The search for oil deposits started in Nigeria in 1908 with Shell Darcy drilled the first well in 1938 (Aigbedion, 2004, Anyanwu et a!; 1997). In 1955, Mobil Exploration Incorporated received concession over the whole of the former northern region in Nigeria where the company carried out relevant geological survey. It also drilled some wells in western Nigeria before abandoning its concession in 1961.

Ezigbo (2008), Shell Petroleum discovered oil in commercial quantity in Nigeria in 1956 and began production of the commodity immediately. Apart from the initial discovery of oil at Oloibirl in the Niger Delta, further discoveries at Afam and Bomu confirmed Nigeria’s status as a major oil producing nation.
Obadan (1998), the petroleum industry grows rapidly from 1960 and 1970 and has replaced agriculture which was the cornerstone of the nation’s economy. The manifestation of the Nigerian oil industry includes one of the world’s largest proven reserves and the production in excess of 2 billion barrels (Van, 2001).At the top of the oil industry is the federal government-owned parastatals, Nigeria National Petroleum Corporation (NNPC) that operates a faint venture agreement with other foreign multinational oil companies in Nigeria to produce both the nation’s crude oil and gas. The four refineries was sold in the year 2007 due to the privatization policy and Nigeria is today importing refined oil from neighboring oil producing countries at a higher rate (Eke, 2011).

The oil industry has assumed a positive position in the Nigerian economy accounting for 8 of the nations Gross Domestic product (GDP) in recent times. ( Dappa, 2010). The industry has also pushed Nigeria to the fore front of the global industry making the country the 6 largest exporting and 7 largest producer of oil in the world. Revenue from the oil sector comprising export earning, petroleum profit tax and royalties has grown steadily over the years. Between 1970 and 2008, earning from oil rose from 75.3% to a peak of89.1% of the total federally generated revenue (CBN, 2010).
Amadi (2010), International Monetary Fund (IM F) has / estimated that Nigeria’s earning from crude oil increases from US$8,500 billion in 1989 to US$10,600 billion in 1990. By 1995, these earnings had declined to US$7,001 billion and declining further to US$5,276 billion in 1998. However, crude oil prices have increased steadily in the new millennium following the implementation of strict production quotas imposed by Oil Producing Exporting Countries (OPEC) on member countries to stem the flow of excess crude oil in the global market place.
ThankGod (2011), the result of the dominant role played by the oil sector in the nation’s economy has made the economic performance of the country linked to oil prices in the past three decades and will continue to control the economic base of the country except if the nation’s government finds an alternative means of achieving the country’s economic needs. Indeed, the over dependence on the oil sector has inspired the current administration to diversify the nation’s economy away from its dependence on crude oil by harnessing natural gas, bitumen and other solid minerals.
Thus, the unexpected boom in the international market helped to propel the growth of performance of the entire economy (UNECA 2005). Oil prices rose from US518.00 a barrel in 1999 to USS28.00 in 2000. Also, OPEC quota for Nigeria increased from 1.885 million barrels a day in March to 2.033 million in April, 2.091 million in July, 2,157 million in October and 2,178 million in 1.88  million barrels a day were exported from 1.666 million in 1999 and in subsequent years, the barrel increased.
Egbos (2011), although oil is largely an enclave sector in Nigeria having a few forward and backward linkages with the rest of the economy, it remains a decisive force for economic performance. Indeed, oil impact is transmitted through the income effect, mediated through public spending and import. In recent times, oil GDP is clearly more volatile than non-oil GDP. As a result of the volatility of oil prices, the sector often experience rapid growth in value added on year followed by an equally rapid decline in the next, with the trend usually reflected in volatile growth for the economy as a whole.

