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CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

The development of the human environment worldwide has been accompanied by industrialization. The oil industry has remained the leading sector of the Nigerian economy for many decades now.

According to EIA (2009), the Nigerian economy is heavily dependent on the oil sector which accounts for over 95 percent of export earnings and about 85 percent of government revenues. The oil industry is primarily located in the Niger Delta area of the country. In addition, Nigeria had an estimated 36.2 billion barrels of proven oil reserves as of January 2009.

In 2008, Nigerian crude oil production averaged 1.94 million bbl/d, making it the largest crude oil producer in Africa. And also being an important oil supplier to the United States. Over half of the country’s oil production is exported to the United States. In 2008, Nigeria exported most of its 2.17 million bbl/d of oil production (approximately 1.9 million bbl/d was exported). Of this, 990,000bbl/d (44 percent) was exported to the United States, making Nigeria the 5th largest foreign oil supplier to the United States.

The major foreign producers in Nigeria are Shell, Chevron, ExxonMobil, Total and Eni/Agip (Experts column, 2010). Nigeria is greatly endowed with abundant natural resources and the weather supports yearround agricultural production. In the past, Nigeria has depended largely on industrial and manufacturing sectors, as well as agricultural production and the export of cash crops like groundnut, millets, maize, cocoa and palm oil, which had a positive growth rate for its income, until oil was discovered in Nigeria.