Nigeria Is A Country Located In West Africa Economics Essay

Nigeria is a state located in West Africa and has thirty six provinces. It stands as one of the most thickly settled state in Africa, with a population of 170,123,740 CIA World Fact book. The population of Nigeria grows about 2.6 % each twelvemonth. It has more than 250 cultural folks and the most dominant cultural groups are Hausa, Yoruba and Igbo folk. Nigeria is along the eastern seashore of the gulf of Guinea, bordered on the West by Benin, north by Niger and Chad and on the E by Cameroon. It covers an country of 356,669 square stat mis ( 923,768 square kilometer ) , ( Fola, 1999 ) . The official linguistic communication spoken is English, and it ‘s used in all authorities interactions and instruction establishments. It has more than 250 single tribal linguistic communications.

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Basic Economy: Nigeria has antecedently been a net exporter of agricultural merchandises. Agricultural sector in Nigeria is little and largely characterized by subsistence agriculture. These farms produce about 80 % of the entire nutrient utilizing about 30.7 million hectares or 33 % of Nigerian land mass. Agriculture contributed 32 % to the GDP in 2001. The agricultural merchandises can be divided into nutrient harvests and hard currency harvests. The nutrient harvests were produced for place ingestion and the hard currency harvests for export intent, chocolate, cotton, gum elastic, palm meat, rice, sugar cane etc.

Nigeria besides has other industries like the fabric industry, Crude oil industry, Sn, niobite: gum elastic merchandises, wood: fells and teguments, cement and other building stuffs, nutrient merchandises, footwear, chemicals, fertiliser, printing, ceramics and steel. Industrial production is about 2.5 % ( 2011 ) . ( UN.World resources,1999 )

Nigerian OIL Market

Nigeria is an oligopolistic market dwelling of different oil industries with the same competitory strength and a immense demand market for their merchandises. By the late sixtiess, oil had replaced chocolate, peanuts, and thenar merchandises as the state ‘s biggest foreign exchange earner. In 1971 Nigeria became the universe ‘s seventh-largest crude oil manufacturer. The Nigerian oil market monetary value is being controlled by an inter-governmental organisation called OPEC ( organisation of the Petroleum Exporting Countries ) . It was founded in Baghdad in 1960 by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The purpose of the organisation is to organize and unify policies among member states, in order to keep stableness in oil monetary values through efficient, economic and regular supply of crude oil, conveying income to bring forthing states ( OPEC,2012 ) . They are made up of some developing states who are extremely dependent on oil export for their economic gross. These states hold about 75 % of the planetary oil militias and provide approximately 40 % of the universe ‘s oil.

The Nigerian oil sector can be differentiated into three chief sub-sectors, viz. , Upstream, downstream and natural gas. The upstream sector is involved with boring and geographic expedition ( The major oil industries are British Petroleum ( BP ) , Exxon Mobil, Total, Royal Dutch/Shell and ChevronTexaco ) . They have an oil modesty of 891 billion barrels and exports about 19.5 billion barrels per twenty-four hours. These companies produce an one-year end product by 15.6 % ( OPEC,2003 ) while the downstream sector trades with distribution of the processed merchandise to the domestic economic system, and its largely handled by the Government. The go oning crisis in the supply and distribution of crude oil merchandises led to a determination by the Government in 2003 to deregulate the down-stream sector. The Government made a policy On December 18, 2003, to implement economic reform plan, by deregulating the downstream crude oil sector, phasing out subsidies and the sale of refineries. ( Compos and Esfahani, 1996 ) . These reforms are to accomplish the Millenium development Goals ( MDGs ) which includes: -wealth creative activity, employment coevals, poorness decrease etc. ( UNDP,2003 )

External FACORS AFFECTING THE OIL INDUSTRY

Nigeria has assorted policies impacting the production and development of oil. In 1967 Nigeria introduced the Petroleum Net incomes revenue enhancement ( amendment ) Decree No. 1, which is based on crude oil net incomes revenue enhancement and royalties from oil industries. The province created assorted bureaus for monitoring and regulating oil activities: federal ministry of lodging and environment in 1979, develops a general policy for environmental protection and control. Nigerian national crude oil corporation ( NNPC ) ensures that oil field operations are carried out at acceptable criterions and in conformity with the commissariats of the assorted crude oil Torahs and ordinances.

