STATISTICAL ANALYSIS ON THE PRODUCTION AND SALES OF CRUDE OIL IN NIGERIA BETWEEN 2005 � 2015

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

As we know, for the past three decades, crude oil has been the major source of revenue, energy and foreign exchange for the Nigerian economy. Oil, being the mainstay of the Nigerian economy, plays a vital role in shaping the economic and the political destiny of the country (Odularu, 2009).

Since 1970’s the petroleum industry has continued to play a dominant role in the socio-economic development of the Nigerian society. Crude oil export provides the bulk of government revenue and most of the foreign exchange earnings. Oil revenue has been and still is the mainstay of the national economy and is likely to remain so for a long time to come. Figures from the Central Bank of Nigeria revealed that in 2006 out of the total revenue of N5,965.1 billion accrued to the country, crude oil contributed N5,287.6 billion. This is equivalent to 88.6% of the total revenue.

More importantly, crude oil for the last three decades has been the major source of revenue, energy and the foreign exchange for the Nigerian economy. In 2000 oil and gas export earnings accounted for about 98% and about 83% of federal government revenue (Ibegbu, 2008).

However due to the ongoing global fall in oil price, crude oil prices in the international market fell significantly from the all-time high at $141 per barrel by the end of July 2008 to $45 per barrel by the end of January 2009. This has forced the federal government to review the budget bench mark down ward from $65 to $45. This will reduced government expenditure and in turn affect the provisions of goods and services in the year 2015.

But considering that a soaring oil price in the last sixteen years made no appreciable impact on the economy, some think that a fall in the price of crude oil could be a blessing in disguise to Nigeria. Government would be forced to look inwards and be more judicious in spending. As we operate a bubble economy, which cannot withstand pressure.

This is why the research work seems to look into the production and sales in crude oil in Nigeria, seeking to know the effect of crude oil in the Nigerian Economic Development between the periods of 2005 to 2015.

1.2 STATEMENT OF PROBLEM

Over the years, the frequent review of production and sales of crude oil has gain a space in the heart of Nigerian, thereby making the product not having a fixed price and most of the time the out of stock of crude oil at depot for sales is also rampant as a result of the following factors; poor funding of investment, communal disturbance, smuggling and diversion of petroleum products and many others.

1.3 OBJECTIVES OF THE STUDY

This research work seeks to examine the production and sales of crude oil in Nigeria, specifically, the study intends to achieve the following objectives:

1.4 SIGNIFICANCE OF THE STUDY

It is imperative to research on the production and sales of crude oil in Nigeria to come out with reality on ground so that the study will help the government and the general public in the following ways;

1.5 STATEMENT OF HYPOTHESIS

The following are the statement of the hypothesis used during the research;

1. H_o: There is no significant relationship between the sales and production of crude oil in Nigeria

H₁: There is a significant relationship between the sales and production of crude oil in Nigeria

1.6 SCOPE OF THE STUDY

This study covers the production and sales of crude oil in Nigeria between the years (2005-2015). The analysis used in this research work is simple linear regression, using production as Y and sales as X. Also to test for the relationship between production and sales using correlation, and to test for difference of two means.

1.7 LIMITATION OF THE STUDY

1.8 DEFINITION OF SOME BASIC STATISTICAL TERMS

1. Crude Oil: Crude oil, commonly known as petroleum, is a liquid found within the earth comprised of hydrocarbons, organic compounds and small amount of metal while hydrocarbons are usually the primary component of crude oil, their composition can vary from 50% -97% depending on the type of crude oil and how it is extracted.

2. Refinery: A factory where a substance such as oil is refined.

3. NNPC: Nigerian National Petroleum Corporation.

4. Regression: is a statistical methodology that utilizes the relationship between two or more quantative variable in other to predict one in the terms of other or others.

5. Correlation Analysis: It involves a statistical investigation of the strength and nature of linear relationship between two random variable x and y; neither of which can be singled out as the cause or effect of the variability in the other variable.

Financial Constraint: Insufficient funds tend to impede the efficiency of the researcher in souring for the relevant material, literature or information and in the processing of data collection.
Time Constraint: The researcher was simultaneously engaged in this study with other academic work. This consequently cut down the time devoted for the research work.
It will help the policy maker to come out with strategies that will help to reduce the issues on the scarcity of oil in the country
It will help the researcher and the Nigerian government in improving on the level of the production of crude oil.
To examine the relationship between production and sales of crude oil
To make forecast on the expected production using past data
To test for the differences between the mean of production and the mean of sales in crude oil over the years under study
To ascertain the trend values of oil production and sales over the years under study
To make recommendation based on the finding of the research.

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