oil industry.

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This was partly due to the fact that oil was very insignificant to the economy before the late sixties and the relative lack of trained personnel and expertise. (Anyanwu etal 1997 pg 113)

By 1971, a year after the Nigerian civil war, oil had started becoming more important to the economy. To strengthen and establish government control in the industry, therefore, the Nigeria national oil corporation (NNPC) was established by a decree in 1971, as an integrated oil company. (Ukwu I. Ukwu pg 109-150).

It was also in that year that Nigeria joined the organization of petroleum exporting countries (OPEC) as the 11th member country. The NNPC had responsibility for both upstream and downstream activities in the industry.

As a result of all these developments, government had acquired a new stature and so decided on active participation in the industry’s activities. It was believed that if government had more say in the running of the oil industry, it could achieve its goals of rapid industrialization and commercial development.

Consequently, share acquired 33 1/3% equity interest in the Nigeria Agip oil company (NAOC) in 1971 and 35% in EIF. (Nigeria Brief-community issues)

Meanwhile, the then ministry of petroleum resources whose functions were mainly regulatory was also running concurrently with NNOC, It was not until 1st April 1997 that a merger between the NNOC and the ministry of petroleum resources created the Nigeria national petroleum corporation(NNPC) combined the commercial functions of the former NNOC (namely: exploration, production, transportation, processing of oil refining, marketing of crude oil and its refined products with the regulatory functions of the former ministry of petroleum resources.

These regulatory functions were then vested in an independent arm of the NNPC, the petroleum inspectorate; which is today a department in the present ministry of petroleum resources and still performing the same role. (Anyanwu etal 1997 p.56)

The NNPC is also responsible for carrying out research in connection with petroleum or anything derived from it and promoting activities for the purpose of turning to good account, the result of such research.


From CBN statistical bulletin, it was gathered that the petroleum sector contributes significantly to government revenue and Nigeria’s GDP.

It showed that oil revenue rose from N17.070 million in 1961/62 to N 96. 390 million in 1970/71 and to N 4,183.816 million in 1974/75 . In terms of percentage contribution, oil revenue’s share was only 7.46% in 1961/62 and 9.06% in 1965/66.

In 1970/71, it’s share rose to 95.99%, thereafter, oil revenue becomes the most dominant revenue (petroleum profit tax, mining rents and royalties, NNPC earnings etc. (statistical bulletin, No 1, vol 9, 1998).

Thus in 1975, oil revenue as a percentage of total government revenue was 78.70% rising to 82.30% in 1979/80 and 97.24% in 1990. The principal factors that accounted for the dominance of oil revenue particularly in the 1970’s were rapidly rising oil prices and production, increased government participation in oil exploration and changes in fiscal arrangements. By 1974, the federal government had acquired 55% equity participation in all the companies producing crude oil in Nigeria. This was increased to 60% in 1979. The changes includes reductions in 1966 and 1971 in the rate of allowable depreciation of investment , the substitution of posted prices, realized the definition of royalties as cost of production rather than as offsets against profit tax and the rising of tax rate, from 50% in 1975.

All government share of crude oil produced apart from what is processed for domestic consumption is sold by the NNPC and proceeds from it are paid into the federal account.

The NNPC sells to its customers directly as well as to some of its joint venture partners at the official selling price. Government revenue from oil also includes other sources besides direct crude oil sales. Various taxes are levied on oil companies such as the petroleum profit tax, which is about 85% of the taxable oil income, royalties, rents ( being taxes on non-producing concessions and excise duties in refining activities, “the total revenue accruing from the oil sector amounts too about 80% of the Nation’s total export earnings”

( Iyoha, 1999: P 70).

In many ways, oil has been the engine of economic growth in Nigeria. It is quite clear that the nation’s economy is heavily dependent on the oil industry.

Crude petroleum’s GDP rose from N 0.43 billion in 1960-69 to N 12.86 billion in 1995, the highest contribution period being 1975-79 at N 17.91 billion.

