CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The development of the petroleum industry in Nigeria has taken different stages at different time in the history of Nigeria. The first attempt at the exploration of oil in Nigeria was in 1908 by a German company named Bitmen Coorporation while the second major effort was in 1937 by Shell D’A Cry Angbo Dutch Company. In 1956, the first economic crude oil was discovered by Shell in Nigeria in the Delta region and exploration was embarked upon by the company in 1958. Nigeria joined the rank of oil producers when its first oil field came on stream (AZAIKI and Shaggy 2009). Since then, oil revenue began to play a prominent role in the Nigerian economy. In recent time oil has been the major source of energy for the households and industries in Nigeria and in the whole world. Oil, being the main stay of the Nigerian economy, plays a vital role to shaping the economics and political cheating of the country.
The oil industry began to play a prominent role in the economic life of the country at the road of the end of the Nigeria (Fashola, 1999). Oil was discovered in Kuwait in 1938. From 1946 to 1982, the country under went large scale modernization. In the 1980s Kuwait experienced a period of geopolitical instability and an economic crisis following the stock market crash in 1999, Kuwait was invaded by Iraq. The Iraq occupation came to an end in 1991 after military intervention by some coalition forces. At the end of the war, there were extensive efforts to revive the economy and rebuild national infrastructure.
Nigeria is Africa’s highest oil exporter and the world’s tenth largest oil producing country. It has realized over US $600 billion in oil revenue since 1960,and is currently the 5th highest net oil exporter in the world (CIA The World Fact Book 2015) Nigerian economy is heavily dependent on natural resources, oil and gas constitutes 98% of total exports 80% of the government revenues and about 20% of GOD (CBN, 2010), In spite of the enormous economic potentials in Nigeria ,it has largely failed to live up to the ambitious growth projections that followed the first oil boom in the 1970s (Bawa and Mohammed, 2007)According to Angawu, et al (1997)petroleum has transformed poor nations into rich ones, desert into water sheds and bankrupt nations into creditors. Specifically, with respect to Nigeria, there is no gain saying that the oil sector has undergone tremendous transformation over the years. The industry which was merely the “supportive” economic sector in the 1960’s with agricultural sector as the dominant one turned to be the predominant source of Nigeria’s foreign exchange earnings and most viable access to international investment opportunities in the 80’s and 90’s No other resources in Nigeria has played such a great role over the national economy as crude oil.
The revenue derived from oil through tax and royalties has been used to carry out development projects in the country (Iyoha, 2000).
Kuwait is a constitutional monarchy with a high income backed by the world’s sixth largest oil reserve. The Kuwait dinar is the highest valued currency in the world. According to World Bank, the country has the fourth highest per capital income in the world. The constitution was promulgated in 1962, making Kuwait the most democratic country in the region.
1.2 STATEMENT OF THE PROBLEM
There has been a general outcry from the masses and non-governmental organization in the increase of low standard of economic life of a country. In recent times, in the economy, this outcry has thus helped to intensify efforts at tackling the problems of low-standard economic life and mismanagement of petroleum resources in Nigeria and Kuwait. Consequently, these researches, thus, examine critically the impact of petroleum revenue and macro-economic policy on Nigeria society and Kuwait in general. The Nigeria and Kuwait economy are still facing different challenges due to neglect of agriculture and other sectors of the economy.
1.3 AIM AND OBJECTIVES OF THE STUDY
The study therefore will attempt to make a comparison between Nigeria and Kuwait economy.
i. To identify the effects of oil revenue on economic policy between Nigeria and Kuwait
ii. To determine long run relationship between oil revenue and economic growth between Nigeria and Kuwait
iii. To examine causality between oil revenue and economic growth between Nigeria and Kuwait
iv. To determine the impact of oil price volatility on macroeconomic variables and sustainable development in Nigeria and Kuwait.
1.4 STATEMENT OF RESEARCH QUESTIONS
For the purpose of this study, the following research questions were raised
I. What are the effects of oil revenue on macroeconomic policy in Nigeria and Kuwait?
ii. Do oil revenue and macroeconomic policy enhance positive standard of economic life of a country
iii. Is there any relationship between oil revenue and wage increase in employee performance
iv. To what extent do oil revenue and macroeconomic performance affect economic development?
1.5 STATEMENT OF RESEARCH HYPOTHESES
This research is vital to employees, management and the economy at large. The following hypotheses were formulated and tested
H0: There is no significant relationship between oil revenue and macroeconomic policy in Nigeria and Kuwait
H1: There is relationship between oil revenue and macroeconomic policy in Nigeria and Kuwait
H0: There is no significant relationship between oil revenue, macroeconomic policy and positive standard of economic life of a country
H1: There is significant relationship between oil revenue, macroeconomic policy and positive standard of economic life of a country
H0: There is no significant relationship between oil revenue and wage increase in employee’s performance
H1: There is significant relationship between oil revenue and wage increase in employee’s performance
H0: There is no significant relationship between oil revenue, macroeconomic performance and economic development
H1: There is significant relationship between oil revenue, macroeconomic performance and economic development.
