Description
CHAPTER ONE INTRODUCTION 1.1 Background of the Study Nigeria is Africa?s largest oil producer and fifth supplier to the United States. She is rated among the 12 biggest oil producers in the Organization of Petroleum Exporting Countries, (OPEC), contributing about 2.5 million barrels per day (bpd) to the OPEC basket. She is the sixth largest oil exporter, ?with a total of 173 oil blocks in operation, according to the Department of Petroleum Resources (DPR)? (Eboh, 2016:1). The OPEC?s Annual Statistical Bulletin 2012 shows that Nigeria has proven crude oil reserves of 37.2 billion barrels, while proven natural gas reserves stands at 5.154 million cubic metres, making it the eighth in the world gas reserves and first in Africa. Yet the country depends on fuel importation to meet local demands of petroleum products. Crude oil production and export commenced in Nigeria in 1958. It accounted for 7.1 per cent of total exports in 1961, which was dominated at that time by cocoa, groundnut, rubber and palm oil, in that order. In 1965, oil constituted 13.5 per cent of the nation?s export earnings, and by 1970, it had become the leading source of foreign exchange, accounting for 63.9 per cent. By 1979, petroleum sales had completely overshadowed non-oil exports, as it then contributed about 95 per cent of the country?s export earnings. In 2012, oil and gas export accounted for almost 96 per cent of export earnings. Also, in 2016, ?Nigeria budget is framed on a reference oil price of $79 per barrel, providing a wide safety margin in case of price volatility? (U.S Energy Information Administration (EIA), 2016:1). No wonder, Central Bank of Nigeria (CBN) reported in 2010 ?that petroleum accounted for approximately 96 per cent of the country?s foreign exchange and 76 per cent of the total government revenue? (CBN, 2010:3). It is no surprise then that it was observed that ?total oil revenue generated into the federation account amounted to N34.2 trillion while non-oil revenue was N7.3 trillion, representing