Thus, the percentage share of crude petroleum in Nigeria’s GDP rose from 1.6% in 1960 to 17.4% in 1970 –74 period and to a peak of 24.3% in 1975 –79 period. It was 22% in 1980, falling to 15.06% in 1985 and to 12.90% in 1990. In 1995, it had further fallen to 12.44%. Crude petroleum has remained the main engine of economic growth in Nigeria inspite of the volatility of the world oil market and its declining share in GDP (Agbejule 1987 p 29)

Commenting on the opportunities available for Nigerian entrepreneurs in the petroleum industry,(Iyoha) noted that oil industries in Nigeria have created opportunities for Nigeria entrepreneurs. He draw attention to the fact that the Nigeria National petroleum corporation represents all aspects of the industry. According to him, the corporation is an integrated international oil company involved in both upstream and downstream operations. This means that virtually all business men can find something of interest in the Nigeria national petroleum corporation group, either in the upstream or in the downstream sector of the industry.

Investment opportunities exist in areas of survey and mapping. These surveys are necessary before meaningful exploration work can take place.(Iyoha 1999p 99)

There are also opportunities in civil engineering works, particularly in the area of preparation of drilling location, construction of ud pits and slabbling or concretes gabs at regsites. Business men can also supply such items as cement, and pipelines. These are areas where Nigerians can harvest alone or in partnership with foreigners.

Attention is also drawed to the immense investment opportunities that exist in the important areas of exploration and production. Although oil exploration started in Nigeria over 53years ago not up to half of the sedimentary basins of the country have been seriously explored.

The Dahomey basin, the Anambra basin, the Sokoto basin as well as parts of the Chad basin have hardly been investigated for the purpose of finding oil or gas. Even in the Niger-delta basin, which has been appreciably explored, activities are limited to the only onshore areas.

A lot of people do not know that about 40% of the offshore areas of the Niger basin (up to 200 meters water depth) is currently under active exploration (Iyoha 2000 P40).

The presence of employment opportunities in any given country is one of basic social needs of the citizens of that country. When citizens are gainfully employed, the social atmosphere will be characterized by individuals who will seek to contribute meaningfully to the development of their nation. According to (Goulet 1971 p15) the three core values that should serve as a conceptual basin and practical guideline for understanding the inner meaning of development include life sustestanance, self-esteem and freedom for servitude.

Life sustenance, which is first of the core values, is characterized by the availability of food, shelter, wealth and protection. These basic needs and other core values can only be realized when the individuals are gainfully employed.

Seers (1969) also recognized the importance of employment as a feature of economic development when he posed the basic questions about development of a society. He asserted thus;

“The question to ask about a country’s development are therefore: what has been happening to poverty? What has been happening to unemployment? What has been happening to equality? If all three of these have decline from levels, then beyond doubts, this has been a period of development for the country concerned. If one or two of these central problems have been growing worse, especially if all three have, it would be strange to call

the result development even if per capital income doubled”.

Oladele (1991) posits that provision of employment opportunities is one of the positive side of oil industry.

Therefore, the presence and activities of the oil industries have created more opportunities for employment in Nigeria.

The trust of the education programme is to develop trained young men and women who can compete for jobs in industry over 57 percent of the work force in the oil companies are from the oil producing Rivers and Delta State. If staff are added from the other parts of the country (Imo, Abia, Akwa-Ibom and Edo states) which have oil operations on their ********, the percentage rises to about 69 percent of job creation by the oil industries in Nigeria. (Oladele 1991 p 96).

The various oil companies in Nigeria have employed contractors to handle most community projects (total contractors ), other areas of contract award are security, clearing up of oil equipments as well as supplies.

(Source: Petroleum Exploration and development in Nigeria ).

Speaking further on the provision of social infrastructure, Obadan (1987) noted that as a good corporate citizen, NNPC recognizes the importance of regular availability of social amenities in the day to day lives of people of the oil producing communities in the Niger Delta areas.

