Petroleum is Nigeria’s main export and a major source of government revenue, and its positive contributions to the economy include the following.
1. It serves as a major foreign exchange earner. Crude oil is Nigeria’s main export, so its sale abroad brings in most of the foreign currency the country uses to pay for imports.
2. It generates revenue for the country through royalties, licence fees, rents and petroleum profit tax paid by oil companies. These payments go into the Federation Account and are shared among the federal, state and local governments to fund their budgets.
3. It creates many employment opportunities. Oil companies, refineries, petrol stations and the firms that serve the industry employ engineers, technicians, drivers and many other workers.
4. It serves as a source of fuel and power for individuals, firms and government. Petrol, diesel, kerosene and cooking gas obtained from crude oil power vehicles, generators, factories and homes.
5. It has helped in the development of infrastructural facilities, especially in the oil-producing areas. Oil revenue and oil-company projects have funded roads, schools, hospitals and water supply, partly through the Niger Delta Development Commission (NDDC).
6. It has helped in the development of manpower through the award of scholarships to Nigerians. Oil companies and government petroleum agencies sponsor students in engineering and other fields, building the skilled labour the economy needs.
7. It has helped to attract foreign investment into the country, e.g. AGIP, ELF and Mobil. Foreign oil companies bring capital, equipment and technology into Nigeria to explore for, produce and sell oil.
8. It has helped to enhance economic growth in the country. Oil earnings raise national income and fund government spending, which in turn stimulates activity in other sectors of the economy.
How it is asked: typical essay forms are “Highlight five contributions of the petroleum industry to the Nigerian economy” and “Explain five benefits of the oil industry to the economy of Nigeria”.