Nigeria’s Role in International Organization (A Case Study of OPEC)
Chapter One
OBJECTIVE OF THE STUDY
The basic objective of this research includes:
- To examine the conditions that necessitate the formation of the organization of petroleum exporting countries OPEC in connection with the security of good and stable price of oil.
- To examine the relationship between demand and supply and crude oil products
- To recommend the appropriate policies and strategies to streamline the price and production level of petroleum resources
- To examine the problems and challenges facing Nigeria as a member of OPEC.
CHAPTER TWO
LITERATUE REVIEW
Introduction.
This chapter reviews literature on OPEC as an organization, itsformation and membership; how oil plays an important role in the international economy and politics as well as Nigeria membership in OPEC.
Formation of OPEC and Nigeria’s membership
The government of Venezuela and Iran were the first countries to move towards the establishment of OPEC in the 1960s by approaching Iraq, Kuwait and Saudi Arabia in 1949, suggesting that they exchange views and explore avenues for regular and closer communication among petroleum-producing nations. The founding members are Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Later members include Algeria, Ecuador, Gabon, Indonesia, Libya, Qatar, Nigeria, and the United Arab Emirates.
On 10th to 14th September 1960, at the initiative of the Venezuelan Energy and Mines minister Juan Pablo Pérez Alfonzo and the Saudi Arabian Energy and Mines minister Abdullah al-Tariki, the governments of Iraq, Iran, Kuwait, Saudi Arabia and Venezuela met in Baghdadto discuss ways to increase the price of the crude oil produced by their respective countries. OPEC was founded in Baghdad, triggered by a 1960 law instituted by American President Dwight Eisenhower that forced quotas on Venezuelan and Persian Gulf oil imports in favor of the Canadian and Mexican oil industries. Eisenhower cited national security, land access to energy supplies, at times of war. When this led to falling prices for oil in these regions, Venezuela’s president Romulo Betancourt reacted by seeking an alliance with oil producing Arab nations as a preemptive strategy to maintain the continued autonomy and profitability of Venezuela’s oil resources.
As a result, OPEC was founded to unify and coordinate members’ petroleum policies. Original OPEC members include Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Between 1960 and 1975, the organization expanded to include Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), and Nigeria (1971). Ecuador and Gabon were early members of OPEC, but Ecuador withdrew on December 31, 1992because it was unwilling or unable to pay a $2 million membership fee and felt that it needed to produce more oil than it was allowed to under the OPEC quota, although it rejoined in October 2007. Similar concerns prompted Gabon to suspend membership in January 1995. Angolajoined on the first day of 2007. Norway and Russia have attended OPEC meetings as observers. Indicating that OPEC is not reluctant to further expansion, Mohammed Barkindo, OPEC’s Secretary General, recently asked Sudan to join.Iraq remains a member of OPEC, but Iraqi production has not been a part of any OPEC quota agreements since March 1998.
In May 2008, Indonesia announced that it would leave OPEC when its membership expired at the end of that year, having become a net importer of oil and being unable to meet its production quota. A statement released by OPEC on 10 September 2008 confirmed Indonesia’s withdrawal, noting that it “regretfully accepted the wish of Indonesia to suspend its full Membership in the Organization and recorded its hope that the Country would be in a position to rejoin the Organization in the not too distant future.”Indonesia is still exporting light, sweet crude oiland importing heavier, more sour crude oil to take advantage of price differentials (import is greater than export) due to Air pollution in Indonesia still being low as compared to China or The United States.
This summarily proved that withdrawal of membership from OPEC is voluntary as displayed by Indonesia and Gabon.
Importance of Oil to Global Economy
According to Peterson (2000), the world’s contemporary industrial societies are all built on natural resources particularly oil energy. Without cheap and abundant energy there would have been no industrial revolution and no technological /knowledge revolution now.
The energy sources which drive cheap and abundant industrial produce have changed over the years, depending on available technology, population and natural resources among other things.
CHAPTER THREE
FORMATION, ACTIVITIES AND STRUCTURE OF OPEC
Introduction
This chapter will look at the structure, activities of OPEC since its formation and also look at important activities of member countries.
Structural Organization of OPEC; How Decisions are made.
The organization is structurally organized and operated.
The conference is the supreme authority of the organization and consist of the “heads of delegates” usually the national ministers for oil, mines and energy of the member countries.
- The conference generally convenes twice a year and takes its decisions on the principle of unanimity. It is responsible for the formulation of the general policy of the organization, decides upon applications for membership, elects the chairman of the board and approves the appointments of governors. It also decides upon the organization’s budget and considers and decides upon the reports submitted to the conference. The current president of OPEC conference is HE Shiek Ahmed Fahad Al Ahmad Al Sabah of Kuwait, who also holds the position of secretary general of the organization.
- The board of governors in its function as management body of the organization directs the implementation of the decisions of the conference and draws up the budget, report and recommendations’.
- The OPEC secretariat is responsible for carrying out the executive functions of the organization under the direction of the secretary general. It consists of the office of the secretary general and a number of qualified special departments. Moreover, the conference can set up special consultative bodies.
- A particularly important concern for the OPEC member state is cooperating with developing countries in their struggle to overcome underdevelopment.
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA
Introduction.
This chapter critically Evaluate Nigeria’s role in OPEC; challenges and prospects. it also outlines how Nigeria moved from Agriculture to oil economy. Finally the study evaluates the benefits and cost derived from Nigeria’s membership of OPEC.
Nigeria from Agriculture to Oil Economy.
