Challenges And Prospects In Nigeria’s Petroleum Industry


Precisely on Sunday, Jan. 15, 1956, Shell D’Arcy Petroleum discovered oil in commercial quantity in Oloibiri in the present day Ogbia Local Government Area of Bayelsa State.

The discovery elicited a carnival-like celebration as it effectively jump-started the development of modern Nigeria, utilizing the vastness of its oil resources.

By the early 1970s, crude oil exploration had reached its peak as an estimated two million barrels of crude oil were produced from the nation’s oil fields daily.

By divine Providence somehow, a son of the Niger delta region of the country , President Goodluck Jonathan, who was barely a year old at the time of the oil discovery — has today become the nation’s Head of State, presiding over the management of the nation’s oil resources, among others.

The occasion of the nation’s 51st independence anniversary has thus afforded perceptive analysts the opportunity to appraise the continued relevance of petroleum resources to the nations’ development despite daunting challenges.

The Group General Manager, Public Affairs Dept., NNPC, Dr Levi Ajuonuma, said recently, for instance, that the efficient management of the petroleum industry had been the key to the economic development and transformation of the nation.

How far this viewpoint goes with Nigeria’s teeming population of analysts is a matter for conjecture but suffice it to say that, no doubt, crude oil remains the highest contributor to the nation’s Gross Domestic Product (GDP).

By a conservative estimate, the contribution of the oil sector is put at 90 per cent, even as Nigeria’s crude oil is highly rated in the international oil market, besides the country being a key player in the affairs of the Organisation of Petroleum Exporting Countries (OPEC) – the club of world’s oil producers and exporters.

While many Nigerian have viewed crude oil discovery as a blessing for the nation, some critics say that it heralded some national drawbacks, especially the drastic decline of agriculture, which had before the discovery of oil been the mainstay of the nation’s economy.

Clearly, therefore, the sector has played a dominant role in Nigeria’s economy as it now accounts for about 90% of her gross earnings. This dominant role has regrettably pushed agriculture, the traditional mainstay of the economy in the early fifties and sixties, to the background.

Since the 1950s when the export of oil started, Nigeria has gradually emerged as a major world supplier of crude oil and an influential member of the Organization of Petroleum Exporting Countries (OPEC).

No doubt, the vast earnings from crude oil has facilitated infrastructural development in the country as well as improved the living standards of the people, though some critics say that more could have been achieved if the revenues from the sector had been judiciously utilized by the nation’s successive leaders since the oil boom years.

Critics have been quick to point to the perceived neglect and the environmental degradation of the Niger Delta region of the nation, where the nation’s oil wealth is derived.

Such discontentment, analysts say, inevitably bred the youth restiveness, insecurity and all manner of social upheavals which plagued the region until very recently.

These, adversely affected the nation’s oil flow and export and by implication led to a downward trend in the nation’s revenue earnings.

The upheavals, nevertheless, culminated in the inception of the Amnesty Programme for Niger Delta militants by the Federal Government under late President Umaru Yar’Adua, which is still ongoing and providing some kind of succor to the aggrieved youths and communities in the area.

Though oil production in the region has picked up since a relative stability has returned to the Niger delta region, the price fluctuations in the international oil market have often created some economic problems for member nations of OPEC, including Nigeria.

Such price instability and security threats in the region have posed serious economic challenges to the country, even as some economists have asked the Federal Government to strive to diversify the economy by reviving the nation’s agricultural sector, which had been neglected.

“The epileptic shifts in the international oil prices and instability in the Niger delta region have made the nation’s economy very vulnerable,” said an economist, Dr Johnson Abejide.

Observers say that despite the multi-billion dollar investments and infrastructural development the sector has attracted over the years, it remained a paradox that the country’s poverty index is still embarrassing to the citizens.

Stakeholders in the oil sector of the economy have alluded to wide-scale corruption and inefficiency in the petroleum industry over the years, which negated the people’s expectations of development from the huge proceeds from crude oil sales.

“There have been lack of transparency, accountability and non-implementation of reforms in the sector over the years and this has limited the nation’s potential in the sector,” said Abejide. That Nigeria has subscribed to the protocols of the Extractive Industries Transparency Initiative, a global organization seeking transparency and efficiency in governance, is somewhat of a development welcomed by many citizens.

In April last year, President Jonathan signed into law the Nigerian Local Content Development Act, which among other things, seeks to develop the indigenous content of the oil sector, with a view to boosting the economic development of the nation. “Expenditure in the industry must transcend returns in terms of revenue and also translate to local capacity, increased technology growth, jobs for Nigerians, capacity to operate and maintain assets and develop critical facilities and infrastructure to support performance of work scopes in Nigeria’’ Jonathan had said.

As one of the immediate gains of the act, the use of made-in-Nigeria pipes for pipeline installations by oil companies is on the ascendancy and this, analysts insist, is capable of enhancing job opportunities in the country. The Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, on her part has vowed to continue with the reforms she initiated in the oil industry, with a view to moving the nation’s economy forward.

Industry analyst express the viewpoint that the strict implementation of all enabling laws for the oil industry, and in particular, the passage of the Petroleum Industry Bill (PIB), still pending at the National Assembly, will go a long way to transforming the petroleum sector for the development of the nation.

As Nigerians continues to celebrate her 51st independence anniversary, stakeholders in the industry challenge the Federal Government to develop the political will to strictly enforce all laws in the industry and thus plug all loose ends the exist.

Jimoh writes for News Agency of  Nigeria.

Muyideen Jimoh