Environmental FACTORS

This factor is created from different policies made by the authorities to checkmate and better the quality of the environment, at the same clip conveying about a balance in the economic and societal sectors. It can be used as an instrument of power to work out some sensed jobs in the environment ( Shore and Wright, 1997 ) .

The Federal Environment Protection Agency of Nigeria ( FEPA ) is responsible for maintaining the environment safe and developing environmental guidelines ( FEPA, 1989, pg:30-31 ) .

Associated Gas Re-injection Act and Regulations ( 1979 ) : this Act requires oil companies to develop gas use installations for the usage of associated gases from oil production, thereby cut downing nursery consequence caused by gas flaring.

Petroleum boring and production ordinances ( 1969 ) : This jurisprudence states that any oil industry above 5years in the oil production, should fix a feasibleness survey of their activities and how they will use or pull off any natural gas discovered in their activities. ( Malamfashi, 2007 ) .

Nigerian policy push on atmosphere protection: the Government seeks to develop schemes to minimise the impact of oil geographic expedition to the environment as a consequence of oil spillage and gas flaring by supervising air emanations and gaseous wastes from oil industries, gas installations and refineries. It besides facilitates the use of these gases by these industries to cut down the green house consequence caused by gas flaring of associated gas. ( FEPA, 1999 ) .

SOCI0-CULTURAL Factors: with the issue of ecosystem devastation and marginalisation of the Niger Delta, the host communities are arising against the Government and the oil industries, doing devastation to company belongings, snatch and manslaughter. This act of terrorist act has created a sense of insecurity in the part detering any signifier of investing by any transnational company.

Legal FACTORS: statute law has been put in topographic point to command assorted crude oil activities in the state. The Petroleum inspectorate is chiefly responsible for the enforcement of the undermentioned Acts and Regulations in the oil industry:

Oil grapevine Act cap 145,1956

The mineral oil safety ordinances, 1963

Oil terminus dues act, 1969

Petroleum production and distribution ( anti-sabotage ) act 1975.

Petroleum merchandises ( designation of oilers ) ordinances 1985.

This jurisprudence can supply chances or menaces for foreign industries who want to put in the state. Recently there was an Act that was made which seeks to increase autochthonal engagement in the oil and gas industry ( The Nigerian oil and gas industry content development Act 2010-The local content Act ‘NCA ‘ ) . The jurisprudence proposes that for a company to measure up as one under NCA, 51 % of the issued portions must be held by Nigerian stockholders, while 49 % of these portions can be held by aliens. During the gas flame uping re-injection Act of 1979, a punishment was put in topographic point for defaulted companies who broke the jurisprudence. A mulct of N0.5 ( tantamount to U.S $ 0.003-0.3 % ) for every million three-dimensional pess ( MCF ) of gas flared. The mulct was increased subsequently to N10 ( tantamount to $ 0.076 in 2003 ) for every MCF of gas flared. Companies have been charged between N20million to N50million ( $ 150,000- $ 370,000 ) yearly for gas flaring. The Bureau of Public Enterprises of Nigeria estimated that each twelvemonth the state loses between U.S $ 500million and $ 2.5 billion to gas flaring. ( World bank,2004 )

INTERNATIONAL BUSINESS ENVIRONMENT

International organic structures have a immense impact on the concern environment in a state. The gas flaring activities ( greenhouse consequence ) have been commented by one of the United Nations bureau ‘s ( UNFCCC-United Nations Framework Convention on Climate Change ) . This convention has certain ends towards cut downing green gas emanations, fiscal support and engineering execution for developing states.

Global Gas Flaring Reduction ( GGFR ) : It is a World Bank public-private partnership enterprise. It was initiated in 2002 by the World Summit of sustainable Development in Johannesburg in South Africa. This bureau has the right to implement the decrease of gases that could be resulted from the Government policy alteration, oil bring forthing states increasing the usage of gas flaring, deficient substructure in developing states.

ECONOMIC INDICATORS

The Gross Domestic Product ( GDP ) ; This is the entire market value of all concluding goods and services produced in a state in a given period. GDP per capita is frequently considered an index of a state ‘s criterion of life. The one-year per centum growing rate of GDP at market monetary values based on changeless local currency. Sums are based on changeless 2000 U.S. dollars..

