ABSTRACT
This study
presents the empirical analysis of the effects of oil exploitation on the
efficiency of artisanal fishing households in the Niger Delta region, Nigeria.
The selection of respondents was multi-staged and involved purposive sampling
as well as random sampling methods. A structured questionnaire and interview
schedule were used to elicit information from a randomly selected sample of 160
artisanal households from Delta and Bayelsa States, Nigeria. Descriptive
statistics, stochastic frontier production and cost function models,
inefficiency effects model and multiple regression analysis were used in
analyzing the data. Among the major findings were that 84% of the respondents
were male-headed households. Fifty percent were between 41-50 years. Sixty
three percent were illiterates while 87% were married. The average household
size was 7 persons. About 49% of the respondents had fishing experience of
above 16 years with a mean experience of approximately 15 years. The average
annual income per household was N96, 386.00. About 85%, 6%, 6% and 4% used
different fishing gears such as nets, trap, longline and hooks, and fence
fishing, respectively. The mean technical efficiency was 73%. The Cobb-Douglas
stochastic frontier model showed that labour, quantity of bait used and capital
inputs had positive signs and were highly
significant at 1% level of probability. Age, access to credit and gender
had significant inverse relationship with technical inefficiency while fishing
distance, membership of co-operative society, fishing experience, number of
trips and oil spill had significant positive relationship with technical
inefficiency. Model showed that wage
rate, price of baits and output adjusted for statistical noise had direct
relationship with the total cost of production and were significant at 1% level
of probability. The mean economic efficiency was 68%. The factors influencing
economic efficiency showed that Age and household size had a negative
relationship with economic inefficiency while access to credit, membership of
co-operative society, number of trips and oil spill had significant positive
relationship with economic inefficiency. Ninety seven percent of the households
confirmed that oil exploitation activities had serious effect on their socio-economic
life. Variables such as fishing
equipment, non-fishing income and household size were significant at 1%,
fishing experience was significant at 5% while micro-credit and compensation
received were significant at 10% probability levels. The overall regression
result was statistically significant at 5% level of probability as 86% of the
total variation was explained by the socio-economic variables. Therefore, the
study calls for policies that could reduce the level of oil pollution and
increase their technical and economic efficiency.
TABLE
OF CONTENTS
Title page ……………………………………………………………………………………………………
i
Certification…………………………………………………………………………………………………
ii
Dedication…………………………………………………………………………………………………..
iii
Acknowledgement………………………………………………………………………………………..
iv
Abstract……………………………………………………………………………………………………… v
Table of
contents…………………………………………………………………………………………. vi
List of tables…………………………………………………………………… ix
List of figures…………………………………………………………………… x
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
……………………………………………………………………….. 1
1.2 Problem
Statement………………………………………………………………………………….. 8
1.3 Objectives of the
Study…………………………………………………………………………… 11
1.4 Research
Hypothesis……………………………………………………………………………….. 11
1.5 Justification of the
Study………………………………………………………………………… 12
1.6 Limitations……………………………………………………………… ……… 13
CHAPTER TWO
REVIEW
OF RELATED LITERATURE
2.1
Crude Oil Exploitation and Nigerian Economy……………………… 14
2.2
Degradation due to Oil Exploration and Production in Nigeria….14
2.3
Effects of Crude Oil Exploitation on the Environment and
agriculture. 17
2.4
Production Efficiency…………………………………………… 18
2.4.1
Technical Efficiency…………………………………………………… 18
2.4.2
Allocative or price efficiency………………………………………….. 19
2.4.3
Economic Efficiency ………………………………………………….. 20
2.5
Efficiency Measurement Techniques ………………………. 21
Deterministic Frontiers ………………………………………………… 22
2.5.1.1 Non-parametric
programming………………………………. 22
2.5.1.2 Parametric
Programming…………………………………………………….. 23
2.5.1.3 Statistical
Approach…………………………………………………… 24
2.6
Review of Theory……………………………………………………… 25
2.7 Review of Empirical
Studies…………………………………………… 26
2.7.1
Production Function Analytical Model…………………… 26
2.7.2.
Stochastic Frontier Production Function…………………………. 28
Theoretical framework…………………………………………. 33
2.8.1
Theory of production…………………………………………………… 33
2.8.2
Theory of the firm……………………………………………………… 35
Analytical
Framework…………………………………………………. 37
2.9.1.
