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Enhancing linkages of oil and gas industry in the Nigerian economy

Year: 2011
Author: Oyejide, T. Ademola
ISBN: 978-1-77011-239-1

MMCP Discussion Paper No. 8

The dearth of linkages between the oil sector and the other sectors of the Nigerian economy is a critical developmental problem. Thus, the primary objective of this study is to examine the extent of the linkages that the oil sector has created with the rest of the Nigerian economy. Based on an earlier study which identified areas where local servicing firms in Nigeria have technological and employment potentials, this study covers three of such areas; Fabrication and construction; well-construction and completion, and Control system and ICT.  We have used both primary and secondary data and the methods of analysis are both descriptive and inferential. Survey results revealed that the degree of local sourcing of inputs (by local suppliers or servicing firms) in the Control system and ICT sub-sector is less than what obtains in the other sub-sectors. It was also found that linkage between first-tier and second-tier suppliers is weak, though information exchange is relatively higher. In the opinion of the servicing firms, their linkage with the oil sector is weak, but fair in the opinion of the oil firms.. Most servicing firms are national, but the control system and ICT sub-sector has highest multinational presence. Multinational firms dominate the oil sector, followed by joint venture, and few are national. Only public power supply was rated grossly inadequate by the servicing firms, On the average, about half of the servicing firms have agreements with foreign companies and local research centres. Import tariff and taxes are found to be the most inconsistent. Firms are involved in some innovations to survive stiff competition.  Control system and ICT sub-sector with higher multinational presence suffer less liquidity problems, but liquidity falls over time. High price of imported raw materials is the largest raw materials problem that affects servicing firms.  Based on a regression analysis, it was discovered that the MMCP drivers, other drivers and their interactions affect linkages. In all, availability of skilled labour (skill), policies (tax) and NSI stand out as the major drivers. Based on the above findings, some recommendations are made to the various stakeholders to promote linkages.

Publication file: MMCP Paper 8.pdf