The GDP in Nigeria grew by 6.28 % in the center of 2012 and the twelvemonth earlier. From the twelvemonth 2005-2012, Nigeria ‘s GDP growing rate has averaged 6.82 % making a extremum of 8.6 % in December ( 2010 ) and its lowest point at 4.5 % in March 2009. Its growing is due to the turning non-oil sectors and robust planetary petroleum oil monetary values. The GDP growing rate provides a step to bespeak the grade of alteration in value of the goods and services provided by an economic system. The crude oil industry provides 95 % of foreign trade net incomes and approximately 80 % of budget grosss ( national agency of statistics ) .

Nigeria GDP

Beginning: www.tradeingeconomics.com/Worldbank

Buying POWER PARITY: this occurs when a unit of any given currency can buy the same measure of goods in every state. This is based on the rule called the jurisprudence of one monetary value. ( Mkandawire, 2009 )

Nigerian buying power para additions from $ 170.7 billion in 2005 to $ 413.4 billion in 2011, although estimations of the size of the informal sector, which is non included in official figures put the existent Numberss closer to $ 520 billion. The prognosis shows a important addition in the PPP from $ 300 million in 2007 to $ 600million in 2014 ( IMF, 2011 ) .

Correspondingly, the GDP per capita doubled from $ 1200 per individual in 2005 to an estimated $ 2,600 per individual in 2011 ( once more, with the inclusion of the informal sector, it is estimated that GDP per capita hovers around $ 3,500 per individual ) . With the debut of rising prices in the economic system, the GDP per capita has dropped lower than the figure in the 1960 ‘s, when she declared her independency. Harmonizing to statistics about 57 % of the population of Nigeria live below a dollar a twenty-four hours. ( CIA World Fact book ) .

Nigeria GDP per capita Palatopharyngoplasty

Beginning: www.tradingeconomics.com/worldbank

GLOBAL COMPETITIVENESS

Competitiveness are set of variables like policies, establishments and other factors that determine the degree of productiveness and growing of a state. The cardinal aims of the Global Competitiveness Report ( GCR ) are measuring the fight of other states utilizing the Global fight Index ( GCI ) and the Business Competitiveness Index ( BCI ) . The productive potency of a state is measured by the planetary fight index ( GCI ) which was introduced by the universe economic forum. It takes into history the state ‘s macroeconomic environment, the quality of public establishments and engineering for fight ( Porter and Schwab, 2002 ) . The more competitory an economic system is higher the degrees of income ( Schwab, 2009 ) . The Business Competitiveness Index ( BCI ) has an overview of the stableness of the political, legal, societal establishments and sound macroeconomic policies. It evaluates the manner in which domestic companies or foreign houses operate in the state and the quality of the macroeconomics concern environment ( Porter and Schwab, 2002 ) . The Global competitory index uses certain economic factors to mensurate the planetary fight of a state. These variables are grouped as the 12 pillars of economic fight. Institution, substructure, macroeconomic environment, wellness and primary instruction, higher instruction and preparation, goods market efficiency, labour market efficiency, fiscal market development, technological preparedness, Market size, concern edification and invention ( Schwab, 2012 ) .

Weights of the three chief groups of pillars at each phase of development

Factor- Efficiency- Invention

Driven driven driven

Stage ( % ) phase ( % ) phase ( % )

Pillar Group

Basic demands 60 40 20

Efficiency foils 35 5 50

Invention and 5 10 10

edification

Income thresholds for set uping phases of development

Phase of Development GDP per capita ( in US $ )