The corporation therefore, between 1986 and 1991, encouraged almost all its joint venture partners to undertake series of basic amenities in these communities as well as in higher institution across the country. One of such contribution of the oil companies in their areas of operation are :-

1. Development of rural road network. NNPC in its desire to promote the various exploration and marketing services nationwide, place high premium on road development and creating a road networks that links effectively the various oil producing communities in the interior , with the urban centers .

On yearly basis, the corporation through its 60% share in the funding of all activities involving the various joint-venture companies and invariably all community assistance initiatives undertaken by them.

Between 1989 and 1990, the NNPC in partnership with one of its joint venture partners undertook the construction of a special link-road running through four oil communities in Delta State – Idieze, Benekuku, Kwale and Okpi/Umusedege. (Nigeria Brief, community issuesl vol. 9, No. 2 June 1983).

2. Electrification :- The importance of 1978-2007 steady supply of electricity as the prerequisite to stable life in this age and time cannot be over-emphasized. With this in mind, NNPC and its joint venture partners have embarked on intensive electrification work in oil producing areas across the country.

The electrification of Agbere, Aggali-olu town, Brass, Dorgu Ewaama, Mgbechi, Okwuzi, Obie, Obriku and Omoku community in Rivers State estimated at N 3.5 million by shell petroleum development company(S.P.D.C), mobile producing Nigeria ltd (MPNL) provided 22 transformers that enable them to tap electricity from the national grid to communities in their area of operation. Several communities in Delta State have also benefited from electricity through the activities of oil industries in their communities. (Nigeria Brief, community issuesl vol. 9, No. 4 June 1984).

3. Portable water:- NNPC recognizes the importance of regular availability of water in the various communities of operations.

In furtherance of this, no less than six water projects were undertaken in communities located in Ughelli South L.G.A and Isoko L.G.A. Five oil producing communities began enjoying steady supply of water. Courtesy of NNPC and it’s joint venture partners.

NAOC Constructed and drill pipe borne water wells at Mgbede Okwuzi, Obirikum and Aggah in Rivers State, Berekuku, Kwale, and Okpai, Kwale and umusadege in Delta State.

Institutions of higher learning also benefited from the NNPC and it’s joint-venture partners through the provision of portable water. They are Delta State University, of Science and technology and petroleum training institute in Warri.( (Nigeria Brief, community Development vol. 10, No. 17 October 1983). ).

On the part of petroleum industry contribution to Agricultural development, NNPC and it’s joint-venture partners have contributed to the development of Agriculture in Nigeria. The objective is to help farmers grow from subsistence to a commercial level of farming and thereby improve their living standard and further develop Socio-economic conditions of the country.

SPDC, The pioneer and largest producer of crude oil in Nigeria have assisted rural communities in the following ways:

a) Improved farming techniques and methods

b) Developed and distributed disease resistant and high yielding varieties of crops.

c) Encouraging crop diversification.

d) Stimulate a teamwork /corporative approach to problem solving.

e) Harness the resources of government agencies, research institutes and philanthropic groups involved in agricultural developments.

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f) Improved the agricultural earnings of farmers and the incomes of local communities. (Obadan 1987) p 102

Also the Nigeria Agip oil company, NAOC, had a number of contributions to the agricultural sector of the economy through the green river project in the following ways:-

a) Improvement of the traditional agricultural system by means of an extension services.

b) The distribution of improved varieties of the main food crops used in agricultural production.

c) The introduction of new crops of nutritional and economic interest, following a monitoring programme to test their adaptability to local conditions.

All the oil companies have been contributing tremendously to the agricultural development of the areas in which they operate. Chevron has put in place an agricultural scheme for Ugborodo and Escravros.

Similarly, Ashland has an agricultural extension office stationed at Izombo /Ossu/Ndiko communities who give advise on continuing basis to farmers techniques and also introduce the improved seedling and small scale farming methods.(Nigeria Brief, community issues vol. 9, No. 7 June 1984).

