CHAPTER ONE

INTRODUCTION

1.1BACKGROUND OF THE STUDY

Natural resources endowment is an important source of national wealth, which

enhances a country’s potential for economic growth around the world. Nigeria is

endowed with abundant mineral and natural resources which amounts to over 34

occurrences ranging from industrial materials, iron ore, tin-ore, limestone, coal,

lead, zinc, columbite ,marbles, bitumen and tar sand. Statistically, the exploitation

of these minerals is very minimal in relation to the level of deposits found in the

country. Nigeria was among the largest producers of columbite, 6thlargest

producer of Tin, 8th largest producer of crude oil and gas.

About 31.3 percent of the total land area in the country is arable, of this, 3.0

percent of the total land is for permanent crop cultivation, 23.0 percent for

meadows and pastures, 15.0 percent is the forest woodland region while 28.0

percent is for other uses with negligible percent for irrigation. Nigeria is also

blessed with abundant maritime resources, water constitutes about 1.4 percent of

the country’s total area which provides an abundance of fish of large variety

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capable of producing about 600,000 metric tons of fish annually and producing less

than 12 percent of their estimated fishery potential (Mordi et al.).

The country’s oil and gas accounts for about 21.9 percent of GDP, 56.4

percent of foreign exchange receipts and 88.6 percent of government revenues in

2015. Prior to the discovery of oil in the 1960s and the oil boom era, Nigeria

depended largely on primary commodities and artisanal mining for export and

revenue. During this period, agriculture and artisanal mining accounts for 60

percent of GDP and approximately 60.0 percent of the labor force. The oil boom of

the early 1970s resulted to a neglect of agriculture and other sources of revenue

generation. During the study period, mining sector has not significantly contributed

to GDP between 1980-2020 period, it peaked to 0.34 percent of total GDP at 1990

constant basic prices in 1982.Petroleum is presently one of the most important and

valuable natural resources of Nigeria. The country received a fair share of profit

derived by the minerals companies while also offering stable and attractive terms

to investors.(U.SEIA,1997). It has been reported that the country loses about N50

trillion annually from her untapped resources. From untapped gold alone, an

estimate of N8 trillion was discovered to have been lost annually in Nigeria. They

are the royalties, taxes charges and other fees that the government at all tiers would

have earned from firms and individuals operating in solid mineral industry

(Mutiu,2006).These revenues from natural resources are expected in the short-run

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to result in economic growth and in the long-run economic development.

(Adeniyi,2012).

This study therefore will be aimed at illustrating clearly the abundance of

natural resources within the geographical domain of Nigeria, and the impact of the

revenues generated from the natural resources on the economic growth and

development of the country.

1.2 STATEMENT OF THE PROBLEM

Nigeria’s economic performance in the past four decades was generally

poor. Over the period 1980-2020, annual GDP growth had averaged 3.5-4 per cent

per annum which implied contraction in per Capita GDP with an increasing

population growth rate of 3.8, which resulted in deterioration of living standards

for most citizens.

A major challenge for the Nigerian Economy is its macroeconomic volatility

driven by external terms of trade shocks, the country’s large reliance oil export

earnings, misplaced priorities and perceived massive corruption which were

transferred directly into the domestic economy. Volatility in public expenditure

showed over reliance on oil earnings and weak fiscal discipline by successive

governments. It has a prolonged period of economic stagnation, rising poverty

levels, decline institutional qualities, low infrastructure, very low human

development index, poor condition of the power sector and also income

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distribution deteriorate very sharply which leads to prolong economic stagnation,

rising poverty levels, decline Institutional qualities, low infrastructure, very low

Human Development Index, and income distribution declined sharply. Obviously,

the failure of the public authorities and institutions to meet the challenges of the

abundance of these resources, created a downturn and negative relationship in the

growth of the Nigerian economy.

According to EIA statistics(2010),the oil reserve of Nigeria will last for

about 47 years from 2011.Though,huge yields are obtained over years from the

domestic sales and export of petroleum resources, its impact as regards the growth

and the development of the economy is questionable, therefore, in order to come

up with a good plan toward diversifying the economy, there is need to carry out a

survey to determine the location of the various natural resource in the country and

to also examine their impact on the growth and development of the country’s

economy.

1.3 OBJECTIVES OF THE STUDY

There has been a growing interest and concern toward the development of

abundant natural resources that Nigeria is endowed with and their contribution to

the country’s economy. Therefore, the main objective of this study will be to

examine the impact of the natural resources revenue to the Nigerian economy.

Others include:

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 1. To examine the impact of natural resources revenue on the Nigerian Gross

Domestic Product (GDP).

2. To analyze the location of various natural resources in Nigeria.

3. To give suggestions to manage available resources productively.

1.4 RESEARCH QUESTIONS

1. What are the impacts of natural resources revenue on the Nigerian Gross

Domestic Product (GDP)?

2. Where are the various natural resources of Nigeria located?

3. What are the possible suggestions as regards managing the available

resources productively?

1.5 STATEMENT OF THE HYPHOTESIS

The following hypothesis was tested:

HO: Natural resources revenue has no significant impact on the

Nigerian economic growth.

H1: Natural resources revenue has a significant relationship on the

Nigerian economic growth.

1.6 SIGNIFICANCE OF THE STUDY

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 The study will benefit students in their field of study by providing relevant

and updated information on how natural resources contribute to the Nigerian

economic growth and development.

The study aimed at adding to the existing researches conducted earlier

on the contribution of natural resources to the Nigerian Gross Domestic Product

(GDP).It also aimed at helping the government and other relative stakeholders in

the mining sector by providing relevant information for the formulation of good

policies toward enhancing the growth and development in the Nigerian economy.

Moreover, the study is advantageous to the Nigerian government in its

planning toward diversifying the economy from its mono-cultural state.

1.7 SCOPE AND LIMITATION

The study focuses on surveying the location of natural resources in Nigeria

and examining the effect of the revenue generated from the exploration of these

natural resources on the country’s economy for a period of 35 years,(ranging from

1986 - 2021).The period is chosen because it’s the period when the IMF’s

Structural Adjustment Program(SAP) was introduced with the aim of restructuring

and diversifying the productive base of the Nigerian economy. Moreover, the

period is long enough so as to permit the reliable estimate of the parameters under

question.
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 Time restrain, funds insufficiency, data inaccuracy, lack of access to

adequate text books and journals as well as browsing materials pose a serious

constraint on this study.

1.8 DEFINATION OF TERMS

Natural resources: Are materials or substances that are raw, occurring in nature

which can be exploited for economic gain.

Economy: An economy consists all activities related to production, or trade and

consumption of limited goods and services by different agents in a given

geographical area or location.

Revenue: Can be defined as total income received from a given source

1.9 ORGANISATION OF THE STUDY

The study is organized into 5 chapters as follows:

Chapter one comprises of the background of the study, statement of the problem,

aims and objectives of the study, scope and limitations, hypothesis testing etc.

Chapter two contains the literature review, conceptual framework, and theoretical

framework. Chapter three discusses the methodology used in analyzing data,

chapter four comprises of data presentation, analysis and interpretation while

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chapter five summarizes the whole study by discussing the conclusion and

recommending adequate policy measures to be taken.