Time Series Analysis of Crude Oil Production and Sales in Nigeria.

(A Comprehensive Study of Nigerian National Petroleum

Corporation, NNPC from 2005 – 2022)

1.1 INTRODUCTION
The search of oil in Nigeria started as early as 1937, but the discovery was not until 1956. The
sole of petroleum products began in December 1957, managed by a consortium of Royal Dutch
Shell and British Petroleum BP Now known as Shell Petroleum Development Company SPDC.
G.A, Aga (1993) stated that Nigeria was the second oil producing nation in Africa after Libya
and sixth in the world. In May 1971, the Nigeria National Oil Company was established under
the company and Allied matter Act of 1958 as applicable then. NNOC was the government
Agency Mandated by law to engage in all phases of oil production and sales, NNOC was later
in 1977 amalgamated into a full flex ministry of petroleum to form the Nigeria National
Petroleum Corporation (NNPC), which is in partnership with several oil company from different
countries operating in Nigeria. Before October 1965, Nigeria Crude Oil was refined overseas
and all the processed oil needs were imported. The first refinery plant came into operation in
1965 located at Alesa Eleme near Port-Harcourt. Later Warri and Kaduna Petro-chemical
refineries were established in 1978 and 1980 respectively. Similarly, Pipeline and Products
Marketing Company Ltd (PPMC) Enugu Depot was commissioned in 25 August 1975 by the
then military Governor of the old Anambra State; Colonel D.S. Abubakar. The last was the
second refinery in Port-Harcourt. It is however worthy to note that NNPC has several
subsidiary company e.g. Pipeline and Product Marketing Company (PPMC).
The oil industry holds a paramount position in the economic landscape of Nigeria, playing a
pivotal role in shaping the nation's growth and development. Nigeria, often referred to as the
"Giant of Africa," has emerged as a significant player in the global oil market. The exploration,
extraction, and export of crude oil have become integral components of the nation's economic
identity.
Nigeria's oil industry can be traced back to the 1950s when commercial exploration began. The
discovery of vast oil reserves, particularly in the Niger Delta region, propelled Nigeria into the
spotlight as a major oil-producing nation. Since then, the industry has undergone dynamic
changes, marked by technological advancements, geopolitical influences, and economic
fluctuations.
The Nigerian National Petroleum Corporation (NNPC), established in 1977, serves as the
cornerstone of the country's oil and gas sector. As the state-owned oil company, NNPC holds a
central role in coordinating and overseeing various aspects of the oil industry, including
exploration, production, refining, and marketing.
1.1.1 IMPORTANCE OF CRUDE OIL TO THE NIGERIAN ECONOMY
Crude oil holds a position of paramount importance in the Nigerian economy, influencing
various facets of the nation's financial and social fabric. At the core of its significance is the role
it plays as the primary revenue source for the country. The majority of Nigeria's foreign
exchange earnings are derived from the export of crude oil, making it a pivotal factor in
determining the nation's fiscal stability. This revenue forms a substantial portion of the
government's budget, providing the financial means to fund critical public services,
infrastructure projects, and social programs that contribute to the well-being of the population.
Beyond its fiscal impact, the oil sector serves as a major driver of employment in Nigeria. From
direct jobs in exploration, production, and refining to indirect employment in associated
industries and services, the sector contributes significantly to job creation, thereby supporting
livelihoods for a substantial segment of the population. Additionally, the revenue generated
from crude oil exports contributes significantly to Nigeria's foreign exchange reserves, a crucial
asset for maintaining currency stability, facilitating international trade, and servicing external
debt.
The importance of crude oil is further underscored by its role in industrial and economic
development. The revenue generated is instrumental in funding key projects that contribute to
the nation's growth, including investments in infrastructure such as roads, bridges, and power
plants. Furthermore, the positive trade balance facilitated by revenue from crude oil exports
helps offset import costs, contributing to a favorable trade position for the country.
The oil and gas sector's attractiveness for investments, both domestic and foreign, has a direct
impact on economic growth. Investments in exploration, production, and related services create
opportunities for businesses and stimulate economic activity. Moreover, the stability of the
government, supported by revenue from crude oil, enables the provision of social programs and
public services, fostering an environment conducive to sustained economic development.
However, it's essential to recognize that while the importance of crude oil to the Nigerian
economy is undeniable, there are challenges associated with over-reliance on this finite
resource. Vulnerability to oil price volatility, exposure to global market dynamics, and the
potential neglect of other economic sectors highlight the need for ongoing efforts to diversify
the economy and ensure a more resilient and sustainable future.
1.1.2. ROLES OF NIGERIAN PETROLEUM CORPORATION TO THE NIGERIAN
ECONOMY
The Nigerian National Petroleum Corporation (NNPC) holds a central and multifaceted role
within the country's oil sector, overseeing various critical aspects of the oil and gas value chain.
In the upstream domain, NNPC engages in exploration activities, collaborating with
international oil companies to discover and extract hydrocarbons. Simultaneously, the
corporation operates and manages the nation's refineries and petrochemical plants, playing a key
role in the downstream sector by ensuring efficient refining processes and the production of
petroleum products for both domestic consumption and export.
NNPC's influence extends to the marketing and distribution of petroleum products, overseeing
the supply chain to guarantee a reliable provision of oil and gas products within Nigeria and on
the international stage. The corporation also functions as a regulatory body, ensuring that
industry operators adhere to established regulations and standards. Through joint ventures with
