University of Vaasa - Vaasan yliopisto

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late 90s with a shift from other real sectors such as agriculture, manufacturing and
mining. CBN (2006) estimated that 89.4 percent of the country’s gross revenue came
from oil revenue in 2006. The dependence on oil and gas implies an overwhelming
exploitation of these resources. In 2006, Nigeria’s aggregate crude oil production
including condensates, averaged 2.23 million barrels per day (mbd) or 813.95 million
barrels, while natural production in the same year reached 57,753.7 million cubic
metres (MMm 3 ).
However, the dependence on this sector has not translated into a well-developed and
efficient petroleum industry in Nigeria. The producing Niger Delta region is rife with
crises, environmental degradation, pollution, unemployment and lack of basic
infrastructure. This has led to the decline petroleum production capacity of the
country with about 11 percent decline in production between 2005 and 2006 (CBN,
2007). Moreover, the natural gas resource is not fully harnessed as is the case in
other developed economy. In 2006, an estimated 18,365.68 million cubic metres
(MMm 3 ) of natural gas representing 31.8 percent of the total annual production was
flared (CBN, 2007).
The dependence on revenue from mainly oil and gas, the collapse of other real
sectors and the inability of these other sectors to contribute significantly to the
country’s GNP as well as budgetary need portray a level of insecurity of the
economy. The country’s ability to pursue its sustainable development goals is
dependent on revenue from petroleum, whose price in the international market is
unstable and unpredictable. Coupled with this, the global agenda to pursue the
development of sustainable energy sources and reduce the reliance and consumption
fossil fuels questions the country’s total reliance on this sector for its revenue.
With the attempt by major consumers and developed economies to ensure a global
shift in the reliance on fossil fuels, Nigeria will need to ensure a shift in its revenue
earning profile to take advantage of this global trend and harness its sustainable
energy resources. The need for the country to adopt and improve its alternative
energy sources are necessitated by the inability ensure a flow-over of revenue to
invest in the development of other real sectors. A high percentage of the petroleum
products consumed in the country are refined and imported from other countries.
Furthermore, only a small proportion of the natural gas produced is channeled into
production in other real sectors. In 2006, only 3.1 percent of the total gas produced
were utilized within Nigeria as cooking gas produced by the Nigeria Gas Company
(NGC), for electricity generation by the Power Holding Company of Nigeria (PHCN)
and by cements and steel companies for heating.
Though Nigeria is the sixth largest exporter of crude oil globally with huge revenue
accruing from oil sales and exploitation, it faces many challenges including:
• Instability in supply and prices of the petroleum products with recurrent acute
shortages
• Land degradation, environmental damage, air pollution and loss of
biodiversity resulting from oil exploitation and utilization
• Conflict, increased poverty level and loss of livelihoods in the oil rich Niger
Delta
• Food crises and food insecurity