The Performance of the Oil Sector on Economic Growth in Nigeria 1980 – 2021
Chapter One
Objective of the study
The objectives of the study are;
- To examine the long-run relationship between oil revenue, oil price volatility and economic growth in Nigeria.
- To find out the impact of oil revenue, Oil price volatility on gross domestic product (GDP).
- To examine the impact of non-oil revenue on economic growth and development of the country.
- To determine empirically whether there is any functional long-run relationship between crude oil revenue and increase/decrease of our GDP within the period under study.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
CONCCEPTUAL FRAMEWORK
Conceptual Framework
The concept of economic growth has to do with the increase in the output level of an economy which can also mean an increase in income level. Economic growth of a country can be determined in the productivity level, volume of trade, investment in both human and physical capital. Ochejele, (2007) defines economic growth as the quantitative and sustained increase inthe country’s per capita output or income accompanied by expansion in labour force, consumption, capital and volume of trade. Accordingly, Anyanwu and Oaikhenan (1995) simply defined economic growth as the increase overtime of a country’s or an economic capacity to produce those goods and services needed to improve the well-being of the citizens in increasing numbers and diversity. It is conventionally measured as the percentage rate of increase on Real Gross Domestic Product (RGDP). Growth is usually calculated in real terms, that is, inflation- adjusted terms, in order to net out the eff ect of inflation on the price of goods and services produced. The growth of Real Gross Domestic Product (RGDP) between 2004 and 2008 was driven mainly by the non-oil sectors as reflected in the non-oil GDP and that the industrial output however fell by 2.2 percent due to poor performance of the oil sector CBN (2008).Henderson and Poole (1991) defined economic growth as the increase in output and other measures of material progress at a certain period. It is also said to be either growth in national output as measured by GDP or GNP (which measures economic power), or growth in the national average standard of living as measured by the GNP per capita (which measures the well-being of citizens).
Economic growth focuses on the expansion of productive capacity over time. The expansion of productive capacity requires an increase in natural resource, human resource, capital and technology.
Thus economic growth is due to growth in inputs, such as labor, capital and technological improvement. Economic growth generally, can be described as a positive change in the level of production of goods and services by a country over a certain period of time. In other words,
economic growth is the increase in the value of goods and services produced by an economy. It can also be referred to as the increase in the gross domestic product. It is a relatively straight forward measure of output and gives an idea of how well off a country is, compared with competitors and past performance. It is a beacon that helps policy makers steer the economy towards key economic objectives. Finally, it is a measure of the wellbeing of a state; usually in real terms, all other things being equal (Enu, 2009).
According to Haller (2012), economic growth is, in a limited sense, an increase of the national income per capita, and it involves the analysis, especially in quantitative terms, of this process, with a focus on the functional relations between the endogenous variables; in a wider sense, it involves the increase of the GDP, GNP and NI, therefore of the national wealth, including the production capacity, expressed in both absolute and relative size, per capita, encompassing also the structural modifications of the economy. In other words, economic growth is the process of increasing the sizes of national economies, the macro-economic indications, especially the GDP per capita, in an ascendant but not necessarily linear direction, with positive effects on the economic-social sector.
Haller (2012) also concludes that economic growth is obtained by an efficient use of the available resources and by increasing the capacity of production of a country. It facilitates the redistribution of incomes between population and society. The cumulative effects, the small differences of the increase rates, become big for periods of one decade or more. It is easier to redistribute the income in a dynamic, growing society, than in a static one. When the rate of economic growth is big, the production of goods and services rises and, consequently, unemployment rate decreases, the number of job opportunities rises, as well as the population‘s standard of life. We shall, for the purpose of this study, employ the definition of economic growth by Haller (2012) as the working definition because it is broad-based and by far more encompassing in explaining economic growth than others.
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
This chapter is concerned with the methods used in collecting, analyzing and interpreting the data for the study, also explains the population of the study, sampling techniques and sampling size; model development, method used in recording and techniques used in data analysis.
