INTRODUCTION
1.1 Background to the study
Oil is a major source of energy in Nigeria and the world in general. Oil being the mainstay of the Nigeria economy plays a vital role in shaping the economic and political destiny of the country. Although Nigeria’s oil industry was founded at the beginning of the century, it was not until the end of the Nigeria civil war (1967 – 1970) that the oil industry began to play a prominent role in the economic life of the country. Nigeria can be categorized as a country that is primarily rural, which depends on primary product exports especially oil products. Since the attainment of independence in 1960 it has experienced ethnic, regional and religious tensions, magnified by the significant disparities in economic, educational and environmental development in the south and the north. These could be partly attributed to the major discovery of oil in the country which affects and is affected by economic and social components.
Crude oil discovery has had certain impacts on the Nigeria economy. Although large proceeds are obtained from the domestic sales and export of petroleum products
Crude oil is one of the natural resources to mankind and a major source of energy in Nigeria. It is a vital commodity in world market despite the campaign for green energy and other sources of power. Crude oil is one of the expensive commodities in the international market. Nigerian economy is heavily dependent on crude oil. The United States remains Nigeria’s largest customer for crude oil, accounting for about 40% of the country’s total crude oil exports. (Nwogu, 2010).
The history of oil exploration in Nigeria dates back to 1907 when Nigerian Bitumen Corporation conducted exploratory work in the country; however, the firm left the country at the onset of World War I. Thereafter, a new license covering 357,000 sq. miles was given to a new firm called Shell D’arcy Petroleum Development Company of Nigeria. The new firm was a consortium of Shell and British Petroleum (then known as Anglo-Iranian). Shell-BP in the pursuit of commercially available petroleum found oil in Oloibiri, Nigeria in 1956. Production of crude oil began in 1957 and in 1960, a total of 847,000 tonnes of crude oil was exported. After that, the economy of Nigeria should have seemingly have experienced a strong increase. In the 70s, Nigeria realised enormous revenue from crude oil, which was regarded as oil boom. As a result of the tremendous revenue realized from crude oil, other exploration companies were attracted to the industry (Udosen et al, 2009).
Nigeria was able to reap instant riches from its oil production (Odularu,2008). Also, NNPC report had it that Nigeria petroleum industry is the main generator of Gross domestic product (GPD) with statistics that oil revenue has totalled $ 340 billion in exports since the 1970s. With this great achievement in the oil sector, government concentrated solely on oil for foreign exchange earnings lead to the neglect on agriculture which had been the source of revenue to the country.
In 2000, oil and gas exports accounted for more than 98% of export earnings and about 83% of federal government revenue, as well as generating more than 14% of its GDP. It also provides 95% of foreign exchange earnings, and about 65% of government budgetary revenues. Nigeria’s proven oil reserves are estimated by the United States Energy Information Administration (EIA) at between 16 and 22 billion barrels (3.5×109 m3), but other sources claim there could be as much as 35.3 billion barrels (5.61×109 m3). Its reserves make Nigeria the tenth most petroleum-rich nation, and by the far the most affluent in Africa. In mid-2001 its crude oil production was averaging around 2.2 million barrels (350,000 m³) per day. It is expected that the industry will continue to be profitable based on an average bench mark oil price of $85-$90 per barrel.
As recently as 2010, Nigeria provided about 10% of overall U.S oil imports and ranked as the fifth-largest source for oil imports in the U.S. However, Nigeria ceased exports to the US in July 2014 because of the impact of shale production in America; India is now the largest consumer of Nigerian oil. There are six petroleum exportation terminals in the country. Oil companies in Africa investigate offshore production as an alternative area of production. Angola and Nigeria are the largest oil producers in Africa. In Nigeria, the deep-water sector still has a large avenue to expand and develop. The Agbami oilfields hit full production in 2005, at 250,000 barrels a day. The amount of oil extracted from Nigeria was expected to expand from 15,000 bbl/d (2,400 m3/d) in 2003 to 1.27 Mbbl/d (202,000 m3/d) in 2010.
Nigeria being a mono- product economy that relies on the income generated from crude oil for day to day running of governmental functions, provision of infrastructure and other social amenities for the citizenry but the income generated depends on the quantity of crude oil produced as well as the price per barrel. Therefore, it is necessary to provide a fitted model that can be used to forecast quantity of crude oil produced for the purpose of making reliable budget for the sustenance of the economy.
1.2 Statement of the problems
Crude oil is very expensive to bring under control when monetary policy is used to show aggregate demand.
The problem of crude oil production in Nigeria is particularly not worthy. It is disturbing to observe that with Nigeria as one of the most oil country in the world, crude oil and other related oil product should not be a problem to the country. So, this research intends to fit an appropriate fitted model of crude oil production in Nigeria from (2006-2020) and to make reasonable recommendations on the result obtained.
1.3 Aim and Objectives
The aim of this project work is to study the price of crude oil on its production for the year 2006-2020. The aim is going to be achieved through the following objectives:
1.4 Significance of the study
This project will serve as reference for more finding on how to tackles the problem of crude oil production in Nigeria and for subsequent researchers who intent to carry out studies related to this topic. It helps in effort to shed more light on the price and export on production of crude oil in Nigeria.
1.5 Scope of the study
The scope for any research work is usually discovered in order to give account to the extent of its inference. For this particular research the scope is restricted to the monthly production of crude oil, crude oil price and crude oil export in Nigeria between 2006 -2020 and fit a model that can be used for future prediction.
1.6 Sources of the data
The data used for this research was sourced from the Central bank of Nigeria Bulletin and the data is secondary since the method of collecting the data is documentary. The data was recorded in their daily register covering 180 months (15 years) from 2006-2020.