Phase 1: Factor driven & lt ; 2,000

Passage from phase 1 to present 2 2,000-3,000

Phase 2: Efficiency driven 3,000-9,000

Passage from phase 2 to present 3 9,000-17,000

Phase 3: Innovation driven & gt ; 17,000

In 2002, in the universe economic forum study, Nigeria was ranked 87th in planetary fight, dropped to 99th place in 2010, Since so those Numberss have increased, now it is graded 127th in the universe economic forum study of 2012. This bead is seen as the instability of the Government governments and policies, corruptness and really slow growing public establishments. Its strengths come from its concern activities ranked ( 64th ) and its big markets ( 34th ) , which provides economic systems of graduated table to companies. On the other manus, it security state of affairs is hapless ( 128th ) with hapless substructures ( 135th ) and under standard health/primary installations ( 140th ) . In add-on, there is no invention or new engineerings being developed to increase productiveness. Harmonizing to Michael Porter in 2002, Nigeria falls into the Factor Driven Economy. Factor goaded states compete based on their factor bequest, chiefly unskilled labour and natural resources. The institutional environment regulations out a state from fight if there are concerns about the protection of belongings rights, moralss and corruptness, authorities inefficiencies. Nigeria falls into the factor-Driven phase which is characterized by low value-added merchandises with a low cost of production based on the contemplation of low rewards and unskilled labour. There are limited agricultural activities with high rates of unemployment. The economic system consists of chiefly exclusive owners who operate little fabrication houses and services. Most of their consumer merchandises are imported, there is no cognition created for invention or technological betterments for the sweetenings of production ( Porter et al. ,2002 ) . For Nigeria to better its economic position to be globally competitory, the Government will hold an increased production efficiency by working on its planetary market, implementing the economic systems of scale attack and re-educate the labour work force to accommodate to the alterations in technological promotion ( Zoltan, 2008 ) . Keeping fight at this phase depends largely on the efficient public presentation of the public and private establishments, good substructures and a stable macroeconomic construction ( Porter and Ketels, 2003 ) .

We have grouped all these constituents that affect fight in 12 different pillars that we call the 12 pillars of fight. These pillars are:

PORTER ‘S FIVE Forces

Menace of New Entrants ( Low ) : The menace of new entrants normally depends on the policies modulating the barriers to entry. The oil boring industry is extremely capital extensive, affecting a high cost of skilled labor. Besides the entree to raw stuffs for operations are controlled by other companies. This makes the menaces of new entrants really low.

Power of Suppliers ( Medium ) : The market is dominated by a few but powerful providers, whose activities are extremely dependent on the demand for oil. Since OPEC controls the distribution of oil, it keeps the power of the providers at a median degree. Switch overing cost between providers is high, so there is no existent competition between providers because they have the same input capacity.

Power of Buyers ( High ) : there is a high concentration of purchasers who are really price- medium. The power of purchasers is comparatively high because they can exchange to an alternate merchandise with a comparatively low cost, besides with the low public presentation in activities and operations of the oil rigs, this gives the purchasers a high bargaining power.

Menace of Substitutes ( Low ) : the menace of replacement merchandises is low now because they still far excessively inefficient to vie over the following decennary. Other options to oil and natural gas are coal, solar and wind power. Renewable energy is the closest replacement to oil.

Industry Rivalry ( High ) : the competition between the companies is high. There are a few companies using the same scheme and bring forthing the same merchandises. Competition is really high due to the low market growing rate, capitalising on the failings of other companies through winning commands. The issue barriers are high due to the high cost of investings.

Identify, describe and measure the impact OF globalisation

Globalization is a procedure of international trade, investing and engineering introduced through a procedure of interaction and integrating among people, companies and the authorities of different states. This means that organisations would hold to confront assorted legislative policies and demands in different states in the procedure of international trading. ( Worthington and Britton, 2000 ) . Its executions creates trade liberalisation, hence its imperative that there is free and unrestricted motion of trade, possible financial governments and investing across the international boundary lines ( Oputa, 1996 ) and ( Salimono, 1999 ) . Globalization has a immense consequence on economic development, civilization and the bing environment. Globalization has resulted in the inflow of transnational oil industries into Nigeria ‘s oil basin ( NIGER DELTA ) for the boring and extraction of the oil which is in high demand at a sensible cost. Due to high demand for oil and gas, globalisation has expanded the universe ‘s economic system in a procedure to convey about economic development and a good criterion of life. The transnational oil industries have non succeeded covering with the integrating of globalisation in Nigeria ( Schifferes, 2007 ) . The land in the Niger Delta part given to these transnational corporations for operations by the Government are inhabited by locals. This environment has been polluted and affected by oil spillages and assorted geographic expedition activities by these companies, destructing the societal home ground and life manners of the people: destructing their farm lands, fouling their rivers where they angle and doing several signifiers of diseases ( Onwuka, 2005 ) . Unfortunately, the ends set out by Globalization has ended up doing a lay waste toing consequence to the Niger Delta. Oil and gas development activities in the Niger Delta have had negative environmental effects.

