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EFFECTS OF GLOBAL PETROLEUM POLITICS ON NIGERIA IN THE CURRENT LOW GLOBAL OIL PRICE REGIME

Authors:
  • Tishk International University

Abstract

This paper evaluated the effects of global petroleum politics on Nigeria, being a major oil producer and an important member of Organisation of the Petroleum Exporting Countries (OPEC) in the current low global oil price regime. The research adopted systems theory, developed by Anatol Rapoport in 1974 as its theoretical lens and employed the qualitative method as its methodology, in which purposive sampling and semi-structured interview were utilised in obtaining primary data from relevant respondents who are versed in global petroleum politics and operations of Nigeria's oil and gas industry. The research found out that Nigeria has been hit hard and negatively affected by the current dynamics of global petroleum politics and collapse of global oil prices, as Nigeria depends almost totally (98%) on earnings from its foreign sales of crude oil. Specifically, the effects on Nigeria are: a devastating economic recession, which has triggered a serious foreign exchange crisis, fall in the value of the Naira, hyper inflation and heightened insecurity, social dislocation, rising youth unemployment, increased abject poverty and weakened state's capacity to perform statutory functions and achieve targeted aims and objectives of state policy. The paper recommended that Nigeria has to strengthen its bargaining power in global petroleum politics, especially at OPEC and engineer a quick and sustainable diversification of the Nigerian economy.
ISSN: 2249-7196
IJMRR/Oct. 2016/ Volume 6/Issue 10/Article No-16/1527-1532
Basiru Musa et. al., / International Journal of Management Research & Review
*Corresponding Author www.ijmrr.com 1527
EFFECTS OF GLOBAL PETROLEUM POLITICS ON NIGERIA IN THE
CURRENT LOW GLOBAL OIL PRICE REGIME
Basiru Musa*1, Dr. Che Mohd Aziz Bin Yaacob2, Prof. Madya Dr. Rusdi Omar2
1Bayero University, Kano, Nigeria.
2School of International Studies, Colgis Universiti Utara Malaysia, Malaysia.
ABSTRACT
This paper evaluated the effects of global petroleum politics on Nigeria, being a major oil
producer and an important member of Organisation of the Petroleum Exporting Countries
(OPEC) in the current low global oil price regime. The research adopted systems theory,
developed by Anatol Rapoport in 1974 as its theoretical lens and employed the qualitative
method as its methodology, in which purposive sampling and semi-structured interview were
utilised in obtaining primary data from relevant respondents who are versed in global
petroleum politics and operations of Nigeria’s oil and gas industry. The research found out
that Nigeria has been hit hard and negatively affected by the current dynamics of global
petroleum politics and collapse of global oil prices, as Nigeria depends almost totally (98%)
on earnings from its foreign sales of crude oil. Specifically, the effects on Nigeria are: a
devastating economic recession, which has triggered a serious foreign exchange crisis, fall in
the value of the Naira, hyper inflation and heightened insecurity, social dislocation, rising
youth unemployment, increased abject poverty and weakened state’s capacity to perform
statutory functions and achieve targeted aims and objectives of state policy. The paper
recommended that Nigeria has to strengthen its bargaining power in global petroleum
politics, especially at OPEC and engineer a quick and sustainable diversification of the
Nigerian economy.
Keywords: Global petroleum politics, Nigeria, Oil, Price regime.
INTRODUCTION
Global petroleum politics and international relations generally took a new shape and direction
ever since oil was discovered centuries ago (Falola and Genova, 2005). States that were
endowed with large reserves of oil also changed their patterns of global relations and
engagements in world affairs with other states and even multinational corporations. This then
culminated in the establishment of Organisation of the Petroleum Exporting Countries
(OPEC) in 1960 to further protect and promote the interests of the oil producers and check
the excesses and arbitrariness of the Seven Sisters (Exxon, Shell, BP, Gulf, Texaco, Mobil
and Chevron) or the major oil companies that were controlling the entire oil dealings of the
world before OPEC came on board and they still exert some level of influence (Sampson,
1975).