Encouragement of local skill is another area in which NNPC is playing important role. It has in recent times through diverse efforts of its joint –venture partners paid great attention to the development, improvement and modernizing of occupations that are native to the communities. In this regard , various kinds of traditional farming practices have been up-graded and modernized by the oil producing companies through application of research and extension services within the oil producing communities across. One of such key crops that was benefited immensely is cassava and its processing.

Between 1988 and 1991, One of the joint-venture company with the encouragement of NNPC spent millions of naira in establishing and sustaining several ultra-modern processing factories.

The factories are located in Akieweowa (Isoko North ), Unwiamuge (Ugheli North) and Igudeba (Oriomuon L.G.A. ) and their major task is employing modern scientific method in processing cassava into garri.

The factories are supervised by qualified agricultural extension officers hired by the company, who gives direction, technical advice and who perform all the farming duties. (Nigeria Brief, community issues vol. 8, No. 12 June 1977).

Furthermore, an analysis of the negative effects of oil industry in Nigeria, showed that in the Niger Delta; Oil industries activities have continued to pose serious environmental problems affecting health, social and economic activities, sustainable development and ecological balance.

The main environmental effects of oil industry activities in Nigeria (Oil producing areas of Niger Delta ) include :

i) Land degradation ,

ii) Air pollution

iii) Water pollution

iv) Deforestation

v) Ecosystem degradation . These are as a result of oil spillage, gas flaring and waste disposal (Iyoha 2000).

According to Onayere (2000) oil spillage is the accidental and unwanted discharge of liquid, hydro carbon into the environment during the course of drilling, producing, processing, transferring while in storage. The liquid hydrocarbon is made up of various constituents and prominent among the constituents are the heavy liquid here referred to as crude and the light part which evaporate easily into the atmosphere called natural gas. In the oil are some other metals and sulphur.

Detwuker (1980) defined oil spillage as the running or pouring of petroleum products out of vessels, pipes or drilling wells to the environment thereby causing harmful effect to organic and inorganic matter in the affected areas.

Oducha (1992 ) defined oil spillage , as the out flow or release of oil into the environment from its natural habitat or storage resulting from error or accidents in production activities with regards to the effects of oil spillage,

Onoyere W (2000) noted that oil spills when they occur either through materials failure, sabotage etc, carry with it conflicts of interest, conflicts with environmentalists, conflicts with members of the host communities, conflicts due to hunger and deprivation and conflicts with government.

Oil spillage when it occurs, according to Okpo (1999) exposes the oil communities to hazards that militate against their health, growth and development. In the same vein, oil spillage and leakages from operational pipelines are said to be common causes of serious physical damage to the vegetations, soil and water long after clean-up. This results in incidence of soil infertility and poor yields from land.

As a result of oil exploration, land is desurfaced, it’s shape changes and most times, the natural waterways are block leading to flooding of farmland.

Biological effects are also very serious. The effects of oil on marine life can be considered as being caused by the physical nature of its smoothening effects and the chemical components of oil. i.e, it’s toxic effect. Marine life could also be affected by clean-up operations or damage to the habitats on which they live.

People in communities affected by oil spillage loose their sources of livelihood and if not completely lost resultant, depletion in fish and farm outputs results in lose of earnings. Other economic activities could be grounded as a result of loss of working tools. In addition, the phenomenon leads to series of fire-out- break that have claimed many lives and valuable properties.

The weekend vanguard of may 20, 2000 in its editorial said for many situation immediately drew in their minds, the horror of the Jesse fire disaster of 1998 where devastating petrol inferno roasted over 1000 persons alive.

Recently, there was also a similar situation in Ugbormro community in Uvwie council area of Delta State, where petrol almost engulfed the entire village. Suffice to say that, there was also a similar experience in Umumghade in Amaitoli in Osisioma council area of Abia State.

Between January 17th and 31st 1980, a total of 280, 000 barrels of oil was reported to have spilled on water and creaks spreading and damaging effects to the neighboring towns-Brass, Yenegoa, fish town and Samgana.

