Name:Du Tianyan  Student ID：S07659
Research paper supervisor:Dr.Seku Conde
Minzu University of China
2007-2008 Academic Year
 

 
Abstract：Nigeria's entire economy revolves around oil, Oil prices raise or reduce has greatly affected on the growth of Nigeria's economy, but this impact is not positive correlation between them. With large reserves meaning the country has, in theory, the potential to build a very prosperous economy. But despite Nigeria's rich natural resources, poverty is widespread and Nigeria's basic social indicators place it among the 20 poorest countries in the world. This paper discuss raise of oil price will not bring big economic growth to this country’s economy base on the social situation now of Nigeria. And once oil price fall down, the economy of this country will be collapsed.
Keywords: Oil price; Nigeria; Economy
Introduction
Nigeria is Africa's largest oil-producing countries and the world's sixth largest oil exporter, is also a member of Organization of Petroleum Exporting Countries (OPEC) the. It has a dual economy with a modern segment dependent on oil earnings, overlaid by a traditional agricultural and trading economy. At independence in 1960 agriculture accounted for well over half of GDP, and was the main source of export earnings and public revenue. The oil sector, which emerged in the 1960's and was firmly established during the 1970's, is now of overwhelming importance to the point of over-dependence: it provides 20% of GDP, 95% of foreign exchange earnings, and about 65% of budgetary revenues. Competition between ethnic and regional groups for power and access to the country’s oil wealth are increasing in intensity as the 2003 elections approach.
The largely subsistence agricultural sector has not kept up with rapid population growth, and Nigeria, once a large net exporter, now imports food. Based on GNP per capita, Nigeria is among the world's 20 poorest countries. Economic growth since the early 1970's has been erratic, driven primarily by the fluctuations of the global oil market. During the 1980's and 1990's Nigeria faced growing economic decline and falling living standards, a reflection also of political instability, corruption, and poor macroeconomic management (most notably the failure to diversify the economy) [1].
Despite Nigeria's abundant natural resources, but the country remains an economic downturn, people still in a state of poverty. Recently, oil price is keeping rising, whether this will bring this troubled country good luck? And if oil price suddenly dropped, how would be the fate of Nigeria?
 
1 Nigerian people living distress
Poverty is still a growing problem in Nigeria - a country which is estimated to have earned about $280bn from oil during the past 30 years. According to the World Bank, about 66% of the population now falls below the poverty line of about a dollar a day, compared to 43% in 1985.
Nigeria's economy is forecast to grow by 3.5% in 2002 according to the Economist Intelligence Unit (EIU) - a rate of growth that would be the envy of many western nations. But the growth is primarily driven by the energy sectors, and is unlikely to feed through to the wider population [1].

December 25, 2006, the South important city, Lagos, Nigeria, experienced thieves thieved the oil, nearby residents knew the thing, and run to rob the oil like crazy. The unknown fire caused pipeline explosion triggered, resulting in 850 people died instantly, and no one survived present there [2]. This matter show that the people of Nigeria live in a very poor state, when there are interests showing, people will fight for them like crazy. And so, these caused a lot of tragedy. For living, people care nothing. October 2005, a Boeing 737 in Nigeria air crash, nearby residents ran past not to save the victims but took cash and jewelers or other valuable things from the crash things [3].
 
2 Oil price is keeping rising; huge oil revenues still can not reverse the situation.
2.1 Shrinking agricultural
1960, agriculture in GDP had a share of 64 percent, agricultural exports accounted for 85 percent of total exports. But with the rise of the oil industry, agriculture was neglected, agricultural output has decreased. 1970s, agriculture in the gross domestic product fell to the proportion of 44 per cent of the 1980s further reduced to 23 percent. 1970 agricultural exports accounted for total exports, the ratio dropped to 30 percent in 1980, accounting for only 2.4 percent. Agricultural growth rate also showed a downward trend, from 1970 to 1974 the average annual growth rate of agriculture for 8.8 percent, but in 1984 the agricultural growth rate as low as -4.8%. Pick-up in the late 1980s, the 1990s, the agricultural growth rate has been about 2 percent of the level of wandering [3].
2.2 Non-developed industry
A normal industrial structure in a nation contribute to the economic growth of the country should be like these. (a) There should be radical transformation of agro-allied, petro-chemical and agricultural sector which provides the raw materials needed.(b) The government should genuinely encourage the industry to embark on research and development activities through subsidizing the cost of such ventures. (c) The government should embark on industrial promotion activities by way of canvassing of the investment possibility of the industry among indigenous as well as foreign investors. (d) The industry should be provided with loads, grants and subsidies as growth inducing. measures, where the need arises. (e) The location of the present companies or firms in the industry is uneven. They are mostly located in the Northern States. For future development therefore, the government should seriously consider the establishment of these companies within the Eastern and Western States. This will help to assure even development and spatial lavational balance. (f) Although the Nigerian economy is at present undergoing a structural transformation through a program of structural adjustment (SAP) with its tool of second tier Foreign Exchange Market (SFEM); the government should however give concessions to certain basic industries (of which sugar industry is among) by way of not allowing totally the workings of market forces to determine their operation. The government should interfere and help positively where the need arise. (g) It is obvious that sugar has no close substitutes but in the course of my study, I found that there has been development of artificial sweetener (sacarine) as a substitute for sugar. However, this product is said to be detrimental to health and hence not acceptable by the drug and food association. The government should take note of this for necessary action to be taken. (h) All the sugar importing companies in Nigeria should be given deadline to stop importation and go into alliance with their foreign partner for the establishment of the sugar factory in Nigeria [4]. In general and finally, the structure and orientation of Nigeria industry have not induced growth and development in this country.
2.3 Pervasive corruption
Whatever direction the new government takes, the greatest threat to the success of public policy is likely to be corruption. Nigeria has been dogged by corruption since before independence, but the abuse of power and lack of transparency reached mind-boggling proportions in the 1990s. An official probe ordered by Gen. Sani Abacha soon after coming to power in 1993 reported that $12.2 bn of oil revenue placed in special accounts between 1988 and 1994 was spent on non-priority items and without proper accounting, in what the report described as "a gross abuse of public trust."
Similarly, soon after assuming power following President Abacha's death in June 1998, Gen. Abubakar ordered an investigation of the alleged theft under his predecessor's administration of some $2.3 bn from the central bank. In November 1998, the government announced it had recovered more than $750 mn from the family and close aides of Gen. Abacha, shortly after former finance minister Anthony Ani publicly charged that $1.3 bn had been irregularly withdrawn from state coffers between January 1997 and May 1998. In another stunning disclosure, a government spokesman said in December that the administration was investigating an alleged $2 bn fraud by some members of the previous regime. This involved the withdrawal in 1996 of $2.5 bn of public funds to settle debts owed to Russia for the construction of the Ajaokuta steel plant, but which in reality had been discounted to only $500 mn in a secretly negotiated debt buy-back deal. Local and foreign media reports have speculated that Gen. Abacha may have had more than $3 bn stashed away in overseas banks [5].
2.4 The oil is not just only belong to Nigeria
Smuggled Nigerian crude oil and petroleum products have reduced official oil income figures at a time when a worldwide oil glut has drastically reduced the country's exports, contributing to pressure on the government to seek loans and make purchases on short term credit. And with significant quantities available on the international market at lower than OPEC-determined prices, the smuggled oil has also helped depress world oil prices.
Nigeria's oil industry, the most important sector of the economy, is dominated by multinational interests-. Royal Dutch/ Shell accounts for 54 percent of production, followed by Gulf with 15 percent, and Mobil, Agip, Elf, and Texaco, each with 10 percent or less [...]

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