Basiru Musa et. al., / International Journal of Management Research & Review
Copyright © 2016 Published by IJMRR. All rights reserved 1528
This paper sought to evaluate the effects of global petroleum politics on Nigeria in the current
low global oil price regime.
The research was based on Systems Theory, developed by Anatol Rapoport in 1974. Systems
theory basically assumes that the entire world represents a whole with independent and
sovereign units called states interacting with others in an interdependent manner in the
international system in order to preserve the system by ensuring its stability and then
defending and promoting their individual interests. A good system consists of different parts;
these parts interrelate with each other or one another in an existing environment; the parts are
both independent and interdependent; there are boundaries that separate one part from
another and there is a stabilization mechanism in the event of disputes and conflicts
(Rapoport, 1974).
This theory is relevant to this research, because Nigeria and its oil and gas industry constitute
one strategic part of the world and more so that Nigeria produces oil and is a member state of
the Organization of Petroleum Exporting Countries (OPEC). Therefore, it means that global
petroleum politics affects it, although this research is to unravel the extent to which it affects
Nigeria in the current low global oil price regime, as Nigeria relies heavily on oil foreign
exchange earnings to support her economy and satisfy the needs of her teeming population.
Furthermore, the entire world is now seized by the phenomenon of globalization, which
refers to the process through which peoples and countries of the world are unified into a
single society economically, culturally, socially, technologically and politically through the
supersonic means of Information and Communications Technology (ICT) and advanced
means of transportation (Makarfi, 2014). In other words, globalization connotes that the
whole world is being molded into a shared social space by economic and technological forces
and that developments in one region of the world can have profound consequences for the life
chances of individuals or communities on the other side of the globe (Aina, 2003).
METHODOLOGY
This paper employed the qualitative method and purposive sampling alongside semi-
structured interview. The justifications for selecting the qualitative method are: firstly, the
qualitative method was chosen for this research because of its flexibility and the fact that, it
adequately provided the research with the needed tools for collecting data and thereafter
analysis. For this, purposive sampling and thematic analysis were adopted, which are integral
parts of the qualitative method. Secondly, the qualitative method was found logical and
systematic, as it ensured the orderly gathering, arrangement, coding and analysis of data in
this research. Thirdly, the qualitative method was found relevant and appropriate to this
research because it ensured the utilization of a relevant theoretical framework, such as the
major theory upon which this research was based, (Systems theory).
In this research, Primary data were elicited or collected through a semi-structured Interview
with relevant respondents and stakeholders in Nigeria’s oil and gas industry. In this regard,
Purposive Sampling, which is a non-probabilistic method of deliberately selecting a sample
on the basis of the questions and objectives of a research (Agbaje and Alarape, 2006) was
employed. In this regard therefore, three (3) relevant respondents were interviewed, namely
two (2) senior Nigerian National Petroleum Corporation (NNPC) officials, one from the
NNPC Towers/Headquarters, Abuja and the other from Kaduna Refining and Petrochemical
Basiru Musa et. al., / International Journal of Management Research & Review
Copyright © 2016 Published by IJMRR. All rights reserved 1529
Company Limited, a subsidiary of the NNPC and one (1) policy maker from the National
Assembly Complex, Abuja.
Global Petroleum Politics, Low Oil Price Regime, OPEC and Nigeria
Oil, as it is argued by some scholars has become a tool and weapon for global power and
influence. In fact, it is widely believed that oil creates development and prosperity because of
the abundant wealth that is generated by the states that have it (Harris, 2009). This picture is
not reflective of many developing oil countries, Nigeria inclusive. This is because despite the
abundant oil wealth that was generated since oil was discovered in 1956 in Nigeria, Nigeria is
still not developed. This scenario aptly captures the resource-curse perspective
(Ariweriokuma, 2009).
This argument does not take care of the fact that the world is in the era of low oil price
regime. This means that the situation in Nigeria is bad and future is bleak because oil wealth
is no longer generated now and mismanagement, corruption and lack of proper planning for
the future played a negative role in undermining Nigeria’s development.