The agricultural history of Nigeria is intertwined with its political history. This can be accessed from the pre-colonial, colonial and post colonial periods. Before the British conquest, the pre colonial society strived on agriculture as the main stay of traditional economy. The periods of colonial administration in Nigeria, 1861-1960, was punctuated by rather ad hoc attention to agricultural development.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
This work summarizes the research work; it proffers solution on how Nigeria could manage the cost and maximize the benefit there in for her membership in the organization.
Summary
The work so far has been able to study OPEC as an organization from its formation, objectives and activities since 1960 through 1971 when Nigeria became a member. However from this period till date Nigeria has generated huge sums of foreign reserves that has not transform the economy but rather breeds crops of corrupt politicians who has mismanaged the economy there by subjecting the country into untold hardship, characterized by high crime rate unemployment, inflation, swollen bureaucracy, balance of payment deficits, neglect of the agricultural sector and over-dependence on oil etc.
In view of the unfolding event in Nigeria’s membership in OPEC since 1971 till date; it is enough to call the shot by pullingout going by the comparison of cost and benefit of her membership. But rather than pulling out as suggested by certain persons, we have forgotten the prospects there in for her, as everything good in life is based on planning and prediction. For example the gas development project between the two OPEC members “Nigeria and Algeria” through the West Africa pipeline system is an opportunity to launch her into the new global market as most developed countries are craving for an alternative source of energy.
More so her membership in OPEC gave her a unique voice among committee of nations therefore boosting her international image.
Through this, she was able to achieve what she alone cannot achieve especially in areas of determining international oil price and production quota.
The research also analyzes graphically the facts and figures of Nigeria membership in OPEC. From the analysis, we were able to review some scholars’ perception on the membership in OPEC. Some were of the opinion that Nigeria has not gained tremendously from the organization and so does not necessarily have to opt out. But with adequate planning and predictions in respect to socio economic adjustment would reap the benefits as a member of OPEC.
However, some have continue to dwell on the negative side of her membership which was majorly based on years of military mismanagement, misgovernance and faulty sharing of the oil revenue which often have generated a lot of controversy especially in the Niger delta region where oil is produced.
Conclusion,
Though Nigeria has encountered several hiccups nonetheless her membership has boosted the image of the country as being one of the 11 member countries regulating the prices and supply of crude oil hence giving her an edge over other countries in the West Africa sub region,particularly in the struggle for a permanent seat in United Nations.
More so her membership has enhanced partnership in the area of gas development projects which will boost the prospects for the markets growth of the economy particularly the gas sector.
However, going by the structural problems faced in the economy certain recommendations are given which I believe would be of enormous importance if strictly adhered to.
Recommendations
These recommendations are given to enable Nigeria re-evaluate the cost and benefits of her OPEC membership and strategically positioned her to reap the benefits of her membership. This solution is centered on Nigeria government and internal value system which are as follows.
- Nigeria government should divest her economy into more profitable ventures like agriculture, gas project and develop tourism as this would reduce the burden on oil and boost her economy with attendant issues like unemployment, high rate of crime.
- Most particularly proceeds from oil should be judiciously managed and re- invested into the economy rather than just spending it on importations of finished items into the county. In view of this the revenue sharing formula should be revised to maximize the contradictions it has generated overtime in the country between different entities in the society.
- Stringent fiscal measures should be adopted by the apex bank in line with international financial institutions like IMF, world bank etc to help manage and stabilize the economy from inflation and also counsel the government on what best policy to adopt to help check against balance of payment deficits.etc.
- Most importantly, Nigeria should remain focused in OPEC while she tries to restructure her domestic market and look for possible avenue where member countries could partner and be of benefits to one another. For example the gas project development between Algeria and Nigeria remains a laudable one
- The government should give adequate concentration to the‘goose that lays the egg’ Niger delta. The region should be well catered for in areas of infrastructure, health and employment. So as to discourage attack on oilinstallation and kidnap of expatriate by the local community; this has invariably disrupted production of about 60,000 bpd thereby pushing up international oil price.SeeNew Nigeria, 2006.
- In view of the Arab revolution in the contemporary world, there is no fear that the world will run short of energy in the foreseeable futures.oil will continue to contribute substantially, in absolute terms, to primary energy and it may even increase its percentage share. The opportunities for Nigeria are obvious.
- The country should be poised to play its proper role in meeting world demand for crude oil and gas and their derivative so as to increase her export earning share.
References
- Bright Erakpoweri Okoguo (1985) Oxford University “The Outlook for Nigerian oil” A paper presentation at the Seminar on Nigeria Economy A.B.U Zaria and Nigerian Institute for Social and Economic Research (NISER), Ibadan November 11-15.
- Business Vanguard June 24, 2008. Business Watch Oct. 2010.
- Charles F .Doran (1977): Myth, Oil and Politics: Introduction to the Political Economy of Petroleum, Free Press third Avenue, New York.
- Dr Abass P.G Class 2011, Class Note on Issues in Nigerian Government and Politics. Department of Political Science, Ahmadu Bello University.
- Emerging markets data file.”Nigeria must remain in OPEC world sources, ic, Xinhua.29jan 2003.
- Ezekiel Ayodele Walker : Structural Change, the Oil Boom and Cocoa economy of South Western Nigeria,1973-1980s,Department of History (Africa) University of Central Florida, Orlando USA. Guardian February 23, 2007.
- http. Www. Nigeria business info.com/agric. Visited on 22/04/2012. http/www.Nigeriaworld.com/columnist/ihenacho.
- http/www.Oapec. Org
- http/www.Opec .Org/news info/quotas/quotas.asp
