ABSTRACT
This study examined the economic effects of crude oil
exploitation on cassava production in Delta State. Specifically, the effect of
crude oil exploitation on land productivity, farm income and cassava yield was
explored. The costs and returns, and hence profitability of cassava production
as influenced by oil pollution, the farming systems and socio-economic
characteristics of cassava farmers were critically examined. Copies of
well-structured questionnaires were used to collect primary data from a sample
of 204 small scale cassava farmers drawn using stratified and simple random
sampling techniques from the three (3) agro-ecological zones of Delta State
between October 2007 and February 2009. Data were analyzed using descriptive
statistics, costs and returns analyses, net margin and regression analyses. The
results revealed that total fixed cost per cassava farmer was N27,
624.49 while total variable cost per cassava farmer was N19,
108.68. Total output of cassava product (garri) before and after oil spill
incidents were 48,636kg and 40,549.22kg with an average yield of 328kg and
274kg respectively per cassava farmer. A net margin of N27, 846.43
and N19, 206.43 before and after oil spills incidents per cassava
farmer, indicating a 31% reduction in profit, was also revealed. Using the
Ordinary Least Square (OLS) multiple regression method to estimate the effect
of crude oil exploitation on the major dependent variables, the linear
functions had the best fit with adjusted R2 of 0.432 and
DW-statistic of 2.08 for land productivity, adjusted R2 of
0.953 and DW-statistic of 1.537 for farm income and adjusted R2 of
0.950 and DW-statistic of 2.015 for cassava yield. The results of the
regression analyses and all the hypotheses tested using the paired t-test
statistic at 1% and 5% probability levels, indicated that crude oil
exploitation had a negative and statistically significant effect on cassava
production in consonance with a prior expectations. Thus, it is recommended among
other measures that government at all levels should take pragmatic steps at
enacting and enforcing stringent environmental laws that will protect the oil
producing farming communities as well as guaranteeing the people a better means
of livelihood.
TABLE OF CONTENT
Title Page
i
Certification
ii
Dedication
iii
Acknowledgement
iv
Abstract
v
Table of
content
vi
CHAPTER ONE
INTRODUCTION
1.1 Background Information
1
1.2 Problem Statement
4
1.3 Objectives of the Study
7
1.4 Research
Hypotheses
7
1.5 Significance of the
Study
8
CHAPTER TWO
LITERATURE REVIEW
2.1 A Brief History of
Petroleum Development in
Nigeria 9
2.2 Oil Exploitation and
Environmental
Pollution
10
2.2.1 Meaning of Oil Exploitation and
Pollution
10
2.2.2 Sources and Types of Oil Industry
Pollution
12
2.3 Oil Spillage and
Pollution
14
2.3.1 Causes of Oil
Spillage
15
2.3.2 Frequency and Magnitude of Oil
Spills
15
2.4 Effects of Oil
Exploitation
18
2.4.1 Oil Exploitation and Land Availability
for Agriculture
19
2.4.2 Oil Exploitation and Soil Pollution
21
2.4.3 Effect of Oil Exploitation on Water/Aquatic
Lives
23
2.4.4 Oil Exploitation and Hydrocarbon
Pollution of
Air
25
2.4.5 Oil Exploitation and Rural/Urban
Migration 26
2.5 Oil Companies and
Corporate Social Responsibility
27
2.6 Farming System in
Cassava Production
31
2.7 Farm Resource
Use
32
2.8 Valuation of the
Environment: Empirical Measures
33
2.8.1 Non-Market Demand
Approaches
34
2.8.2 Market Demand
Approaches
34
2.9 Productivity
Implications of Environmental Pollution
36
2.10 Conflicts and Resource
Use
38
2.11 Theoretical
Framework
40
2.11.1 Integrated Environmental Impact Model for Oil and
Chemical Spills 40
2.11.2 Concept of Agricultural Resource Productivity
41
2.12 Analytical
Framework
42
2.12.1 Multiple Regression Analysis
42
2.12.2 Gross Margin/Profit Function Analyses
42
2.12.3 The Student’s “t”
