Performance Evaluation of NNPC (1999-2015) Using Regression Analysis Techniques
Chapter One
Objectives of the study
The following are the aims and objectives of the study
To evaluate the contribution of NNPC in Nigeria economic development.
To know if there is a relationship between NNPC’s performance and the economic development of Nigeria .
To point out the negative roles of NNPC and the oil industry.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
ECONOMIC DEVELOPMENT
Economic development is the process in which a nation is being improved in the sector of the economic, political, and social well-being of its people. The University of Lowa’s center for International Finance and Development states that: ‘’the term has been used frequently by economists, politicians, and others in the 20th and 21st centuries. The concept, however, has been in existence in the West for centuries. Modernization, westernization and especially industrialization are other terms often used while discussing economic development. Economic development has a direct relationship with the environment and environmental issues’’. Economic development is very often confused with industrial development, even in some academic sources. Whereas economic development is a policy intervention endeavor with aims of improving the economic and social well-being of the people, economic growth is a phenomenon of market productivity and rise in GDP. Consequently, as economist AmartyaSen points out ‘’economic growth is one aspect of the process of economic development’
NNPC Significant Achievements in Nigerian’s Economic Development
- NNPC oversaw the country’s first equity stake in oil production with the Agip Oil Company in the mid-60s to better exploit resources for national development.
- It spearheaded oil exploration to confirm Nigeria’s position as the top crude exporter in Africa in the 1970s, boosting oil revenue from N200 million to N10 billion through the decade.
- In 2004, the NNPC unveiled plans to launch the ambitious West African Gas Pipeline to supply Nigerian natural gas to several neighboring countries.
- Nigeria emerged as an important exporter of natural gas with the establishment of the liquefied natural gas plant in Bonny in 2005 as part of efforts to end gas flaring by the end of this year.
- NNPC entered into a $ 1billion dollars jointventure in the offshore Agbami fields to increase national crude production capacity by a further 250,000 barrels per day.
- Through its recent Okapi Power Plant, the NNPC will generate the first carbon credit in compliance with the Kyoto Protocol and related UN resolutions (Building C, n.d).
Under the reviewed period, NNPC worked aggressively in revamping the oil and gas industry into an engine for job creation, poverty alleviation and rapid national growth which were and still some of the fundamental objectives/roles of the NNPC. Such objectives/roles are as follows:
- Enhancing access to capital and technology and promoting independent control of jointventure investments.
- Multiplying gas production and improving transmission to both domestic and regional gas markets.
- Achieving production efficiency and selective growth to improve capacity in jointventure operations.
- Establishing strategic partnerships with global gas companies to secure presence in international markets.
- Rationalizing the NNPC portfolio to ensure focus on high-growth potential assets.
- Implementing further reforms in the oil and gas sector to improve transparency and boost investor confidence.
- Reducing operational constraints and production suspensions resulting out of vandalism and violence. · Extending refineries and gas-based industries to help turn Nigeria into a regional hub for petroleum products (Building C, n.d).
CHALLENGES OF NNPC TOWARDS ECONOMIC DEVELOPMENT
Economic development is the process by which a nation improves the economic, politics, and social well-being of its human. The term has been used frequently by economists, politicians and others in the 20th and 21st centuries. The concept, however, has been in existence in the West for centuries (Wikipedia, n.d). In the study, the Nigerian National Petroleum Corporation (NNPC) listed the challenges confronting the corporation towards economic development to include assets integrity issues, crude oil and product theft; sub-commercial contracts; low capacity utilization of refineries; issues of subsidy management and inefficient business model (Roseline, 2015). Specifically, the corporation lost N345.7 billion to pipeline repairs and associated costs; crude oil and product theft/losses and unrealized subsidy claims in 2015 alone. The corporation said in its January to August report of the country’s petroleum sector obtained by The Guardian on Monday that incessant pipelines breakages nationwide have led to massive leakages and huge accounting losses to NNPC (Roseline, 2015).
CHAPTER THREE
STUDY METHODOLOGY
Introduction
This chapter describes the methodological framework used in attaining the stated objectives of the study. It also shows the research hypothesis postulated. The main focus of this chapter is on the research design, type and sources of data, the model developed for this study and the tool of analysis.
Type and sources of data
The data used in this study were all collected from secondary sources including annual time series data for performance of NNPC which was taken as proxy for economic development, NNPC performance collected for the period spanning between 1999 and 2015. The data were obtained from the statistical bulletin of the Central Bank of Nigeria (CBN), 2017.
The Model
Over the years, economic growth models developed by Barro (1990); Mankiw, Romer and Weil (1992) have been used by many researchers provide a theoretical framework for the analysis of the factors promoting economic growth. This growth in the development literature has brought a break-through where many other variables are now considered into the growth framework in addition to the traditional factors like capital, labour and technology. This has brought extension in the development model to include other variables like NNC in the analysis of economic development. In this vein, this study follows Cravo, Gourlay and Becker (2010) approach to specifically analyse the impact of performance of NNPC on economic development of Nigeria.
The model for this study is specified in equation 1 as follows:
RGDPt = f ( PNNPCt , ECDPMTt + mt ) – – – – – – – – – – – – – – – -(1)
Where RGDP represents real gross domestic product, which is taken as proxy for economic development while PNNPC and ECDPMT represent total output of performance of NNPC and economic development respectively.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
This section presents and discusses the result of Augmented Dickey Fuller (ADF) and Philips unit root tests of individual series, followed by modified ordinary least square (OLS) regression technique. Table 1 depicts the result of the ADF unit root test. It can be seen that all the variables (real gross domestic product (RGDP), performance of NNPC (PNNPC) and economic development (ECDPMT) are not stationery at levels but they become stationery after differentiating once at 5 percent level of significance.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain performance of evaluation of NNPC. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of performance of evaluation of NNPC
Summary
This study was on PERFORMANCE EVALUATION OF NNPC (1999-2015) USING REGRESSION ANALYSIS TECHNIQUES. Three objectives were raised which included: To evaluate the contribution of NNPC in Nigeria economic development, to know if there is a relationship between NNPC’s performance and the economic development of Nigeria and to point out the negative roles of NNPC and the oil industry. The study employed regression technique to model the relationship between performance of NNPC and economic development of Nigeria. In view of the fact that this study used time series data (1999-2015) and inherently it might exhibit some strong trends, the non-random disposition of the series might undermine the use of some of econometrics tests such as F and t-tests. This is because they can cause rejection of a hypothesis which would have otherwise not been rejected. This study conducted stationary test using ADF test to mitigate such situations. After that, a fully modified simple ordinary least square is applied with a view to find the nexus between the dependent variable and independent variables used in the model.
Conclusion
This study is a very interesting area of coverage. If NNPC and its subsidiaries can adhere to the recommendations below, most of the challenges will fizzle out for the good interest of the country and the economy. The economy of the country cannot grow as expected if large chunk of the youths is not properly enlightened and engaged
Recommendation
The federal government should ensure that every contract/financial transactions made by NNPC should be made public and spirit of transparency and accountability should be encouraged to the fullest. Experts with wealth of knowledge should be sorted for at least for proper subsidy management and well-articulated business model that will take into cognizance of our environmental factors for good of the corporation and the economy.
References
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