international oil companies, NNPC harnesses external expertise and resources to optimize
exploration, production, and the development of oil and gas assets.
Contributing significantly to government revenue, NNPC plays a crucial role in funding national
budgets through the payment of royalties, taxes, and dividends. The corporation is instrumental
in implementing government policies related to the oil and gas sector, aligning its strategies with
national development objectives. Engaging with a diverse range of stakeholders, including local
communities, government agencies, and international partners, NNPC addresses social and
environmental concerns, fosters collaboration, and promotes sustainable practices.
Additionally, NNPC invests in and oversees the development of vital infrastructure such as
pipelines, storage facilities, and transportation networks, facilitating the efficient movement of
oil and gas products. The corporation is actively involved in research and development
initiatives to enhance technological capabilities within the oil and gas sector, striving to improve
exploration techniques, enhance production efficiency, and adopt environmentally sustainable
practices.
In summary, NNPC's integral role in the Nigerian oil sector spans exploration, production,
refining, regulatory oversight, revenue generation, infrastructure development, and research
initiatives. As a key player, NNPC contributes significantly to the nation's economic
development and plays a crucial role in shaping the trajectory of the oil and gas industry in
Nigeria.
1.2 NIGERIAN NATIONAL PETROLEUM CORPORATION (ITS ROLE IN
PRODUCTION AND SALE OF PETROLEUM PRODUCTS)
The NNPC‟s role in Oil Industry is so much that it cannot handled it alone. This is the reason
for the establishment of subsidiary company like pipeline and Products Marketing Company Ltd
(PPMC).
The Nigerian National Petroleum Corporation manages the affairs of the oil industry in Nigeria,
while the PPMC under the corporation is in charge of sales of petroleum products.
Government policy on oil matter such sales is been conveyed by the Petroleum Products Price
Regulatory Agency (PPPRA) currently headed by Alhaji Gbalamosi. NNPC therefore, works in
conjunction with PPPRA to implement government policy such as prices of petroleum products.
Nigerian National Petroleum Corporation carries out its function as such in both local and
international.
The significance of crude oil production and sales cannot be overstated in the context of
Nigeria's economy. The revenue generated from oil exports constitutes a substantial portion of
the national income, forming the backbone of the country's fiscal structure. The economic
vitality of Nigeria is intricately linked to the fortunes of its oil industry.
Crude oil exports contribute a substantial share to the country's foreign exchange earnings,
enabling Nigeria to engage in international trade and maintain economic stability. The revenue
derived from oil sales plays a crucial role in funding public infrastructure, social programs, and
governmental operations. Additionally, it influences the nation's balance of payments, impacting
its ability to meet external obligations and invest in strategic development initiatives.
However, this economic dependence on oil also exposes Nigeria to the volatility of global oil
prices, geopolitical tensions, and market fluctuations. As the nation grapples with the challenges
and opportunities presented by its oil industry, a nuanced understanding of the dynamics
surrounding crude oil production and sales, particularly under the purview of the NNPC,
becomes imperative.
This study aims to delve into the intricate workings of Nigeria's oil industry, focusing on the
time series analysis of crude oil production and sales with a specific emphasis on the role played
by the Nigerian National Petroleum Corporation. Through a comprehensive exploration, this
research seeks to unravel patterns, trends, and insights that can contribute to a nuanced
understanding of the interplay between the oil sector and the broader Nigerian economy.
1.3 STATEMENT OF PROBLEM
In light of the substantial economic advantages associated with crude oil, the Nigerian oil
industry is confronted with a myriad of challenges and intricacies. These challenges encompass
the volatile nature of global oil prices, concerns pertaining to transparency and governance,
limitations imposed by inadequate infrastructure, and environmental considerations.
Furthermore, a meticulous examination is imperative to gauge the effectiveness of the Nigerian
National Petroleum Corporation (NNPC) in orchestrating the management and optimization of
the nation's oil resources.
This research endeavors to meticulously explore and address the multifaceted challenges
encountered by the Nigerian oil industry. By conducting an in-depth analysis, the study aspires to
offer nuanced insights into the intricate factors that influence the dynamics of crude oil
production and sales in Nigeria. The primary emphasis will be on scrutinizing the operational
aspects of the NNPC, aiming to decipher its role and efficacy in navigating the complexities of
the oil sector. Through a comprehensive examination of these facets, the research seeks to
contribute valuable perspectives that can inform strategies for enhancing the industry's resilience,
sustainability, and overall performance.
1.4 OBJECTIVES OF STUDY
1. To analyze the historical trends in crude oil production and sales in Nigeria from 2005 to
2022.
2. To assess the role and performance of the NNPC in managing and overseeing the oil sector.
3. To identify key factors influencing fluctuations in crude oil production and sales.
4. To provide recommendations for improving the efficiency and sustainability of the Nigerian
oil industry.
1.5 SIGNIFICANCE OF THE STUDY
The importance of this study is underscored by its capacity to provide invaluable insights to a
diverse array of stakeholders, including the Nigerian government, policymakers, industry
participants, and the academic community. Through a more profound comprehension of the
intricacies surrounding crude oil production and sales, this research holds the potential to serve
as a foundational resource for the formulation of well-informed policies. Moreover, it aims to
contribute to the refinement of governance practices within the Nigerian oil sector.