Test
43
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Study
Area
45
3.2 Sampling
Procedure
46
3.3 Data Collection
47
3.4 Data
Analyses
48
3.4.1 Model Specification and Estimation
49
3.4.2 Gross Margin Analysis
51
3.4.3 Hypotheses
Testing
52
CHAPTER FOUR
RESULTS AND DISCUSSION
4.1 Farming Systems of
Cassava
Farmers
53
4.2 Socio-Economic
Characteristics of Cassava
Farmers
54
4.3 Profitability Analysis
of Cassava Farming
56
4.3.1 Cost Analysis in Cassava Farming
56
4.3.2 Returns in Cassava Production
59
4.3.3 Net Margin Analysis
61
4.4 Corporate Social
Responsibility of Oil Companies and Cassava Farming
Activities
63
4.5 Effects of Crude Oil
Exploitation on Land Productivity and Farm Income of Cassava
Farmers
66
4.6 Effect of Oil Pollution
on Cassava Farm Income 69
4.7 Effect of Crude Oil
Pollution on Cassava
Yield
71
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of Findings
74
5.2 Conclusion
76
5.3 Recommendations
76
5.4 Contribution of
Knowledge
78
5.5 Suggestion for Further
Study
78
References
79
Appendix
94
LIST OF TABLES
PAGE
1.1 Nigeria Net Oil Revenue
(N million)
3
2.1 Oil spills in Nigeria
(1976-1996)
16
3.1 Communities Surveyed and
Sample
Sizes
47
4.1 Farming Systems of
Cassava
Farmers
53
4.2 Distribution of
Socio-Economic Characteristics of Cassava
Farmers
54
4.3 Average Fixed and
Variable Costs in Cassava Production per hectare
57
4.4 Total and Average Yield
of Garri per Cassava Farmer before and after Oil Spill
Incidents
59
4.5 Test for Difference in
Yield of Garri before and after Oil Spill
Incidents
60
4.6. Cost and Returns in Cassava
(Garri) Production per Cassava
Farmer 61
4.7 Depreciation of Fixed
Cost
Items
62
4.8 Test for Difference in
Net Margin (Profit) per Cassava Farmer
before and
after Oil Spill Incidents.
63
4.9 CSR: Responses of Male
Cassava Farmers.
64
4.10 CSR: Reponses of Female Cassava
Farmers.
64
4.11 Farmers’ Response as to whether CSR
of oil companies has improved their farming
activities
65
4.12 Regression Results on Factors
Affecting Land Productivity in Delta
State
67
4.14 Factors Affecting Cassava Yield in
Delta State
71
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND INFORMATION
One of the most discussed issues in Nigeria in recent time is
that of sustainable development. Sustainable development, according to the
Bruntland commission, is development that meets the needs of the present generation
without compromising the ability of future generations to meet their own needs
(World Commission, 1987).
Agriculture plays fundamental role in the development of any
economy. Thus, according to Uwakahet al, (1991), agriculture is the
bedrock of the economic development of most developing nations. Edordu, (1986)
put it succinctly as follows: “experience has shown that no modern developed
country around the world achieved rapid industrialization without having
previously or simultaneously attained a marked increase in agricultural
production”. The contribution of agriculture to development, most especially in
the developing countries includes provision of food supplies, employment,
capital formation, release of labour for industrial development and fibre needs
of industries (Okorie and Eboh, 1999; Njoku, 2000; FAMRD, 2002). This implies
that agriculture is very crucial to the social and economic development of
Nigeria.
Agriculture is a vital business enterprise having various
components. One of these components that is productive in nature is crop
production-a component that dominates largely the Nigerian agricultural scene.
It is noteworthy that agriculture in Nigeria is dominated by small scale
farmers who are responsible for about 90 percent of the total production
(Olatunbode, 1990). The small holder farmers usually have farm sizes ranging
between 1-4 hectares and cultivate mainly staple food crops (Obinne and Mundi,
1999).