Okorie (2012), the oil sector has improved the Gross Domestic Product of the nation which increased the. per capita income per head as well. Revenue from the sector has improved the nation’s economy steadily since the discovery of the oil industry in Nigeria. The Oil Producing Exporting Countries (OPEC), has helped to improve the standard of living of member states which Nigeria is among the member countries. The OPEC serves as a determining circle through which the oil rich countries distributes their barrels of oil to the needy nations at an agreed rate.
Adeyemi the oil industry’ have contributed ‘in the reduction of unemployed graduates in the country. The sector employ graduates every year. This reduction in unemployment creates an avenue for the families involved to improve the standard and welfare of their households. In other words, the sector train their employed staff abroad for knowledge update thereby making them experts in their area of specialization. This equally help them to contribute favourably among their international counterparts.
Murtala (2008), the oil discovery has not only boasted Nigeria as the giant of Africa but has improved the country’s infrastructural development, economic advancement and living standard of people. The state of Nigeria today cannot be compared to how it was before the discovery of oil. It has improved the country’s export generation and development status.
Anoke, K.N (2012), the impact of oil in the country’s economy has helped to raise the country’s foreign reserves. It has equally contributed to the nation canceling their foreign debt. The increase in the price per barrel especially when member country’s are in dispute increase the country’s revenue from the sector.
Ade, T. (2009), the presence of oil industry in the country has contributed in their redistribution of income among member states in the country. This helps each state to go into internal and external development of their states. This makes the country’s benchmark for development. The excess gained from the crude oil sales have helped the country gained steadily from the sharing formula which help the state governors and local government administrators to develop their own states and local councils.

The idea of the fuel subsidy is a good one as it was intended to give the average Nigerian access to cheap petroleum products. There were obvious flaws in the policy. Attempts have been made by various governments to get rid of the policy but failed (Odili, 2012). The regulatory framework, Petroleum and Pipelines Products Regulatory Agency (PPPRA) used to enforce the subsidy was weak, under resourced and suffered from the Migeria factor.  The secrecy  and lack of transparency by the administrator of the subsidy (The NNPC) did not help matter either.
Duke, D. (2012), Nigeria still cannot make her refineries efficient. This means that she cannot produce enough refined products for local consumption. The country has had various failed turn around maintenance programmes by almost every government in the last 20 years and the refineries are still not working to capacity resulting in continued imports of refined products. Most of the so called subsidy disappears in the importation of refined products that are sold to Nigerians at inflated, manipulated or distorted pump price.
Hanza (2012), the economic reality of the matter is that government cannot control the price of a product if government does not control the supply or how the product is sold to the consumer. The Nigerian government controlled NNPC is not the sole retailer of refined products in Nigeria and there are more private retailer than government controlled NNPC stations.
Kunle (2012), In oil subsidy removal, the theory is that deregulation and removing the subsidy may initially lead to inflationary pressures but as the market is opened up to investors, billions of dollars will flow into the downstream sector and more private refineries will open for business in Nigeria. Eventually, the market will be self regulatory and prices for refined petroleum products and other goods and services will be at the natural market level as competition forces price down, knowing that the long term benefit will be more than the short term pain.
Kayode (2011), Oil subsidy removal will help government great imbalance between recurrent and capital expenditure in Nigeria. Encourage foreign investment in downstream infrastructure, free move funds for local investment in the oil sector, increased local refinery production. Removal will reduce importation of refined products in the medium to long term and eventually stabilize market prices as competition increases reaction from labour and political leaders.