Nigeria has been part of OPEC since 1971 and it was in this year that it established the
Nigerian National Oil Company (NNOC), which was replaced in 1977 by the Nigerian
National Petroleum Corporation (NNPC), which is charged with the following functions in
both the upstream and downstream sectors of Nigeria’s oil and gas industry:
1) Exploring and prospecting for, working, winning or otherwise acquiring, possessing and
disposing of petroleum.
2) Refining, treating, prospecting and generally engaging in the handling of petroleum for the
manufacture and production of petroleum products and its derivatives.
3) Purchasing and marketing petroleum, its products and by-products.
4) Providing and operating pipelines, tanker-ships or other facilities for the carriage or
conveyance of crude oil, natural gas and their products and derivatives, water and any other
liquids or other commodities related to the corporation’s operations.
5) Constructing, equipping and maintaining tank farms and other facilities for the handling
and treatment of petroleum and its products and derivatives.
6) Carrying out research in connection with petroleum or anything derived from it and
promoting activities for the purpose of turning to account the results of such research.
7) Doing anything required for the purpose of giving effect to agreement entered into by the
Federal Government with a view to securing participation by the government or the
corporation in activities connected with petroleum.
8) Generally engaging in activities that would enhance the petroleum industry in the overall
interest of Nigeria.
9) Undertake such other activities as are necessary or expedient for giving full effects to the
provisions of the NNPC Act (Ariweriokuma, 2009).
Basiru Musa et. al., / International Journal of Management Research & Review
Copyright © 2016 Published by IJMRR. All rights reserved 1530
Historically, the global price of oil has never been stable, as it rises and falls, although this is
usually attributed to certain geopolitical events in the global system and politics in OPEC on
one hand and that of the non-OPEC members on the other hand, such as the United States of
America with its current shale oil development and pumping same into an already saturated
global oil market (Speight, 2011).
There has not been a deal despite several meetings by OPEC to try to reach a deal to cut
production and prop up global oil demand and restore the price to its $100 and above
position, as Saudi Arabia, being the largest producer of Natural crude oil still produces at the
level it was producing before the collapse of the prices in June, 2014 (Fattouh & Sen, 2016).
Current events in the global oil markets indicate that countries that rely heavily on oil
proceeds are currently suffering, although many of them, Nigeria inclusive have been blamed
for not managing oil wealth prudently and for not diversifying their economies much earlier
to other viable sectors and areas, such as agriculture, solid minerals, Information and
Communications Technology (ICT) and Manufacturing (Economist, 2014).
RESEARCH FINDINGS AND DISCUSSION
The following findings, which are named ‘the effects of global petroleum politics and low
global oil prices on Nigeria’ were found and discussed below:
1) Devastating Economic Recession
Nigeria has currently been plunged into a devastating economic recession, which has
virtually shut down the Nigerian economy and the oil and gas industry, which powers it and
Nigeria. The recession has caused a serious foreign exchange crisis, continuous fall in the
value or purchasing power of the Naira (Nigeria’s national currency) against major
international currencies, especially the Dollar; a galloping inflation, which made so many
food items beyond the reach of ordinary Nigerians and in some cases, the middle class.
2) Heightened insecurity
There is a serious case of general insecurity in Nigeria, from the human form of security to
the physical security. This is to a large extent connected to the dwindling economic fortunes,
Nigeria and Nigerians have been living through since the fall in global oil prices in June,
2014, as Nigeria becomes helpless and almost incapacitated, as regards finding an immediate
antidote or solution to the economic crisis (Economist, 2014).
3) Social dislocation
Social life is becoming destroyed, as people have been hit hard and losing their means of
livelihood. This is because many Nigerians have been disengaged from their jobs, as many
companies have shut down and government is no longer recruiting, as it even finds it difficult
to pay workers’ salaries and allowances. This is more prevalent in the component units
(states) of the Nigerian federation.