In recognition of the importance of crop production in the
Nigerian economy, successive governments in Nigeria have undertaken various
policy measures to revitalize the agricultural sector. However, none of these
measures has yielded adequate fruitful result. This is an evidence of the fact
that the bulk of Nigeria’s foreign currency earning presently comes from crude
oil and gas. NNPC, (2004) reports that the national budget depends heavily on
the revenue expectation from oil and gas and this will remain for a while.
Thus, the dominant role of crude oil has pushed agriculture, the traditional
mainstay of the economy from the early fifties and sixties, to the background.
According to Onwudiwe, (2003), there are eighteen oil companies
operating currently in Nigeria. These companies operate over 159 oil fields and
produce from over 1,481 oil wells. Of this figure, the Shell Petroleum
Development Company (SPDC), controls about half (83 oil fields and 748 oil
wells). All of these are almost exclusively in the Niger Delta region.
Oil production in Nigeria has come a long way from the early
days of the 1950s. Today, of Africa’s proven crude oil reserves of some 66
billion barrels, Nigeria accounts for 25 billion barrels, more than 35 percent
of the total. Therefore, the significance of oil in Nigeria’s political economy
has grown considerably. From accounting for one percent of Nigeria’s export
earning in 1958, it now accounts for up to 98 percent of export earnings; and
from accounting for some 70 percent of total government revenue in 1970, it now
accounts for between 80 and 90 percent. This phenomenal rise is attributable to
crude oil output, which grew from 1.88 million barrels in 1958 to 822.75
million in 1974 and to 547.08 million in 1985 (NNPC, 1985). This figure rose
significantly to 751.8 million barrels as at 1996 (CBN, 1996).
According to CBN, (2000) Nigeria’s crude oil production,
including condensates, rose by 11.2 percent over the level in the preceding
year (1999) to 2.18 million barrels per day (mbd). Consequently, net oil
revenue rose sharply from N204, 848m in 1996 to N857, 582m
in 2000 as shown in the following table.
Table 1.1: Nigeria Net Oil Revenue (Nmillion)
Fiscal Year
|
Oil Revenue (Net) (N million)
|
1996
|
204,848.0
|
1997
|
218,727.3
|
1998
|
166,333.1
|
1999 1/
|
336, 131.6
|
2000 2/
|
857,582.2
|
Sources: Federal Ministry of
Finance Central Bank of Nigeria. In CBN Annual and Statement of Accounts for
the year ended 31st December, 2000 (P. 102).
Extracted from Federation and Account Operation
1/Revised
2/Provisional
There is therefore, no doubt that the Nigerian oil industry has
affected the country in a variety of ways. On one hand, it has fashioned a
remarkable economic landscape for the country. However, on the negative side,
petroleum exploration and production also have adverse effects on fishing and
farming which are the traditional means of livelihood of the people of the oil
producing communities in the Niger Delta region of Nigeria, specifically Delta
State.
Eteng, (1997) asserts that “oil exploration and exploitation had
over the last four decades impacted disastrously on the socio-physical
environment of the Niger-Delta Oil-bearing communities, massively threatening
the subsistent peasant economy and the environment and hence the entire
livelihood and basic survival of the people”.
In a similar vein, Gbadegesin, (1997) averred that “oil
exploration and production in South Eastern Nigeria, has adversely affected
peasant agriculture, the basis of sustenance of millions of rural inhabitants
through a complex web of interaction of several negative environmental factors.
Such factors include contamination of streams and rivers, the problem of oil
spill, forest destruction and bio-diversity loss, the environmental effect of
gas flaring and effluent discharge and disposal”. Thus, if the oil industry is
considered in view of its enormous contribution to foreign exchange earnings,
it has achieved a remarkable success. On the other scale, when considered in
respect of its negative impact on the socio-economic life and the environment
of the immediate oil bearing local communities and their inhabitants, it has
left a balance sheet of ecological and socio-physical disaster. This rightly
provides a framework to carry out an economic assessment of the effects of
crude oil exploitation on small scale cassava production in Delta State of
Nigeria.