CHAPTER ONE

INTRODUCTION

1.1       INTRODUCTION/BACKGROUND OF THE STUDY

Nigeria is the largest country in Africa located between 30 and 140 east longitude and 40 and 140 North latitude, it has an area of 923,79 square Kilometers with a population estimated at 140 million people in 2005, the country doubles as Africa’s most populous country. Nigeria also trebles as the largest produces of crude oil and natural gas in Africa, Nigeria is the 10th largest oil producer in the world the 3rd largest in Africa and most prolific oil producers in sub-Saharan Africa from a small beginning of an output of about 5000 barrels per day in 1958, production level reached about 2.055 million b/d in 1973 and rose to a high level of 2.3million b/d in 1979. thus steadily from 1960 petroleum sector began to exert its overriding height to the extent that by the mid 1970 it had incontrovertibly anchored itself as the most readily available resource for prosecuting programme directed at achieving rapid growth and development of the Nigeria economy (Aminu 1997). The Nigeria economy has undergone numerous phases in the premise of diagnoses, it is said that the country, is a memo economy. In spite of structural changes over the years the economy has been relying of a single sector for her foreign exchange.

Prior to independence in 1960 agricultural sector dominated the provision of food income and labour force of the Nigeria’s populace, agricultural accounted for the nation growth rate of 5% per annum across the 1950, and 1960s. In 1960, agriculture sector contributed triple what the petroleum sector contributed to the country’s GDP foreign exchange earning; the National income investment etc. oil is a major source of energy in Nigeria and the world in general. Oil being the mainstay of the Nigeria economy plays a vital role in shaping the economic and political destiny of the country (Gbadebo Odolarui 2005). In 1970, the petroleum sector took over as the bedrock of the Nation, although it entered the export list since 1958. Petroleum asserted it importance in 1970 after the Nigeria civil war (1967-1970), when it accounted for 70% and 80% of export and export earnings respectively since then Nigeria economy has solely dependent on the petroleum sector as the major sector of government revenue and foreign exchange (Ojamerage and Oyaide 1987).

The nature of the economy was described by the erstohile petroleum resources minister Alhaji Riwance Lukman “As an oil related economy with a weak and neglected agricultural sector and a manufacturing capacity dependent on imported raw materials”. Nigeria depends on crude oil and when there is any slight fluctuation in the world oil market the economy is thrown into commotion why, is this so? For the past three decades crude oil has been a major source of revenue, energy and foreign exchange for the Nigerian economy, Against this background, this paper work reviews the early attempts of exploring oil, its importance, its role as it affect various segment of the economy example government revenue foreign exchange etc). Secondly we will analyze some of the problems of  the petroleum sector, the role of NNPC and OPEC as well as the prospects of the industry in Nigeria. Thirdly, build and specify models to this effect, present and analyze date, concluding this work by providing recommendation based on our findings