By delving into the dynamics of crude oil production and sales, the study aspires to offer
strategic guidance for policymakers, empowering them to make decisions that align with the
nation's economic goals and environmental considerations. The findings also stand to benefit
industry stakeholders by providing a nuanced understanding of market trends, thereby aiding in
the development of adaptive strategies. Furthermore, the academic community can leverage the
insights generated by this research to advance scholarly discourse and contribute to the broader
knowledge base related to oil industry dynamics.

Ultimately, the significance of this study extends beyond its immediate context, as it holds the
potential to foster positive transformations in the oil sector. The knowledge generated is
anticipated to catalyze improvements in policy frameworks, governance structures, and
operational practices, thereby fostering a more sustainable, resilient, and efficient oil industry in
Nigeria.

1.6 SCOPE OF STUDY

The temporal and geographical parameters of this study are meticulously defined, centering on
the period spanning from 2005 to 2022 and encompassing a national scope that includes the
entirety of Nigeria. This deliberate timeframe of two decades allows for a comprehensive
examination of the trends, patterns, and developments in crude oil production and sales within a
substantial historical context.
The national scope ensures a holistic approach, considering the diverse regions and facets that
collectively constitute the Nigerian oil landscape. This inclusivity enables a nuanced
understanding of the variations and nuances that may exist across different parts of the country.
To facilitate a rigorous analysis, this study will predominantly draw upon data sourced from
reputable outlets, prominently including reports from the Nigerian National Petroleum
Corporation (NNPC). The NNPC, as a key player in the Nigerian oil sector, provides a wealth
of information crucial for understanding the operational dynamics and trends. In addition to
NNPC reports, the study will leverage data from government publications and other pertinent
sources, ensuring a robust and multifaceted dataset for analysis.
By employing a judicious combination of data sources, this research aims to construct a
comprehensive narrative that not only captures the quantitative aspects of crude oil production
and sales but also considers the broader contextual factors that may influence the industry
dynamics. This approach is designed to enhance the reliability and depth of the findings,
offering stakeholders and researchers a thorough understanding of the intricacies shaping the
Nigerian oil sector over the specified period.
1.7 LIMITATIONS OF STUDY
Despite the utmost commitment to ensuring the precision and dependability of the data, it is
imperative to acknowledge the presence of certain limitations that may influence the study's
outcomes. These limitations encompass factors such as data availability, potential biases in
reporting, and external influences on the oil market.
One notable limitation involves the availability and accessibility of data. Despite efforts to
obtain comprehensive and up-to-date information, certain data points may be restricted,
incomplete, or subject to reporting delays. These constraints could potentially impact the
thoroughness of the analysis, and the study will transparently communicate any data-related
limitations encountered during the research process.
Another facet to consider is the potential for biases in reporting. Various stakeholders, including
governmental bodies, industry entities, and research institutions, may present data with inherent
biases or unintentional inaccuracies. This could arise due to reporting practices, data collection
methodologies, or discrepancies in the interpretation of industry metrics. Awareness of these
potential biases is essential for interpreting findings within the context of the data's limitations.
External factors influencing the oil market pose an additional challenge. The global oil market is
inherently volatile and subject to geopolitical, economic, and environmental influences that are
beyond the control of the study. Fluctuations in oil prices, geopolitical events, and unforeseen
market dynamics may impact the study's ability to predict or explain certain trends.
Acknowledging these limitations is fundamental for maintaining transparency and ensuring a
balanced interpretation of the study's findings. By openly addressing these challenges, the
research aims to foster a critical mindset among readers and encourage a nuanced understanding
of the complexities inherent in the analysis of crude oil production and sales in Nigeria during
the specified period.