The concluding issue on the negative impact of globalisation by the Oil Industry is the international trade understanding between Nigeria and the Chinese oil company ( SINOPEC ) . They have provided really hapless assistance and investing into the state ‘s economic system, increasing unemployment by outsourcing externally, importing foreign goods and services, constantly advancing corruptness and disregarding transparence in concern ventures ( Kolas, 2007 ) .

The impact of globalisation in Nigeria has non shown any grade of economic development as the Government lacks the strong belief to continue any societal contracts, doing lay waste toing effects by geographic expedition companies to dwellers in the Niger Delta, disregarding the agricultural sector and the struggle battles between activists and the authorities. It ‘s largely likely to state that Nigeria would non be able to to the full capitalise on it ‘s natural resource wealth and turn it into a sustainable economic system, based less on oil exports and more on human capital.

In a positive note, the impact of Globalization through the oil industry has offered chances for the state to bring forth wealth through exportation of petroleum, spread outing international trade in goods and services, derive entree to engineering and development of certain substructures ( Bayo, 2000 ) and ( Salimono, 1999 ) .

CHANGES IN THE ORGANIZATIONAL CULTURE

Embracing globalisation means a drastic alteration in the organisational civilization of the oil industry. This implies its constructions and manner of activities must reflect the nature of the environment. Technology alteration continues to distribute across states, accommodating the concern environment to the alterations in engineering by preparation of a subdivision of the labour force in the accomplishments of ICT ( Information and communicating in engineering ) direction, using new technological schemes for production efficiency. Increasing the competition in the planetary market, by bettering the Government policies and intercessions in certain industries making an progressively stable environment.

Corporate SOCIAL RESPONSIBILITIES AND SUSTAINABLE DEVELOPMENT

Harmonizing to Andrew Carnegic, the laminitis of US Steel Company,

“ In practising corporate societal duty, two basic rules should be applied, charity rule and stewardship rule ” .

This rule if applied might function the corporate involvement of the organisation every bit good as the stakeholders. With the outgrowth and growing of new companies in a peculiar community, there is force per unit area from their stakeholders ( Ministry of Environment, the organized labour, the International Oil Companies ( IOCs ) , fringy field operators and Autochthonal Manufacturers, the media, National Association of Road Transport Owners ( NARTO ) , Independent Marketers ) and the community to prosecute in assorted duties affecting the rectification of the harmful effects of their operations. In this context Stakeholders are persons or groups who have certain involvements or rights in the organisation ‘s activities. These groups benefit from the net incomes of the organisation ( Jackson et al, 2011 ) . In the Corporate societal duties harmonizing to Paul Griseri and Nina Seppala, 2010:8, refers to,

“ The duties of business communities to prosecute those policies, to do those determinations or to follow those lines of action which are desirable in footings of the aims and values of our society. ”

This suggests that corporate societal duty ensures that its activities towards the community has a positive impact in footings of the general accepted norms to avoid an involvement of struggle between the company and the host community ( Griser and Seppala, 2010, p.8 ) , by given a per centum of the net incomes earned by the organisation operating in the Niger Delta part for the socio-economic development of the host community and heightening the ends of achieving sustainable development ( Emiri and Deinduomo, 2009 ) , but this is non the instance for the people in the Niger Delta. The crisis in this part has led to major confrontations between the autochthonal communities, the oil companies and the Nigerian Government. Various Rebel groups have been formed like the MEND ( Movement of the Emancipation of the Niger Delta ) and MOSOP ( Movement for the Survival of Ogoni People ) whose confrontations resulted in judicial violent deaths, snatch, colza and devastation of oil grapevines ( The ogoni people, 2001 ) . These oil industries would hold been classified socially antiphonal if they provided employment for the host communities, societal substructures and payment of royalties and compensation to the host communities for the harm to their belongingss ( Aderemi, 2008 ) .

CSR of a house should hold rules that carry some kind of value to the people in the host community. Companies should merely be antiphonal to those expected moral issues that needs attending.