On February 10th 1980, an oil rig of the SPDC also caught fire at Obex North east of Sapele releasing a large quality of oil into the inland water.

About 180 casualties and over 1000 hospital cases were reported during the river spillage. In 1998, it was reported that Mobil Oil company at Eket spilled about 40,000 through out the whole of the Niger Delta.

The Jesse fire out-break in 1988 which was mentioned in earlier was as a result of long time petroleum products spillage that was not attended to, though it was attributed to sabotage. The oil spillage of September 17th 1999 at Ekakpamere from “shell 214” flow line spreading to about three kilometers led to contamination of drinking water, destruction of fishing creeks, farmland health hazards. ( Atlemen M.I and Okosodo L.A 2000).

Meoliver (1980) put the effects of oil spillage in the following words “Mangroves forests have hitherto served as natural boundaries not only between one state and another, with oil cutting away that national landscape telling where one state territory ends and where the other begins is no longer an easy matter. This goes a long way to tell magnitude of degradation that the Niger-Delta has been subjected to.

Gas flaring has also raised a lot of concern in communities in the Niger Delta. Gas flaring is a major source of air pollution and releases methane gas to the atmosphere. The major consequences of gas flaring are

i) The release of CO2 and methane to the atmosphere

ii) Acidification

iii) Water quality degradation. Like other air pollutions, gas flaring poses serious health hazard to people living near the flaring sites. The ash residue also contributes both to soil and water degradation.

Tragically, Nigeria has the dubious honour of being the foremost gas flaring country in the world in sum. Oil industry activities in the Niger Delta have caused and continue to cause considerable damage.

In the main, oil industry activities have resulted in agricultural land degradation, air pollution, water pollution and loss of territorial and aquatic biodiversity arising from habitat destruction. ( Iyoha 2000 p 21)

In addition to the negative economic, social and health consequence of environmental pollution on the inhabitatants of the Niger Delta. Oil industry activities pose a serious threat to the ecology of the wet lands and the long-term survival of their human and other species.

Although a lot of efforts have been made to curtail associated as gas flaring. Substential amounts exceeding 70% of total annual gas products is still flared in the Nigeria oil fields. Government efforts to control gas flaring has been mostly regular imposing of penalties for gas flaring on the joint –venture partners. Blanket prohibition by government on flaring has been impossible, as the economy is dependent on oil.(Onoyere, W and Onoyere I.A 2000, Iyoha 2000). On the part of waste disposal and its effects, Iyoha noted that while the laws and guidelines are in place, waste disposal in oil field operation has been less than satisfactory. Regulators on the other hand have not effectively enforced compliance. Main constraint, however, is the lack of national infrastructure and facilities for waste disposal.

Government needs to facilitate the building of industrial incinerators, engineered land filled. Sewage treatment plants in cities, urban areas and municipalities. City and municipal drainage channels are beginning for improvement, waste are dumped indiscriminately in our cities blocking public drains and destroying the aesthetics of our country. These are posing great risk and hazards to public health and the ecosystem.

With respect to poverty, there is great deprivation for majority of the people in the Niger Delta region of Nigeria is no longer in doubts. Ironically, this is where the bulk of the wealth of Nigeria comes from. Also, it should be pointed out that vast majority of the Niger Delta region is made up of rural settlement .

Given the circumstances which they are faced with, they appear helpless. So it is not that they are lazy as some people will want to believe. The `condition is caused by the leadership policy of the Nigerian nation. These policies and statutes that vest the control of the oil and mineral wealth on the federal government while the control of lands through kind use act is vested on the state government.

As a result of these policies which have been earlier mentioned, we can say that the people of the Niger Delta are poor because lack of purchasing power due to low income, no access to capital and lack of opportunities for income generations. Infact, they lack access to social and economic services like good roads, electricity and portable water.