4) Rising youth unemployment
Youth unemployment continues to go up, as many able and willing young graduates cannot
find jobs or be gainfully employed. This is also attributed to the collapse of global oil prices.
Basiru Musa et. al., / International Journal of Management Research & Review
Copyright © 2016 Published by IJMRR. All rights reserved 1531
5) Increased abject poverty
Abject poverty has been increased and it continues to take its toll on helpless and hapless
Nigerians. This has also resulted in malnutrition, hunger and diseases, as many Nigerians
cannot afford three (3) square meals per day.
6) Weakened state’s capacity to perform statutory functions and achieve targeted aims
and objectives of state policy
The Nigerian state has become effete or weak and as such, incapable of performing its
constitutional duties of steering the affairs of Nigeria and promoting the general wellbeing of
Nigerians, home and abroad. This has threatened the very corporate existence of Nigeria, as it
continues to suffer from dwindling economic fortunes, arising from the dramatic collapse of
crude oil prices.
CONCLUSION
This paper assessed the impacts of global petroleum politics on Nigeria in the current low
global oil price regime. Nigeria is found to be suffering seriously, as a result of the collapse
of the oil prices and this is due to the glaring fact that Nigeria relies almost totally on oil and
it was improvident in the past, as it never saved nor managed the oil wealth should there be
an ugly situation of this nature or simply the ‘rainy day.’
Some of the effects that have been found to be taking a serious toll on Nigeria include: a
catastrophic economic recession, heightened general human and physical insecurity, social
dislocation, skyrocketing youth unemployment, increased abject poverty and a weakened
state’s capacity to perform statutory functions.
RECOMMENDATIONS
The paper finally recommends that the Nigerian state should strengthen its bargaining power
in global petroleum politics, particularly at OPEC and quickly put in place measures to
diversify the Nigerian economy away from oil to other sectors, such as agriculture, solid
minerals, manufacturing, ICT and aviation.
It also recommends further research on the politics that may likely surround the
diversification of the Nigerian economy in relation to the interests of the western powers and
the major International Oil Companies (IOCs), operating in the Nigeria’s oil and gas industry,
especially the upstream sector of the industry.
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[3] Ariweriokuma S. The Political Economy of Oil and Gas in Africa: The Case of Nigeria.
New York: Routledge, 2009.
[4] Economist. The Economist Explains: Why the Oil Price is falling, 2014.
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[5] Falola T, Genova A. The Politics of the Global Oil Industry. USA: Praeger Publishers,
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[6] Fattouh B, Sen A. OPEC Deal or No Deal? This is Not the Question. Oxford: The Oxford
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... This follows certain decisions and disputes taken at OPEC meetings and among other member states of OPEC, such as Saudi Arabia and Iran. It is a known political and legal fact that Nigeria's sovereignty is undermined due to this global oil integration and consequently, the Nigerian economy and its citizens suffer seriously (Musa, Yaacob & Omar, 2016). ...
... Consequently, this development shatters Nigeria's major revenue source as a state and renders it weak and powerless, as it lacks the influence needed to influence how decisions should be made to favor it and its citizens on the international oil scene, particularly in the corridors of OPEC power. Although, it was recently able to secure an exemption from production cuts by OPEC to help it raise the revenue necessary to meet its budgetary provisions (Musa, Yaacob, and Omar, 2016). ...
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  • A Agbaje
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Agbaje A, Alarape AI. Introductory Lectures on Research Methodology. Ibadan: University of Ibadan Press, 2006.
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The Politics of the Global Oil Industry
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Falola T, Genova A. The Politics of the Global Oil Industry. USA: Praeger Publishers, 2005.
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Fattouh B, Sen A. OPEC Deal or No Deal? This is Not the Question. Oxford: The Oxford Institute for Energy Studies (OIES), 2016.
  • M B Makarfi
Makarfi MB. African Politics Simplified. Kano: Maltage Prints and Publishing Ltd, 2014.
An Introduction to Petroleum Technology
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Speight JG. An Introduction to Petroleum Technology, Economics and Politics.USA: Scrivener Publishing LLC, 2011.