1.6 SIGNIFICANCE OF THE STUDY
The outcome of this study will enlighten the governments of Nigeria and Kuwait, policy makers and the general public on the influence of oil revenue on macro-economic policy in Nigeria and Kuwait with a view to understanding better how to manage the revenue generated from abundant oil in Nigeria and Kuwait for rapid and sustainable development of the country. This research will also serve as a resource base to other scholars and researchers in the field subsequently, which if applied will go to an extent to provide new explanation to the topic. The findings of this study will help the government and non-governmental organization to guide against negative challenges facing an economy.
1.7 SCOPE OF THE STUDY
The study will focus on the relevance of oil revenue and macroeconomic policy in Nigeria and Kuwait generally. These will cover the overview of money generated from crude oil in Nigeria and Kuwait, and its effect on the economy of the nation. It will also cover how the governments of Nigeria and Kuwait have allocated and managed resources generated from oil since beginning of oil exploration and production in Nigeria and Kuwait.
1.8 LIMITATIONS OF THE STUDY
Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet and interview). The researcher we simultaneously engaged in this study with other academic work. This consequently will cut down on the time devoted for the research work.
1.9 DEFINITION OF TERMS
REVENUE: The income generated from the sale of goods or services, or any other use of capital or assets, associated with the main operations of an organization before any costs or expenses are deducted.
ECONOMIC POLICY: It is the actions that government takes in the economic field. It covers the system for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, national ownership, and many other area of government intervention into the economy.
STANDARD OF LIVING: It is the level of wealth, comfort, material goods and necessities available to a certain socio economic class in a certain geographical area.
GROSS DOMESTIC PRODUCT: This is the monetary value of all the finished goods
This is an increase in the capacity of an economy to produce goods and services, compared from one period of time to another.
ROYALTY: Payment to an owner for the use of property, especially patents, copyrighted works, franchises or natural resources.
SUSTAINABLE DEVELOPMENT: Meeting the needs of the present without compromising the ability of future generations to meet their own needs.
TABLE OF CONTENTS
Page
Title Page i
Certification ii
Dedication iii
Acknowledgement iv
Abstract v
Resume vi
TABLE OF Content vii - ix
CHAPTER ONE: INTRODUCTION 1
1.1 BACKGROUND OF THE STUDY 1 - 2
1.2 STATEMENT OF THE PROBLEM 2
1.3 OBJECTIVE OF THE STUDY 2
1.4 STATEMENT OF THE RESEARCH QUESTION 3
1.5 STATEMENT OF THE RESEARCH HYPOTHESES 3
1.6 SIGNIFICANCE OF THE STUDY 4
1.7 SCOPE OF THE STUDY 4
1.8 LIMITATION OF THE STUDY 4
1.9 DEFINITION OF THE TERMS 4
CHAPTER TWO: LITERATURE REVIEW 6 - 8
2.1 HISTORICAL DEVELOPMENT OF OIL 8 - 9
2.2 HISTORICAL BACKGROUND OF NIGERIA AND KUWAIT 9 - 12
2.3 HISTORY OF NNPC AND KNPC 12 - 19
2.4 OIL AND THE GLOBAL ECONOMY 20
2.5 SOURCES AND ALLOCATION OF GOVERNMENT REVENUE 20 - 27
2.6 MACROECONOMIC POLICY 27 – 30
2.7 ECONOMIC DEVELOPMENT 30 - 37
CHAPTER THREE: RESEARCH METHODOLOGY 38
3.1 RESEARCH DESIGN 38
3.2 METHODOLOGY 38
3.3 MODEL SPECIFICATION 38 - 39
3.4 METHOD OF EVALUATION 39 - 40
3.5 DATA REQUIRED AND SOURCES 43
CHAPTER FOUR: PRESENTATION AND INTERPRETATION OF RESULTS 45
4.1 DATA PRESENTATION 45
4.2 PRESENTATION OF RESULT 50
4.3 DATE ANALYSIS 55
4.4 STATISTICAL CRITERIA 58
4.5 ECONOMETRIC CRITERIA 60
4.6 TEST FOR AUTOCORRELATION 62
4.7 NORMALITY TEST 64
4.8 HETEROSCEDASTICITY 65
4.9 CONLUSION 67- 47
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION 69
5.1 SUMMARY 69
5.2 RECOMMENDATIONS FOR POLICY 71
5.3 RECOMMENDATIONS FOR FURTHER RESEARCH 73
5.4 CONCLUSION 75
BIBLIOGRAPHY