Impact Of The Oil Sector On The Economy

It is appropriate at this point to make certain clarifications as regards concepts such as: crude oil, oil sector petroleum industry, gasoline or petrol, etc, that will from time to time be used in this research work.
The oil sector or petroleum industry is used interchangeably to refer to the combination of firms dealing on commodities like 0crude oil, petrol, kerosine, gas, etc.
Hence the crude oil sector should not be seen generally as representing crude oil production alone, as used in this study, but as an all embracing industry bringing the firms dealing in all petroleum products together.
One of the surest ways of justifying the comments which have been made on the position the oil sector has placed Nigeria in the international circle; is to find out the extent to which crude oil has affected the Nigeria economy.
Nigeria’s position as Africa’s biggest oil producers in OPEC according to synge (1988), no doubt, has considerable impact on Nigeria’s influential role in the continent.
Also, the expenditure of the Nigerian-government has been influenced to a great extent by the crude oil revenue.
Infact, it is the contribution of oil to the domestic economy of Nigeria that influences the nation’s role in the continent.
Crude oil has not been without its own side effects on the Nigerian economy these equally need to be considered to adequately show the “full-impact” of crude oil in the Nigerian economy.
Therefore, the underlying problems of this study is stated in a question from thus; is oil responsible for the boom or doom on the Nigerian economy?
As a young nation with oil wealth coming almost unexpectedly (immediately after independence), Nigeria no doubt had its developmental growth problems to cope with; the oil wealth brought about growth opportunities as well as problems for the nation (quinlan, 1980). It is these opportunities and problems that the study intends to analyze in terms of the impact of the oil sector or the Nigerian economy. Hence, while the opportunities represents the positive contributions of the sector, the problems stand for negative impact of the sector on the Nigerian economy.
The oil wealth contributed immensely to the Cross Domestic Product (GDP), Foreign Exchange Earning, Government revenue, etc. This effect of these and other variables reflected in the expenditure of government positively. This therefore indicates the positive impact of the oil industry on the Nigerian economy. Also, it is note worthy to mention the negative effect of oil in the economy, the oil wealth dramatically increased the country’s financial position, as stated above, and sub-sequently, improved the individual spending and general welfare.
This upsurge in income and spending, without adequate increase in productivity, resulted in the rise in the general price level of the nation, hence increasing the rate of inflation. The adverse effect of this is the fall in the real income which severely affected those on fixed income.
More over, the oil wealth encouraged the drift from the moral to the urban areas, resulting in the cities.The oil sector being capital intensive contributed marginally to employment.