Petroleum and the Nigeria Economy

Topics: Petroleum, Economics, Economic growth Pages: 10 (2940 words) Published: June 5, 2013
Global Business and Economics Research Journal ISSN: 2302-4593 Vol. 2 (5): 102 - 115

The impact of petroleum on economic growth in Nigeria
Michael Baghebo
Niger Delta University, Bayelsa State, Nigeria baghebomichael@yahoo.com

Timothy Okule Atima
Niger Delta University, Bayelsa State, Nigeria

Abstract The study examines the impact of petroleum on economic growth of the Nigerian economy. Data covering the period 1980-2011 was collected from the Central Bank of Nigeria Statistical Bulletin, and transparency international Agency annual publications and analyzed using econometric approach. The stationary status of the time series data was examined using Augmented Dickey Fuller test. The regressand is Real Gross Domestic Product (RGDP), The regressors are Foreign direct investment (FDI), Oil revenue (OIL), Corruption index (CI), External debt (EXDEBT). The series attained stationary after differencing. The Johansen cointegration test was conducted to ascertain the long run equilibrium condition of the variables in the model. The variables were cointegrated because four cointegrating equations were found. The Parsimonous model was established to account for the short run dynamic adjustments required for stable long run equilibrium. It was discovered that the variables: oil revenue and corruption index impacts negatively on Real GDP, while FDI and EXDEBT have positive impact on the growth of the economy. This means that the resource curse theory is proven to be true in Nigeria. The study concludes that, if the petroleum industry bill is passed and implemented to the letters, there exists hope for the Nigerian nation. Keywords: petroleum, economic growth, Nigeria

Citation: Baghebo, M. and Atima, T. O. (2013). The impact of petroleum on economic growth in Nigeria. Global Business and Economics Research Journal, 2(5): 102-115.

© Global Business and Economics Research Journal. Available online at http://www.globejournal.org

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Baghebo and Atima Vol 2 (5): 102-115

Global Business and Economics Research Journal ISSN: 2302-4593

1. INTRODUCTION The petroleum industry in Nigeria is the largest industry. Oil provided approximately 90 percent of foreign exchange earnings and about 80 percent of Federal revenue and contributes to the growth rate of Gross domestic product (GDP). Since the Royal Dutch Shell discovered oil in the Niger Delta in 1956, precisely in Oloibiri, in Bayelsa state, the oil industry has been marred by political and economic strife largely due to a long history of corrupt military regimes, civil rule and complicity of multinational corporations, notably Royal Dutch Shell. Six oil companies- Shell, Elf, Agip Mobil, Chevron and Texaco dominates the oil industry in the country. Together, they hold some 98% of the oil reserves and operating assets. A range of 50 others have minor interests, some of which were recently acquired. There are three major actors in the Nigeria oil industry. They are: the ministry of petroleum resources, the Nigerian National Petroleum Corporation (NNPC) and its subsidiaries, the oil prospecting companies made up of the multinational companies and indigenous companies together with their subsidiaries (Baghebo, 2012). The operations and activities of petroleum are regulated by the Federal government of Nigeria; she does this through the enactment and implementation of bills and acts. Several bill and act have been passed to check petroleum exploration and exploitation, they include among others: the petroleum act of 1969 (CAP 350), the oil pipeline act 1966, the land use decree 1978 etc. The recent 2012 petroleum industry bill is a comprehensive development blueprint, below are the objectives of the bill:  Create a conducive business environment for petroleum operations;  Enhance exploration and exploitation of petroleum resources in Nigeria for the benefit of the Nigeria people;  Optimize domestic gas supplies, particularly for power generation and...
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