Though according to the CRD report of 1996 which says that “meanwhile, the people would have suffered huge and untold losses. Apart from the health risks to which they are exposed to by pollution, they suffer from economic activities. Fishing activities as fishes die from pollution or migration. Elsewhere, farmers are dislodged from the soil they have been using for so many years and all of these loses are not adequately addressed by either the compensations paid or the system of paying compensation”.

It is obvious that the discovery of oil in the Niger Delta has brought no comfort to the communities. Since land belonging to the community is forcefully taken for oil prospecting operations.

In fact, those who reap the benefit are local the benefit are the local chiefs, traditional rulers, the ruling class and other regions of the nations. It can, therefore, be said that discovery of oil in the Niger Delta is a curse rather than blessing since it has created poverty and inter-ethnic war among the inhabitants of the area.( Ailemen M.I and Okosodo L.A . 2000 )

Anger is growing and increasing militancy is threatening the traditional social order in many communities. Leaders, who in the past were unquestionably followed are now being increasing challenged by more militant –Youth groups. Women groups are also becoming more vocal. The result is a complex and dynamic fragmentation of communities characterized by frequent power shifts between factions.

This makes it difficult to build a relationship as well as negotiate compensations for land acquisition, damages and spills. An agreement with one group may be rejected by others with no faction commanding the support of whole community. The result is frequent disruption to operations, confussion and ill-feeling within communities and dissatisfaction with the oil industry. Land rights where are central to the social system, in all parts of rural Nigeria, too are the focus of ages. People depend on land to grow their cattle as they have through the centuries.

However, under the land use act of 1978, the government took over custody of land. As a result, rents on land acquired for oil operations are payable to the state governments. Communities are compensated by oil companies for the loss of the right to the land, but such compensation are not usually enough.

Often, the dissatisfaction felt by communities are is exacerbated by the fact that oil royalties which go to its federal government is taken out from the companies. These has also lead to a resurgence in ethnic conflicts, which have a long history in parts oaf the Delta. These are mainly disputes over territory with neighboring communities. Some have oil under tones because the oil production or reserves that a community can claim under its land will influence how much assistance it gets from the government and oil companies. These factors mentioned above lead to the poverty in the various oil producing areas and have also resulted to violent conflicts in recent years which involve the Urhobo, Itsekiri, Ijaw, Ogoni, Okrika, Afam, Kalabari, and nembe groups.

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Oil and the Niger Delta crisis is another critical area. Oil and related crisis in the Niger Delta dates back to early 1960’s. It actually came to head in 1963 when late Isaac Boro left the University of Nigeria, Nsukka to burst an oil pipeline in

section of the present Rivers State and declared the succession of oil Rivers State from the Nigeria nation. He was tried for treasonably felony that same year and sentenced to jail term.

The circumstances that lead to his action have not changed, rather they are getting worst daily. The oil related crisis in the Niger Delta is becoming a regular feature. It has assumed larger dimension and it’s now involves different group interest conflicts between communities or between two ethnic groups or such crises come in different form such as seizure of operating location or vandalisation of pipelines or kidnapping of oil company staff /employees for ramson. (Iyoha 2000 p 50)

All these crisis can be traced to sources such as deprivation or poverty or neglect of such communities by government and oil companies. These crisis are raising their heads because the people of the oil producing communities

are denied good benefits from the oil coming from their soil by the law governing oil production in Nigeria.

This crises are becoming incessant and move frequent because the oil communities perception of injustice and has become unbearable. This is corroborated by the NDES (1997) report which noted that a rivers State Study group stated in 1980;

“ At the moment, the colonial government left Nigeria, there was no doubt in the minds of oil Rivers people that natural resources and in particular, lands, petroleum resources and other economic potentialities belonged to the autonomous people of Nigeria where they were and we had no misgivings of the magnitude that a petroleum decree and land use decree would emerge, whereby all the most important natural resources of our people would be confisticated by the central government and be left with ridicular 3% of the huge revenue that our territory produces. We cannot bear this any longer”.

