Economics Essay范文节选

The struggling economy of Nigeria recently Economics Essay
 

The economy of Nigeria has continuously struggled to leverage the country’s vast wealth in fossil fuels in order to displace the crushing poverty that affects a little over half of its fast increasing population. The coexistence of vast natural resources wealth and extreme poverty has been referred to as the “Dutch disease” or “resource curse” by many economists and Nigeria clearly suffers from this disease. Despite the country being blessed with vast quantities of oil and is the sixth largest oil exporter in the Organization of Petroleum Exporting Countries (OPEC), which has generated billions of dollars in revenues over the last forty years since oil was found in Nigeria, this has not translated into an improved economy for the country. Instead through inefficiencies (infrastructural and institutional), corruption, abuse of natural monopoly powers, mismanagement, smuggling, bureaucratic bottlenecks and excessive subsidizing, the supply of refined crude oil in the country has virtually collapsed.

 

In recent years, the exports of oil and natural gas at a time of peak prices have enabled the country to post merchandise trade and current account surpluses. By the estimation of the World Bank, 80 percent of energy revenues in Nigeria benefit only a fraction of the population as a result of corruption. Within the current decade, Nigeria achieved a milestone agreement with the Paris Club of lending nations to eliminate all of its bilateral external debt. Under the agreement, the Paris Club will forgive most of the debt, and Nigeria will pay off the remainder with a portion of its energy revenues. Before this, about 75 % of Nigeria’s foreign debt was owed to Paris Club countries. A large chunk of this debt was due to interests and payment arrears. Nigeria's external medium and long-term debt was known to be tentatively estimated at US$3 1.9 billion (equivalent to 78 percent of GDP) at the end of 2000, and consisted of obligations to Paris Club creditors (US$24.4 billion), multilateral creditors (USS3.8 billion), and commercial creditors (US$3.6 billion). A small amount of debt (US$140 million) was also estimated to be owed to non-Paris Club bilateral creditors. The largest bilateral creditor is the UK (with about 27 percent of total Paris Club debt), followed by France, Japan and Germany (at about 15-17 percent), and Italy, the Netherlands, and the US (at less than 10 percent). Among the multilateral institutions, the World Bank (IBRD and 1DA) and the African Development Bank (ADB and ADF) were the largest creditors, with debt stocks of US$2.6 billion and US$1.1 billion, respectively. Nigeria has no outstanding credit or loans to the Fund. Outside of the energy sector, the country’s economy has been highly inefficient with human capital also being underdeveloped.

 

2003 to 2007 saw Nigeria implementing an economic reform program called National Economic Empowerment Development Strategy (NEEDS) with a related initiative at the state level called the State Economic Empowerment Development Strategy (SEEDS). NEEDS, with the purpose of raising the country’s standard of living- through a variety of reforms including deregulation, liberalization, privatization, macroeconomic stability, transparency, and accountability- addresses basic deficiencies such as the lack of freshwater for household use and irrigation, unreliable power supply, decaying infrastructure, impediments to private enterprise, and corruption. The government hopes that NEEDS will create 7 million new jobs, diversify the economy, boost non-energy exports, increase industrial capacity utilization, and improve agricultural productivity.

 

A long-term economic development program is the United Nations (UN) sponsored National Millennium Goals for Nigeria. Under the program covering the first fifteen years of the 21st century, Nigeria is committed to achieve a wide range of ambitious aims involving poverty reduction, education, gender equality, health, the environment, and international development cooperation. These are referred to as the Millennium Development Goals (MDGs). In an update released in 2004, the UN found that Nigeria was making progress toward achieving several goals but was falling short on others. Specifically, Nigeria had advanced efforts to provide universal primary education, protect the environment, and develop a global development partnership. However, the country lagged behind on the goals of eliminating extreme poverty and hunger, reducing child and maternal mortality, and combating diseases such as human immunodeficiency virus/acquired immune deficiency syndrome (HIV/AIDS) and malaria. A prerequisite for achieving many of these worthwhile objectives is curtailing endemic corruption, which stymies development and taints Nigeria’s business environment. Corruption mostly harms Nigerians themselves, but the country is widely known around the world for various fraudulent activities.

 

The oil boom of the ‘70s led Nigeria to neglect its strong agricultural and light manufacturing bases in favour of an unhealthy dependence on crude oil and by the beginning of the 2000, exports of oil products accounted for more than 98 % of export earnings and about 83 % of federal government revenue. New oil wealth, the concurrent decline of other economic sectors, and a lurch toward a statist economic model geared up massive migration to the cities leading to increasingly widespread poverty, especially in rural areas. Accompanying this trend, by 2000 Nigeria's per capita income had plunged to about one-quarter of its mid-1970s high, below the level at independence. Along with the endemic malaise of Nigeria's non-oil sectors, the economy continues to witness massive growth of "informal sector" economic activities, estimated by some to be as high as 75 % of the total economy.