Production Function Analytical model……………………… 37
2.9.2
Stochastic Frontier Production Model……………………. 39
2.9.3
Inefficiency Frontier Model……………………………………………… 42
CHAPTER THREE
METHODOLOGY
3.1 The
Study Area……………………………………………………..
45
3.2
Sampling Procedure…………………………………………………………………………….. 45
3.3 Data
Collection…………………………………………………………………………………… 47
3.4
Analysis of Data……………………………………………………………
48
3.4.1 Model
Specification………………………………………………………… 49
3.4.1.1 Stochastic Frontier Production Function
Model……………… 49
3.4.1.2 Technical and Economic Inefficiency
Models……………………… 51
3.4.1.3 Multiple Regression
Analysis…………………………………………….. 52
3.5 Likert
Scale Analysis………………………………………………………… 54
3.6 Testing of Hypotheses………………………………………………………….
55
CHAPTER FOUR
RESULTS
AND DISCUSSION
4.1
Socio-Economic Characteristics of the Respondents………………… 56
4.2
Artisanal Households Fishing Systems……………………………………… 59
4.3 Technical and Economic Efficiencies of
Artisanal Fishing Households…… 60
4.3.1 Estimated Production
Function……………………………………………… 60
4.3.2 Sources of Technical
Efficiency…………………………………………… 61
4.3.3
Estimated…Cost Function…………………………………
……………. 63
4.3.4 Sources of Economic
Inefficiency……………………………………………65
4.4 Estimating the Technical Efficiencies of the
Artisanal Fishing Households……. 67
4.4.1
Technical Efficiency…..Estimates…………………………………………….. 67
4.4.2
Estimation of Economic Efficiency………………………………………… 68
4.4.3 Allocative Efficiency among Artisanal
Households in the Niger Delta Region, Nigeria………………………………………………..69
4.5
Environmental, Economic and Social Effects of Oil Exploitation………. 71
4.6 Effects of Relief Programmes on Household
Income and Socioeconomic Characteristics of Household Heads ………………………………76
4.7 Test
of Hypothesis…………………………………………………………..
78
CHAPTER FIVE
SUMMARY,
CONCLUSION AND RECOMMENDATIONS
5.1
Summary ………………………………………………………………. 80
5.2
Conclusion……………………………………………………………………
82
5.3
Recommendations…………………………………………………………… 83
5.4
Contribution to knowledge…………………………………………………. 84
5.5 Areas
for Future Research……………………………………………………
85
REFERENCES…………………………………………………………………. 86
APPENDIX I
………………………………………………………………. 96
LIST OF TABLES
Table
Page
Table 1.1: Domestic fish production in Nigeria by
sectors (metric tonnes) 4
Table 1.2: Oil Spill
Data………………………………………………………….. 16
Table 4.1: Distribution of the Respondents by
selected Socio-Economic Characteristics…………………………………………………………. 57
Table 4.2 Distribution of Respondents by Fishing
Systems……… 60
Table 4.3: Estimated Cobb-Douglas Stochastic
Frontier Production Function for
Artisanal fishing Households in the Niger Delta Region, Nigeria……… 61
Table 4.4
Estimated Stochastic Frontier Cost Function for Artisanal Households in
the Niger Delta Region, Nigeria… …..……………..65
Table 4.5
Frequency Distribution of Technical Efficiency among Artisanal
Households in the Niger Delta Region, Nigeria……………………….. 68
Table 4.6:
Frequency Distribution of Economic Efficiency Indices… 69
Table 4.7 Allocative Efficiency among the
Artisanal Households in the Niger Delta Region, Nigeria………………………………………………70
Table 4.8: Opinion of Respondents on
Environmental, Social and Economic Effects of Oil Exploitation……………………………… 72
Table 4.9: Regression Results of the Effect of
Relief Programs on Household Income and
Socioeconomic Characteristics of Household Heads in Oil Producing
Communities…………………………….. 76
Table 4.10: Generalized likelihood ratio test of
hypothesis for the parameters of The
stochastic frontier production for artisanal fishing households…… 79
LIST OF TABLES
Figure
Page
Figure 1: Effects of Oil Spillage on Artisanal
Fishing Households…… 34
CHAPTER
ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The search for oil in Nigeria started in 1906 when
the Nigerian Bitumen Corporation (NBC) drilled fourteen wells in Lagos area
(Pearson, 1970). This move was however
called off due to the outbreak of World War I.