Research Design
The design used in this research is ex-post facto, as the study entails the use of time series data for the periods under study as it allowed for the collection of past documented data. This provided the basis for the full establishment of the relationship between the variables. Therefore, the non-survey design is adopted to actualize the research objectives, which aim at examining the impact of oil revenue on the economic growth in Nigeria.
Population of the Study
Population refers to the totality of all conceivable elements or subjects relating to a particular phenomenon of interest to the researcher. The subjects or elements are the individual items that make up the population, which may be observed or physically counted (Tahir, 2012). The population of this study is the National economic data relevant to this study. However, this is restricted to oil revenue, non-oil revenue, oil price volatility, per capita income, GDP and GNP.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
Introduction
The chapter presents the data analysis and interpretation of result of the dependent variable and independent variables, it also presents the results obtained from the test of the research hypotheses.
CHAPTER 5
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Summary
The principal concern of the study is to examine the performance of oil sector on economic growth in Nigeria (1980-2021). In addition, this study also looks at the oil revenue, non-oil revenue and oil price volatility as determinants of oil revenue in Nigeria. The study comprises of five (5) chapters. The first chapter of the study is an introduction to the subject matter of the research, it talks generally about the background of the study giving full insight to the issue of performance of oil sector and economic growth in Nigeria. A statement was provided on the problem that prompted the study and the objectives to be achieved as were stated. Also, in line with the objectives, research hypotheses were developed as well as the scope and significant of the study.
Literature review was conducted in chapter two; this chapter examined a number of journals and articles on the topic to determine the various elements and concepts that derive the analysis of the impact of oil revenue on the economic growth in Nigeria. Empirical studies and theoretical framework were also reviewed.
Chapter three was centered on the methodology used for this research work. For the purpose of this study, data are extracted from published statistical websites and Central Bank of Nigeria;statistical bulletins covered the period of forty one years (41) years from 198 – 2021. It also went further to reveal the sampling technique and the method of data collection and techniques of data analysis employed.
Finally, the fourth chapter is on the presentation, interpretation and analysis of the data. This was done with use of data are extracted from published statistical websites and Central Bank of Nigeria; statistical bulletins computed using statistical for social science E-view version 10.
Based on the result this study, the following findings are:
- Oil revenue and oil price volatility has significant impact on Gross Domestic Product of Nigeria.
- Oil revenue and oil price volatility has significant impact on Gross National Product of Nigeria.
- Oil revenue and oil price volatility has significant impact on Per Capita Income in Nigeria.
Conclusions
The results from the analysed data shows that oil revenue play significant role in Nigeria‘s economy through its contribution to GDP. Furthermore, Nigeria has managed oil revenue to achieve economic growth on all fronts. The data collected and analyzed showed that Nigeria has saved in a fund to diversify investment in productive portfolios. Nigeria has also saved to smoothing expenditure process without much borrowings, and has saved for infrastructural development. It can be concluded that in reality Nigeria lacked the basic key capabilities presence of weak political and democratic institutions which have encouraged the institutionalization of bad governance, corruption and outright disregard for the rule of law to manage oil revenues to attain the desired economic growth
Recommendations
Based on the above findings and conclusions, the study recommended the Nigerian National petroleum corporation (NNPC) should diversify its export baskets through downstream production, this will enhance the refined petroleum for exports. The government should encourage more private company participation. So that better equipped refineries can be built and the cost of refining crude oil will reduce. Security should be boosted on the high sea where crude oil products are being smuggled. This will help reduce the loss from illegal export of crude oil products. Government should give immediate attention to the indigenes of the region where crude oil is being extracted from. This will reduce the unrest in that region. Government should establish an institution that will ensure that the multinational oil companies are socially responsible to their host community. Government should fight corruption by establishing institutions that will arrested and prosecute corrupt public office holders. There is the urgent need for Nigeria to diversify their export market especially the oil market.
References
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- Anyanwu, J. C., Oyefusi, A., Oaikhenan H., & Dimowo, F. A. (1995).The structure of the Nigeria economy. Anambra: Joanee Educational Publisher Ltd.