The above can tell the level of anger that is building up in the oil communities even twenty years ago but nobody cares. Also, the youth restiveness and disturbance in the oil producing communities can also be traced to the large number of educated but unemployed youths, though aware of the large amount of money being made from the ancestral lands. Situation like this too have brought about restiveness among the youths of the oil producing communities resulting in disruption of production activities and vandalizing petroleum pipeline in search of a fair deal, even at the expenses of their lives. This is at times done with the aim of getting significant compensation paid to host communities for polluted lands, streams, clean-up contacts. Also such compensation paid; generate inter-community or inter-ethnic fights over suffocating claims over ownership of the affected piece of land while jostling to get their share of the compensation paid.

The land use Act created its own problems when it said in section 29 3) b) that compensation claims be paid to the traditional rulers for disbursement to the communities. This also have led to recent attacks on community leaders /traditional rulers. This can further be buttressed by referring to the NDE report of (1997) which identified causes of oil community dissatisfaction to include.

a) The fact that contracts are awarded to opinion leaders and local chiefs in communities, who abandon projects site after collecting contract fees.

b) Community assistance projects do not often get to the target communities and are not initiated in consultation with the people.

c) Oil companies often initiate and execute poorly defined projects that may be quickly abandoned or vandalized.

d) The non-chalant attitude of the oil companies showed to their areas of operations (Niger Delta ). These have made youths in these areas restive. They have unemployed youths and adults but under their house, people are unemployed from outside to do even menial jobs, when one can recall that there is federal government law which says that ministries/parastatals should employ people from the catchment areas which by extension should apply to the oil companies at least for peace to reign.

According to Milton A Iyoha (2000), oil industry activities are of great benefit in recent years. Oil export revenues have accounted for approximately 97 percent of total exports and about 80 percent of total of total government revenue,(Iyoha 1999).

In many ways, oil has been the engine of economic growth in Nigeria. Rising oil prices have be associated with booming economy while low world oil prices have precipitated a recession.

A case in point was the early 1980s when the collapse of petroleum left Nigeria in a quagmire of economic problems. Falling outputs, galloping inflation, rising fiscal deficits, increasing balance of payment deficits and escalating external debt . Thus, we have a position where oil industry activities contribute positively to the growth of the Nigerian economy while at the same time, they damage the environment.

Thus, the challenge is to derive strategies to mitigate the environmental damage from oil industry activities. Accordingly, the aim was to suggest policies for mitigating the environmental damage from these activities.

The unprecedented destruction of NNPC pipelines in recent times was partly accountable for the serious disruption of regular flow of petroleum products in the country. Jacksin Obadselei said that 524 cases of leakage of the corporations pipelines were recorded in 1999 and of these only 27 were attributed to corrosion and other natural causes while 497 cases were traced to vandalisation.

According to Okpe(1999), oil industry activities exposes to hazards that militate against their healthy growth and development. In the same vein, oil spillage and leakages from operational pipelines are said to be common causes of serious physical damage to the vegetation, soil and water long after clean-up. This results in incidence of soil infertility and poor yields from land.

According to Okoh and Egbon, (1999) the environment is not static and continuously in the process of changes. Environmental changes can be natural changes within the ecosystem or induced by people’s interactions with environment.

However, the issue now is the effect of energy on the environment. By far, the most fundamental environmental problem facing Nigeria is the “warming” due to what is termed “the green house effect”. Carbondioxide (CO2 ) and other gases produced by nature in the atmosphere functions as a sort of blanket.

This blanket retains the warrant’s received by the earth in the form of sunshine, preventing the release of the heat on other space. Without this blanket, the earth temperature would be 30-40o c lower than it is today due to the warmth provided by the blanket.

Niger-Delta comprises Rivers, Bayelsa, Cross River, Delta, Akwaibom, while the oil producing state includes Delta, Edo, Ondo, Ekiti, etc. Niger Delta covers about 70,000 square kilometers with high ecological value. It has nearly 200 oil fields with wells over 400 oil production and storage facilities scattered within its swamps and creeks which are operated by multinational firms such as shells, mobil, Chevron, EIF, Agip, and Texaco in joint venture with the Nigerian national petroleum company (NNPC). (Okoh and Egbon, 1999 ) .