Sustainable development is a term used to bridge the spread between development and the environment ( Rogers, et al 2008 ) . The universe committee on Environment and Development ( WCED ) defines Sustainable development as the

“ Development that meets the demands of the present without compromising the ability of future coevalss to run into their ain demands. ”

The construct of sustainable development became cognizant in 1987, when the universe commissioning on environment and development ( WCED ) was endorsed ( Ikein et al, 2008 ) . This is an consciousness of the demands and realisation of the importance of engineering in run intoing the present and future demands of the host state ( Ikein et al, 2008 ) . Sustainable development plans have failed in the yesteryear with the failure of the oil industries present to carry through their obligated duties to the community. Implementing an Environmental Management plan to back up sustainable development will depend on the best practical environmental options ( BPEO ) . The lay waste toing consequence of transnational companies has led to the devastation of the Rhizophora mangle forests in the Niger Delta with important loss of biological diverseness ( works and carnal species ) . Other jobs associated with this industry ‘s sense of globalisation has caused loss of farming areas, wellness abnormalcies and a autumn in societal position. The gas flaring effects besides of these oil industries have led to the emanation of nursery gases which causes inauspicious consequence of alterations in clime.

The World bank/IMF proposed a structural accommodation plan ( SAP ) , that aims to make a rapid structural alteration in the economic system in favour of market dealingss ( Onyeonoru, 2003 ) . These reforms yielded no long-run consequences, alternatively they had a negative consequence on the industrial and economic public presentation of the state. ( Onimode 1989 ; Streeten 1997 ; Sawyerr 1998 ) . The major job with the execution of the globalisation strategy was they came as a debt-settling undertaking alternatively of development plans ( Onyeonoru, 2003 ) .

Kyoto Protocol: This is a planetary understanding under the United Nations Framework Convention on Climate Change ( UNFCCC ) . This was implemented on the 11th December, 1997 in Kyoto, Japan. This is a legal understanding implementing industrialised states to cut down the emanation of the nursery gases that cause clime alteration by 5.2 % over an mean period of 5 old ages, 2008-2012. This consequence of this execution has non yielded any positive consequence, because Nigeria ‘s economic system is driven by the production of crude oil that is exported to developed states ( guardian study ) .

Its actions brought Nigeria to a present stage of dragging intractable jobs of mass poorness, oppressive foreign domination, inequality, cultural debasement, political instability in Nigeria ( Onyeonoru, 2003 ) . To accomplish an effectual sustainable development plan, the oil organisations should consolidate with the Government and stakeholders making a partnership towards achieving this end. An effectual sustainable plan can be done by merely working renewable beginnings of energy as a agency of accomplishing a good sustainable development pattern. This can be done by community support agribusiness strategies, urban nutrient production, seting of trees and prosecuting in recycling engineering.

Decision

New companies come ining the oil industry in Nigeria will hold to accommodate to the instability of Government policies and really tight environmental policies that guide against environmental pollution. Besides confronting the ceaseless issues of insecurity, high rates of unskilled labour, unemployment and hapless substructures increases the hazard of losing capital and labour force.

Nigeria is a thickly settled state with about 140 million people with a aggressive economic system. The Political system is acquiring stable due to the switch from Military regulation to democratic regulation. Different policies are put in topographic point to back up Foreign Direct Investments and promote denationalization of domestic industries, therefore promoting globalisation to a less grade. The socio-cultural economic system is now encompassing the construct of foreign investings and sees this as an chance for self-development and community restructuring.

The IMF reported a growing in Nigeria ‘s gross domestic merchandise from 9.5 % in 2009 to 7.3 % in 2011, and its power of buying para. Despite its non-competitive characteristics in the planetary market, there has ever been a rise in per capita, which is driven by a solid growing in new emerging markets like telecommunications, building industry and electronics, driving a growing of GDP per capita of US $ 338 in 2003 to US $ 49O in 2012 ( IMF,2011 ) . The Government is working on both reforms and infrastructural plans to promote its wellness and instruction sectors by implementing substructure and health/education policy reforms. Quite a figure of transnational companies have seen a ground to put in Nigeria despite the economic instability of the state like General Electric ( GE ) , Coca-cola, legion telecommunication houses ( MTN, ETISALAT, GLOBACOM, AIRTEL ) .

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