CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Oil is a major source of energy in Nigeria and the world in general. Oil being the mainstay of the Nigerian economy plays a vital role in shaping the economic and political destiny of the country. Although Nigeria’s oil industry was founded at the beginning of the century, it was not until the end of the Nigeria civil war (1967 – 1970) that the oil industry began to play a prominent role in the economic life of the country (Fashola, 1999). Oil abundance, and specifically oil dependence has often been associated with poor growth, poverty and underdevelopment. Nigeria is considered to be a classic example of the contradiction between natural resource abundance and perverse economic development outcomes (or the paradox of plenty). It is Africa’s highest oil exporter, and the world’s tenth largest oil producing country. It has realized over US$ 600 billion in oil revenues since 1960, a figure greater than the resources used by the Marshall Plan in rebuilding Europe after World War II, and is currently the 8th highest net oil exporter in the world. Nigeria’s economy is heavily dependent on natural resources: oil and gas constitutes 98% of total exports, 80% of government revenues and around 20% of GDP (CBN, 2010). In spite of the enormous economic potentials in Nigeria, it has largely failed to live up to the ambitious growth projections that followed the first oil boom in the 1970s. Also, social indicators have displayed no specific tendency towards improvement such that in 2010, Nigeria was ranked 142nd out of 169 countries by the United Nations Human Development Index. Furthermore, up to 70% of Nigerians are considered to be ‘poor’ – subsisting below the national poverty line (NBS, 2012). It thus goes without saying that Nigeria has evidently grappled with the paradox of plenty.
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