 

Nigeria's proven oil reserves are estimated to be 37.2 billion barrels as of January 2010. The majority of reserves are found along the country’s Niger River Delta and offshore in the Bight of Benin, the Gulf of Guinea and the Bight of Bonny. Current exploration activities are mostly focused in the deep and ultra-deep offshore with some activities in the Chad basin, located in the northeast of the country. Nigeria has an estimated 100 trillion cubic feet of proven natural gas reserves as well. Nigeria is a member of the Organization of Petroleum Exporting Countries (OPEC), and in mid-2001 its crude oil production was averaging around 2.2 million barrels per day. A collapse of basic infrastructure and social services since the early 1980s was accompanied by poor corporate relations with indigenous communities, vandalism of oil infrastructure, severe ecological damage, and personal security problems throughout the oil–producing Niger Delta region which has continued to plague Nigeria's oil sector. Efforts are underway to reverse these troubles with amnesty recently granted to the region militancy groups who have over the years been involved in the region’s insecurity through vandalism of oil infrastructure, kidnapping and hostage taking of oil workers especially the expatriates. The major multinational oil companies have launched their own community development programs. The immediate past president included developmental programs for the oil-producing Niger Delta region in the ‘7-point Agenda’. The Niger Delta Development Commission (NDDC) has been created to help facilitate economic and social development in the region. With all these programs and many yet to be launched, there are high hopes that the NDDC can reverse the impoverishment of local communities. Meanwhile, the United State remains Nigeria's largest customer for crude oil, accounting for 40% of the country's total oil exports with Nigeria providing about 10% of overall U.S. oil imports and ranking as the fifth-largest source for U.S. imported oil. Apart from the United Kingdom, Nigeria is the largest trading partner of the United States with the trade balance overwhelmingly favouring Nigeria, due to oil exports.#p#分页标题#e#

 

Nigeria's high propensity to import means that roughly 80 percent of government expenditure is done spent in foreign exchange. Cheap consumer imports, resulting from a chronically overvalued Nigerian Naira, coupled with excessively high domestic production costs due in part to erratic electricity and fuel supply, have pushed down industrial capacity utilization to less than 30 %. More Nigerian factories would have closed if not for the relatively low cost of labour. Domestic manufacturers, especially pharmaceuticals and textiles, have lost their ability to compete in traditional regional markets; however, there are signs that some manufacturers have begun to address their competitiveness.

 

In August 2000 the International Monetary Fund (IMF) and Nigeria signed a one-year Stand-by Arrangement (SBA), to reschedule the debt agreement between Nigeria and its Paris Club creditors. By August 2001, despite continued dialogue with the IMF, Nigeria had been unable to implement many of the SBA conditions. The IMF consent to extend its SBA by a few months and seek out revised targets and conditions for a new agreement meant that Nigeria had to prove that it was capable of implementing strong and sustained economic reforms over the years. By September 2001, few creditor governments had signed bilateral rescheduling agreements.

 

In the light of highly expansionary public sector fiscal policies during 2001, the government has sought ways to head off higher inflation, leading to the implementation of stronger monetary policies by the Central Bank of Nigeria (CBN) and under spending of budgeted amounts. As a result of the CBN's efforts, the official exchange rate for the Naira has stabilized at about 140 Naira to the dollar. The combination of CBN's efforts to prop up the value of the Naira and excess liquidity resulting from government spending led the currency to be discounted by about 20 % on the parallel (nonofficial) market. A key condition of the Stand-by Arrangement has been closure of the gap between the official and parallel market exchange rates. The Inter Bank Foreign Exchange Market (IFEM) is closely tied to the official rate. Under IFEM, banks, oil companies, and the CBN can buy or sell their foreign exchange at government influenced rates. Much of the informal economy, however, can only access foreign exchange through the parallel market. Companies can hold domiciliary accounts in private banks, and account holders have unfettered use of the funds.

 

Expanded government spending also has led to upward pressure on consumer prices. Inflation which had fallen to 0 % in April 2000 reached 14.5% by the end of 2000 and 18.7 % in August 2001. In 2000 high world oil prices resulted in government revenue of over $16 billion, about double the 1999 level. State and local governmental bodies demanded access to this "windfall" revenue, creating a tug-of-war between the federal government, which seeks to control spending, and state governments desirous of augmented budgets preventing the government from making provision for periods of lower oil prices.