Pearson (1970) stated that Shell made Nigeria’s first commercial oil
discovery in 1956 at Oloibiri located in Bayelsa State. This according to Pearson (1970) and Ozobia
(1998) led to the discovery of numerous other oil fields and subsequently to
the development of various terminals. Oil spillage and pollution are some of
the negative by-products of the petroleum industry and its effect on
socio-economic life of the artisanal households is a source of major
concern. The exploration and
exploitation have had impacts on the environment through frequent spills, pipe
explosions, pollution, sabotage, gas flaring and effluent emission. Other sources of oil pollution to the
environment include transportation, effluent water from oil refineries,
lubrication oils and other wastes in the form of sludge, bitumen, slops and oil
sand/sediment present in large amount within oil flow stations, storage
terminals and tanks (Ogri, 2001;
Nwilo & Badejo, 2005).
Oil production and consumption has probably
brought both the best and worst of modern civilization in Nigeria. It has contributed enormously to the
country’s economic growth and on the other hand, has left profound adverse
impact on the natural environment. Nigeria is currently the largest producer of
crude petroleum in Africa and sixth largest in the World. Estimates of
Nigeria’s oil reserve range from 16 billion to 22 billion barrels, mostly found
in small fields in the coastal areas of the Niger Delta (Chindah & Braide,
2000). Agriculture is however the major economic activity in the Niger Delta
region. The Federal Office of Statistics (F.O.S, 1995) stated that crop farming
and fishing account for about 90% of all forms of activities in the areas. However, the level of agricultural production
in the Niger Delta is somewhat low given the abundant resource endowment. In
the 1960s, Nigeria relied heavily on the agricultural sector for economic
development, contributing over 70% of the Gross Domestic Product (GDP).
Nevertheless, with the oil boom of the 1970s, the contribution of agricultural
sector fell drastically to the extent that the nation became an importer of
fish for instance.
Fish
production makes immense contribution to agricultural development as recognized
in Bada (2005); Bene and Heck (2005). In terms of Gross Domestic product (GDP),
the fishery sub-sector has recorded the fastest growth rate in agriculture. The
contribution of the fishery sub-sector to GDP at 2001 factor cost rose from
N76.76 billion to N162.61 billion in 2005 (CBN 2006).Fish is an important
source of protein to a large number of fishing households in Nigeria. It is
consumed in a variety of forms, including smoked, dried, fried or steamed. Fish
provides 40-50% of the dietary intake of animal protein of the average
household in Nigeria (FDF, 2007).
According to Adekoya and Miller (2004), fish and fish products
constitute more than 60% of the total protein intake in adults especially in
rural areas of Nigeria. Amiengheme (2005) enumerated the importance of fish in
households Nutrition as follows.
a. Fish
has a nutrient profile superior to all terrestrial meats (beef, pork and
chicken, etc) being an excellent source of high quality animal protein and
highly digestible energy;
b. Fish is
a good source of sulphur and essential amino acids such as lysine, leucine,
valine and arginine. It is therefore
suitable for supplementing diets of high carbohydrates contents,
c. Fish is also a good source of thiamine as
well as an extremely rich source of omega-3polyunsaturated fatty acids, fat
soluble vitamins (A, D and E) and water soluble vitamins (B complex) and
minerals (calcium, phosphorus, iron, iodine and selenium);
d. It has a high content of polyunsaturated (Omega
III) fatty acids, which are important in lowering blood cholesterol level and
high blood pressure. It is able to
mitigate or alleviate platelet (cholesterol) aggregation and various arteriosclerosis
conditions in adult populations;
Nigerians are large consumers of fish with demand
estimated at 1.4 million metric tonnes per annum. Moreover, the recent concern
is that the demand is out- stripping the supply as explained in Kapadia
(2002). The annual state of economic
report by sector published by Central Bank of Nigeria shows that, Nigeria
imports over US$ 200 million worth of frozen fish per annum to offset the gap
in the domestic demand in the country (CBN, 2006). Food and Agricultural
Organization (FAO) categorized fishing types as artisanal fishing, aquaculture
and industrial fishing (FAO, 2004). It is worthy of note that the artisanal
fishing households supply the greatest percentage of Nigeria’s annual fish
output as shown in Table 1.1. The table shows that the relative contribution of
artisanal households to domestic fish production ranged between 83.0% in 1985
to 81.7% in 2007 with an annual average of 86.1% (FDF, 2007).