The study concentrated on the impact of oil industry on economic growth performance in Nigeria within the period of 1970 to 2000. A multiple regression analysis was employed to capture the influence of OREV on GDP and also determine the trend effect, that the effect of time as a variable. The results revealed a positive relationship between the variables.

The conducted t-tests indicated that the explanatory variables do not significantly affect Nigeria’s economic growth. The implication is that some important variables have been omitted from the model.

While the conducted f-test showed that the joint influence of the explanatory variables is insignificant, the R2 test indicates the poor explanatory power of the model, which is also a pointer.


The oil industry is a vital industry in Nigeria. Its output via oil revenue is generally agreed to be a catalyst to economic growth. This study explored the workings of this industry on the shores of Nigeria, specifically, the producing Niger-Delta. It equally discussed the consequence of oil exploration on the environment.

The people, the agricultural and manufacturing sector and above all, on the Gross Domestic Product, (GDP) of Nigeria from 1970 to 2000. The study proved that there has been environmental degradation, neglect of the people, abandonment of the agricultural and manufacturing sectors and a reasonable contribution to GDP, though with variation in the trend.

It is the opinion of the researcher that corruption in the Nigerian nation may have contributed immensely to the poor contribution of the oil sector to the economic growth of Nigeria. For example, allegations abound where retired military officers and some influential politicians are offered oil licenses to lift and export crude oil and the proceeds are reflected in the private pockets of such people only.


Here, the researcher in a bid to enhance effective contribution of oil industry to GDP made the following recommendations.

 There is a need to develop the agricultural sector side by side with the oil sector, the government need to develop agricultural sector which has been neglected over the years because oil is a wasting assets and too much reliance on oil to the neglect of agricultural is not of much benefit to the economy. Through this means, the industry sector will be modernized through the transfer of resources from the agricultural sector.

 There is also need to renew ageing facilities, working hard to reduce ageing facilities will help to reduce the number of oil spill in the course of operation, the amount of gas flared and reduce waste products. All these will also help to meet the latest safety and environmental standard.

 The need to institute environmental monitoring and management. The concept of environmental impact assessment (EIA) should be encouraged and enforced by regulators. EIA is a good project development strategy that forces developers to look through the life cycle of a project from the conceptual stages through design, construction and production phases to the decommissioning or abandonment phase; In so doing, the impacts of the project on the environment though life cycle are identified, modeled and evaluated with the objectives to mitigate the effect of all negative impacts and enhance the benefit of all positive effects in their host communities.

 As much as possible, established market based instrument like pollution taxes and affluent charges should be utilized. This will economize the use of bureaucracy and reduce the cost of enforcement. Also, revenue obtained from pollution taxes should be used for environmental –begging-projects or to compensate inhabitants of the oil producing areas of the economy.

 There is also, the need to work closely with the communities. This will help to reduce or settle the various problems that arise from the various communities in the country and will enable federal and state government, oil industry and communities to plan better for developments and minimize the impact on the environment.

 More so, there should be contingency team that will comprise the representative from the oil industry, the host communities, the NNPC, professional bodies, etc. This group will be responsible for the drawing up of emergency preparedness plans and implementation, which will be used to combat spills. The group should also be in charge of relief packages for affected communities.


The researchers recommend that more variables be included in the model and also more sophisticated econometric methods be employed in determining the impact of oil industry in the economic performance of Nigeria.

Economic Growth In Nigeria – Impact Of Oil Industry

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  1. Iniobong Ephraim Ebong says:

    could you please provide detail of the author and publishers and date of publication for citations and credits for research references. thanks. Ebong

  2. pls, i need a project on the effect of fuel consumption on the economic growth of nigeria. 1986-2014. thank you. you can call me: 08029031707

  3. Oyerinde oluwafemi says:


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