For a solution to the perennial problem of fuel subsidy costs and fuel supply issues, the government must adopt a lasting solution that will not only stand the test of time but must also encompass and anticipate future challenges (Femi, 2012). Such issues must be pursued actively and must be viable, comprehensive, scalable and robust.
Femi (2012) establish and develop a comprehensive and viable power and energy policy; it is important to know a clear, articulate, comprehensive and well integrated policy on both energy and power. The energy sector encompasses a broad swat of the petroleum industry along with other sources of energy which includes the fossil fuel while the energy policy encompasses the use of all fossil fuel which includes the petroleum products, coal and gas. Therefore, for a nation with Nigeria’s resources and energy use profile, the crucial and immediate target should be prudent exploitation of abundant gas resources for electricity generation and greater economic participations.
Mohammed (2011), achieving the objective of stabilization and revitalization of refineries for domestic consumption is absolutely necessary and essential. Given the straight forward nature of this objective, it is difficult to understand why it has been a near impossible feat for the government to achieve this-perhaps a clear indicator of the scale of corruption within; while it may be true that the government is not the best suited organization for running and operating a refinery still goes without saying that the government is perhaps the best suited source for financing and executing such a cost intensive project.
Mustapha (2012), Federal government must re-organize the ownership and operational structures of the refineries so as to optimize efficiency. The NNPC refinery subsidiaries and entities shall be dissolved and liquidated and new structure and management shall be established.
Njoku (2011), the nation’s primary representation in the oil industry is the Nigerian National petroleum company (NNPC) and it has become an over-bloated, over burdened and inefficient agency which can best be described as a can of worms. NNPC should be dismantled and broken into different independent agencies and after dissolution, it’s role as a regulatory government agency shall also be transformed to the federal ministry of petroleum and it’s abundant agencies.
Kunle (2012), oil refineries are often designed with a specified crude feed stock in mind. The chosen design and construct of a refinery could also be largely influenced by the investor with regards to final product output. In the Nigerian scenario, local consumption comprised entirely of local crude feedback. In other words, there should expand national oil refinery capacity and improve efficiency.

Musa (2011), inflation or hyper inflation may ensue if the government removes fuel subsidy as higher energy prices are factored into prices for everything. Equally, public and private sector workers and low salaried workers will see their standard of living drop drastically as they struggle to make ends meet. Indeed, the cost of living for the average Nigerian will rise if the fuel subsidy removal takes place.
Abubakar, K. (2011), Removal of oil subsidy may lead the country to social and industrial unrest as the cost of living pushes every citizen to below $300 or less per annum as the average Nigeria lives on GDP per head.
Shegun (2010), unemployment will definitely rise as small and medium enterprises (SMEs) find it more expensive to either hire or retain staff. If workers demand for salary and they cannot pay, they will lay them off. If consumers lose their jobs they will have no money to buy the foods or services of these SMEs and these companies will close and lay off their staff. It becomes a vicious circle.

The oil sector has been plagued by various problems which undermined it’s optimal development over the years. The Nigerian National Petroleum Corporation (NNPC) is controlled by the ministry of petroleum resources. It lacks autonomy as a result of which decision taking is often bureaucratic and unnecessarily delayed. Therefore, the operation of the NNPC is characterized by inefficiency especially in refinery operations, distribution and marketing (Ibiyemi 2008).
Ijeoma (2010), frequent delays in the payment of cash calls for the joint venture operators have tended to discourage increase in the level of investment by the oil companies. Inefficiency of funds has also constrained adequate equipment maintenance and efficient refinery operations by the NNPC. The federal government delays in the payment of cash calls for it’s point venture operations in the upstream sub sector, focusing more on maintenance rather than growth.
Okilo (2010), communal disturbances have been disrupting crude production as oil communities clamour for higher stake in oil operations. This has led to the kidnap of oil management experts and burning of oil wells in the designated areas. Communal crisis have caused the lives and properties of many innocent souls which led to the stoppage of work by many oil companies and their subsidiaries.
Ademola (2010), there are many case of massive smuggling of petroleum products across the borders in guest for foreign exchange and to take undue advantage of the domestic price vis-à-vis neighboring countries prices. This led to the decline in the petroleum supply for domestic consumption and high increase in the pump prices. It often raise artificial inflation in the country as other sectors would adjust their own prices at that period in order to cushion the effect of the oil increase. Equally, some marketers hoard products in periods of scarcity in order to sell in the black market at higher prices.
Igbatayo F. (2008), high technical cost of production due to low level of domestic technological development is most challenging. The government should improve on domestic technological development than importing from neighboring countries. This will also increase their level of investments in the oil sector. Domestic technological development will also curb product adulteration and as well protect environmental degradation due to the flaring of associated gas.
Share on Google Plus


The publications and/or documents on this website are provided for general information purposes only. Your use of any of these sample documents is subjected to your own decision NB: Join our Social Media Network on Google Plus | Facebook | Twitter | Linkedin