 

History of Crude Oil in Nigeria 尼日利亚原油的历史
 

Commercially, oil was discovered in Nigeria in 1956 at Oloibiri in the Niger Delta after series of exploration lasting half a century. Meanwhile, Oil was first discovered at Araromi in Ondo State. A German Company, the Nigeria Bitumen Corporation started exploration in that area in the year 1908. The company terminated its operations due to the outbreak of the First World War in 1914. Some years passed before an Anglo-Dutch consortium came to Nigeria as Shell D' Arcy and that "sparked off" major exploration in Nigeria. The company was awarded the sole concessionary right to cover the whole territory of Nigeria, and major exploration started in 1937. Exploration activities were also interrupted by the Second World War the company started again in 1947. The commercial discovery was made by Shell-BP. Nigeria joined the ranks of oil producers in 1958 when its first oil field came on stream producing 5,100 bpd. After 1960, exploration rights in onshore and offshore areas adjoining the Niger Delta were extended to other foreign companies. In 1965 the EA field was discovered by Shell in shallow water southeast of Warri. In 1970, the end of the Biafran war coincided with the rise in the world oil price, and Nigeria was able to reap instant riches from its oil production. Nigeria joined the Organization of Petroleum Exporting Countries (OPEC) in 1971 and established the Nigerian National Petroleum Company (NNPC) in 1977; a state owned and controlled. The Ministry of Petroleum and the Nigeria National Oil Corporation were merged to form the Nigerian National Petroleum Corporation (NNPC). At that time, NNPC’s primary function was to oversee the regulation of oil in Nigeria, with secondary responsibilities for upstream and downstream developments. In 1988, the Nigerian government divided the NNPC into 12 subsidiary companies in order to better manage the country’s oil industry. The majority of Nigeria’s major oil and natural gas projects are funded through Joint Ventures, with the NNPC.

 

In an effort to continue expanding oil industry in Nigeria, a lot of incentives were introduced by the federal government. This effort is initially to increase oil reserve and gas utilization. Such incentives are:-

 

Memorandum of Understanding (MOU), which guarantees profit margin of $2.30/bbl for companies that meet target in reserve additions performance above the set target attracts $2.50/bbl. Differentiated tax credit was also introduced to compensate investment risk in a volatile market.

 

The revised nleinorandum of Understanding (MOU) and Joint venture Operating Agreement (JOA) in 1991.

 

The production sharing contract (PSC) of 2002, which ensures that risks are balanced between partners, Etete (2002)

 

The liberalization of downstream sector in the year 2002.

 

These incentives increased the number of companies prospecting and exploring in Nigeria from few to fifty nine (59). Federal government also mapped out some incentives for companies that can prospect in deep off shores, to encourage the technical and capital intensive nature of such ventures, Bello and Butt (2004).

 

Since the 1990’s, the oil sector of the Nigerian economy, in general terms, has been faced with some of the following problems:

 

Inappropriate pricing of petroleum products for domestic consumption.

 

Relatively low level of investments in the sector, compared to its potentials.

 

Restrictions imposed by crises and production disruptions caused by host communities.

 

The Federal Government’s delays in the payment of cash calls for its Joint Venture operations in the upstream sub-sector, focusing more on maintenance rather than growth.

 

High technical cost of production, due to low level of domestic technological development.

 

Environmental degradation due to the flaring of associated gas.
 

 

Recent Developments in Nigerian Oil and Gas近期尼日利亚石油与汽油的发展

The government has been planning to transform NNPC into a more profit-driven company that can seek out private funds in the market. While these discussions have been underway for many years, a Petroleum Industry Bill (PIB) is currently being debated by the National Assembly. The PIB is designed to reform the entire hydrocarbon sector to increase the government’s share of revenue; increase natural gas production; streamline the decision making process by dividing up the different roles of NNPC into a profit-driven company; privatize NNPC’s downstream activities; and promote local content. The Bill would also provide for a greater share of oil revenues to the producing communities and expand the use of natural gas for domestic electricity generation.

 

Parts of the bill have recently been approved as stand-alone laws while the different agencies and roles of the new National Oil Company and the NNPC have yet to be fully defined. Differing versions of the PIB are currently being debated, especially around more contentious points such as the renegotiation of contracts with international oil companies, the changes in tax and royalty structures and clauses to ensure that companies use or lose their assets.

 

As part of the energy sector reform, in April 2010, the Nigerian government signed the Nigerian Content Development Bill (NCD) into law. The bill is aimed at increasing the role of Nigerian companies in all aspects of the oil and gas industry. The new law requires that Nigerian companies obtain contracts and win bids so long as the local company is capable, the Nigerian content is higher, and the bid is not more than 10 percent higher than the otherwise winning bid. The NCD applies to all contracts worth over US$1 million and also applies to insurance, banking, and other sectors tied into the oil industry.