THE PETROLEUM SECTOR
S. W Petters
As an oil-exporting Third World nation, Nige ria's economic development has witnessed trials and tribulations, as the nation's for tunes have risen and fallen in the stormy seas of the international oil market. Nigeria's vulnerability to oil price shocks stems from the nation's over dependence on crude oil export. This is amply evi dent from the drastic decline in non-oil exports over the past three decades of petroleum production in Nigeria.
Crude oil accounted for 7.1 per cent of total exports in 1961, which was dominated at that time by cocoa, groundnut and rubber, in that order. In 1965, oil had climbed to 13.5 per cent of the nation's export earnings, and by 1970, it had become the leading source of foreign exchange, accounting for 63.9 per cent. The 1973 Arab oil embargo against the United States of America did not only earn Nigeria the windfall revenue of an oil boom. By 1979, petroleum sales had completely overshadowed non-oil exports, as it then con tributed about 95 per cent of the country's export earnings. During the peak of the oil boom, Nigeria's premium crude, the Bonny Light (37° API), fetched the commanding price of 40 dollars a barrel.
But by 1982, as a result of sustained recession in the western industrialised nations, stringent con servation and substitution measures, as well as increased crude production of non-OPEC coun tries, there was a glut in the international oil market. Consequently, the official price of the Bonny Light tumbled through 35 dollars a barrel in 1982 to 29.5 dollar per barrel in 1983 and then dipped below 10 dollars a barrel. Down too went the Nigerian econ omy, crashing along with petroleum prices. In spite of efforts to revamp the economy through the Structural Adjustment Programme, an economic package that includes comprehensive non-oil export diversification initiatives, petroleum still con tributes an average of 95 per cent of the nation's external earnings.
In 1990, following the Gulf War and the United Nations trade embargo on Iraq and Kuwait, not only did the Organisation of Petroleum Exporting Countries (OPEC) re-allocate the production shares of both nations to other producers such as Niaeria: there was also a sharp momentary increase in crude oil prices. From the low spot price of 15.49 dollars in June 1990, the average spot price of the Bonny Light soared to 36.78 dol lars a barrel in August 1990. In 1993, the spot price of the Bonny Light, on the average, was about 18 U.S. dollars per barrel.
So strategic is the petroleum sector to the Nigerian economy that crucial aspects of this sec tor such as exploration, production, gas utilisation, conservation, and petroleum policy and legislation are sensitive economic issues. Also sensitive polit ically is the refined product pricing policy, especial ly subsidising energy prices. These matters are reviewed below.