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Chapter One: Introduction


1.1. Background of the Study

The Nigerian National Petroleum Corporation (NNPC) was formed on April 1, 1977, by the merging of the Nigerian National Oil Corporation and the Federal Ministry of Mines and Steel.

By legislation, NNPC oversees the joint venture between the Nigerian federal government and a number of foreign multinational businesses, including Royal Dutch Shell, Agip, ExxonMobil, Chevron, and Texaco (which has since merged with Chevron).

The Nigerian government explores and produces petroleum in conjunction with these corporations. The NNPC Towers in Abuja are the headquarters of NNPC. consists of four similar towers.

The NNPC also operates zonal offices in Lagos, Kaduna, Port Harcourt, and Warri. It maintains an international office in London, United Kingdom.

In addition to its exploration efforts, the Corporation was granted authority and operational interests in refining, petrochemicals, product transportation, and marketing.

Between 1978 and 1989, NNPC built refineries at Warri, Kaduna, and Port Harcourt, and it took over the 35,000-barrel Shell Refinery in Port Harcourt, which was established in 1965.

In 1988, the NNPC was commercialised into 12 key business divisions that covered all aspects of the oil sector, including exploration and production, gas development, refining, distribution, petrochemicals, engineering, and commercial investments. Currently, the subsidiary firms are:

National Petroleum Investment Management Services (NAPIMS)

Nigeria Petroleum Development Company (NPDC)

The Nigeria Gas Company (NGC)

The Product and Pipeline Marketing Company (PPMC)

Integrated Data Services Limited (IDSL

Nigeria LNG Limited (NLNG)

National Engineering and Technical Company Limited (NETCO)

Hydrocarbon Services Nigeria Limited (HYSON)

Warri Refinery and Petrochemicals Company Limited (WRPC)

Kaduna Refinery and Petrochemical Company Limited (KRPC)

Port Harcourt Refining Company Limited (PHRC)

In addition to these subsidiaries, the industry is overseen by the Department of Petroleum Resources (DPR), a branch of the Ministry of Petroleum Resources.

The DPR guarantees industrial compliance, processes licence, lease, and permit applications, and creates and enforces environmental standards. The DPR and NAPIMS play critical roles in the day-to-day operations of the sector.

According to Onoh J.K (1995), when Nigeria got independence in 1960, oil production had already begun, and the country was exporting more than 170,000 barrels per day. In 1964, the Gluf oil company discovered offshore oil on the Okan structure of the then-Bendel state (now Edo).

The licences awarded to these enterprises were both offshore and onshore. With these commercial discoveries in petroleum products, Nigeria’s socioeconomic and political development began to crystallise, as did its internal ethnic dynamics.

Before the mid-1960s, all crude oil produced was exported due to the lack of local refineries, while domestic demand for petroleum products was covered by imports.

However, the need to conserve foreign cash offers job possibilities to some extent, and the benefits of setting up refineries locally motivated the Nigerian government to establish and commission a refinery in Port-Harcourt in 1965.

The refinery has a capacity of 35,000 barrels per day to accommodate rising domestic demand, while excess fuel oil is exported.

According to Michael Tanzer (1980), demand for oil products continued to outstrip supply, prompting the government to officially open the Warri refinery in 1978 with a total capacity of 100,000 barrels per day, giving the country a current potential capacity of 260,000 barrels.

These were intended to process 50% Nigerian light crude and 50% medium crude. Expansion construction is now underway at both the Kaduna and Warri refineries, with a fourth refinery being built near Port Harcourt at a cost of approximately N750 million.

It is hoped that when the fourth refinery is completed, it will increase domestic refinery capacity by 150,000 barrels per day, making our offshore processing arrangement unnecessary, which involves taking Nigerian crude abroad for refining and importing products to meet the shortfall in domestic requirements.

As output from all refineries exceeds demand, a surplus will be available for export.

The evaluation of the performance of the Nigerian National Petroleum Corporation (NNPC) has become vital due to the Nigerian government’s over-dependence on oil. The NNPC, the most significant sector of the Nigerian economy, must be effectively managed to avoid economic failure or recession.

1.2. Statement of the General Problem

As the economy’s dominant sector, the oil industry should have an impact on other sectors.

Over the last few decades, Nigeria’s economy has been increasingly dependent on oil earnings. During the 1986-92 period, oil export revenues climbed at an average rate of 13% per year, while GDP measured in current US dollars decreased by an average of 1%. Oil export revenues, along with the continued deterioration of the non-oil economy, imply more dependency.

Over time, the oil industry has made significant contributions to the expansion of Nigeria’s economy. Based on this promise, the researchers intend to assess the NNPC’s impact on Nigeria’s economic development.

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