BACKGROUND OF THE STUDY
Oil is a major source of energy in Nigeria and the world in general. Before the advent of oil (Crude oil), agriculture used to be the mainstay of the Nigerian economy which plays a vital role in shaping the economic and political destiny of the country (Abolaji1985:2).
In 1960s, agricultural products provided about 80% of the total export earnings and the main cash crops were cocoa, palm oil, groundnut etc. In 1962, agriculture accounted for about N229.8 million or 82% of the nation’s total values of export. Moreso, in 1964 a total of N356.4 million was realized which represented 85% of the country’s total export for that year.
According to Ezeagu (1979:9), the exportation of agricultural products was really thriving during these years. However, by 1976 out of N274.2 million that came from export, agriculture accountedonly for 4% of the nations earnings, even with the take-over of export financing by the Finance Development House, the earnings from the non-oil export (which agriculture products dominated) have not improved by the end of 1991. It only managed to provide 3.8% out of the total revenue. This was as a result of the oil boom and excess dependence on its revenue or earnings.
During this time, the need and consumption pattern shifted and became import – oriented. Thus, the insatiable desire for importation of goods became widespread in the nation with its attendant economic problems.
According to the Statistical Bulletin 1997:60 of the Federal Bureau of Statistics, the 1970s witnessed a drastic change of Nigeria economy from one share of agriculture to Gross Domestic Product (G.D.P) which drastically dropped from about 40% in the early 1970s to about 20% in the 1980s and even 16% in the 1990s. Since the oil sector assumed a wider dimension to account for about 20% of Gross Domestic Product (G.D.P), it also accounted for 81% of government revenue and 96% of export earnings.
Sequel to the oil boom of the 1970s, spectacular change that crept into the Nigerian economy with devastating effect still lingers on till today.
The heavy dependence on oil as the main source of revenue to the economy was highly vulnerable. Agriculture was completely neglected to the extent that Nigeria began to import agricultural products which were previously exported. The oil revenue kept declining and the celebrated “boom” of 1970s became a “doom” for the country.
Following the glut in the international oil market from 1982 to date, the country’s projected revenue has never been attained due to instability in the price of oil, for instance as at September 1985, the total federally collected revenue was N20.287 billion. Arene (1985:25).
In 1987, N29.44 billion was projected as federally collected revenue, out of which N28.53 billion was envisaged to come from the oil sector. This raises the question of how successful or to what extent can this sum be realized when the vagaries of oil market are considered?
To this end, President Olusegun Obasanjo buttressed his optimism in which he stated, “As a nation, we should be sensitive to oil but not panic at the falling process rather we should pursue vigorously the current programme already put in place to diversify revenue sources (Statistical Bulletin 1999:80).
To all intents and purposes, the strengths and weaknesses of Nigeria economy are tremendously being subjected to the dictates of oil revenue. It could easily be seen that Nigeria virtually has no control on the foreign exchange which is in high demand in the country because of excessive importation of foreign goods which is as a result of underdevelopment on the part of our industries, for example, cottage industry.
Furthermore, there is optimism on the part of the federal government inspite of the instability of the oil market, that the selling price of the crude oil would be $14 per barrel with the production base of 1.355 million barrels per day. It is imperative on the part of the government to seek alternative source to supplement oil as the major source of revenue.
Moreover, some major areas have been suggested by the experts as a possible solution that can help salvage the present economic situation. These are agriculture, mining, deregulation and promoting manufacturing industries.
1.2 STATEMENT OF THE PROBLEM