AN EMPIRICAL ANALYSIS OF THE RELATIONSHIP BETWEEN CRUDE OIL EXPORTATION AND AGRICULTURAL PRODUCTION IN NIGERIA

CHAPTER ONE

INTRODUCTION

The petroleum industry in Nigeria is the largest on the African Continent. As of 2014, Nigeria’s petroleum industry contributes about 14 to its economy. Therefore, through the petroleum sector is important, it remain in fact a small part of the country’s overall diversified economy.

Oil was discovered in non-commercial quantities at Akata, near Eket in 1953 prior to the Akata find, the company had spent around 6 million pounds in exploratory activities in the country shell BP in the pursuit of commercially available petroleum found in Oloibin Nigeria in 1956. Other important oil wells discovered during the period were Afan and Bomu in Ogoni territory.

Production of Crude Oil began in 1957 and in 1960, a total 847,000 tonnes of crude oil was exported. Towards the end of the 1950s, non British forms were granted license to explore for oil.

Agriculture in Nigeria is a branch of economy in Nigeria, providing employment for about 30% of the population as of 2010. The sector is being transformed by commercialization at the small medium and large-scale enterprise.

Major crops includes beans, sesame, cashew nuts, cassava, cocobeans, groundnuts, gum Arabic, kolanut, maize, melon, millet, palm kernel, palm oil, plantains, rice, rubber, sorghum, soya beans and yams.

The country’s Agricultural products fall into main groups; food groups produced for home consumption and exports. Prior to Nigerian civil war, the country was self sufficient in food but increase steeply after 1973. Bread made from American wheat replaced domestics crops as the cheapest staple food.

Although it depends mainly on the oil industry for its budgetary revenues, Nigeria is predominantly still an agricultural society. Approximately 70% of the population engages in Agricultural Production at subsistence level. Agricultural holding are generally small and scattered, it provided 41% of Nigeria’s total Gross Domestic Product (GDP) in 1999. This percentage represented a normal decrease of 24.7 from its contribution of 65% to the GDP in 1957. The decrease will continue because as economic development occurs, the relative size of the Agriculture Sector usually decreases.

1. BACKGROUND OF THE STUDY

Nigeria economy is basically an open economy with international transactions constituting an important proportion of her aggregate economic activities. Before the discovering of Crude Oil in 1956, Nigeria like many other developing African countries started as agrarian economy. Agriculture was the dominant sector in the economy, provided both cash crops and food crops of the economy are accounted for the largest part of the foreign exchange of the country. Then, Agricultural Products were the main exports commodities. This is because of its arable land and conducive climate, the country was known for production of main Agricultural Production like groundnuts, Colton, palm kernel and palm oil discovery in 1956 and its exploration in commercial quantity in 1958, however, the oil sector gradually became the dominant sector of the economy and almost the sole source of export earnings.

Crude oil is a major source of energy in Nigeria and the world in general. Nigeria is the largest oil producer in sub Sahara Africa, the fifth largest petroleum exporting country (OPEC) and the fifth largest oil exporting country to the united state. Nigeria produces 30% of the total oil production in African region. Oil revenue has historically provided about 95% of export earning and about 78% Federal Government Revenue (World Bank, 2002) coincided with the rise in the world oil price, and Nigeria was able to reap instant riches from its oil production. Nigeria joined the Organization of Petroleum Exporting countries (OPEC) in 1971 and established the Nigerian National Petroleum Corporation (NNPC) in 1977.

Following the discovering of crude oil b shell D’ Array Petroleum Pioneer Production began in 198 from the company’s oil field in Oloibin in the Eastern Niger Delta. By lates sixties and early seventies, Nigeria had attained a production level of over two million barrels of crude oil per day

1. STATEMENT OF THE PROBLEM

Nigeria was famous for her agrarian economy through which cash crop were exported thus making Nigeria a major exporter in that aspect. Indeed, agriculture is the bedrock of every economy progress without developing the Agricultural sector. The Agricultural sector slipped into a total state of neglect, sustained at the peasant level, in spite of Nigeria’s rich Agricultural resource endowment; there has been a gradual decline in Agriculture’s contribution to the nation’s economy (Manyongs et al 2005).

In the 1960’s, Agriculture accounted for 65-70% of total export, it fell to be about 40% in the 1970’s and crushed to less than 20% in the late 1990’s. The decline in Agriculture sector was largely due to the rise in crude oil revenue in the early 1970’s.

Hence, the questions are;

Is the Agriculture and Oil Sector on the increase or decrease? And
Is there relationship between Agricultural sector and Crude Oil revenue in Nigeria?

This study is imperative as it provides then forecast Agricultural Production and Crude Oil revenue in Nigeria as well as their relationship.

1. 3 OBJECTIVE OF THE STUDY

The main objective of this study is to analyze statistically the relationship between Agricultural sector and crude oil revenue in Nigeria and make forecast with the model.

The specific objectives are as follows

To determine the trend pattern in the crude oil revenue and Agricultural production revenue.
To determine the relationship between Agricultural Production and Crude Oil Exportation.
To make forecast with the model estimated.

1.4 HYPOTHESIS OF THE STUDY

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