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Assignment on Natural Resource Economics (ECN 315)

BERNARD OKPE

University of Abuja

Question: Summaries the course outline on Natural Resource Economics (ECN 315)

Brief Review of the Natural Resources Economics

(A) MEANING OF NATURAL RESOURCES ECONOMICS

1. Introduction

2. Meaning of Natural Resources Economics

3. Brief Background into Natural Resource Economics

4. Relevance of the study of Natural Resources Economics

(B) SCHOOLS OF THOUGHT IN NATURAL RESOURCES ECONOMICS

1. Optimistic School

2. Pessimistic School

(C) PROPERTY RIGHTS, EXTYERNALITIES AND INDIVISIBILITIES

(D) POLICY MEASURES ON NATURAL RESOURCES ENDOWMENT IN NIGERIA

1. Water Resources in Nigeria

2. Forestry in Nigeria

3. Petroleum Resources in Nigeria

4. Fishery in Nigeria

5. Solid Minerals in Nigeria

(E) ENVIRONNEMENTAL MANAGEMENT AND ISSUES OF NATURAL RESOURCES

1. Pollution

2. Externalities

3. Desertification

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(A) MEANING OF NATURAL RESOURCES ECONOMICS

1. INTRODUCTION:

Natural resources are the endowment of nature. Example includes metals, fish, timber and oil. While

natural resources are an important factor of production, they are typically quite different from other

essential factors of production such as labour. The amount of labour that will be available next year will

be little affected by whether or not it is used today. However, this not true of natural resources such as

iron ore and timber, where the amount available next year does depend on how much is used today. For

this reason, questions of conversation are important, these are:

Are we using the resources too rapidly?

Do the expanding industrial requirements of a growing economy along with our finite and shrinking

resources supplies put us on a collision cause that will eventually bring about collapsed of the

economy?

What can Economics tell us about when and how the government should intervene to lilt our use of

natural resources?

2. MEANING OF NATURAL RESOURCES ECONOMICS:

Natural resources economics deals with the supply, demand, all of the earth natural resources. One

main objective of natural resource economics is to better understand then role of natural resources in

the economy in order to develop more sustainable method of managing resources to ensure their

availability to future generations.

Resources economist study interactions between economic and natural systems, with the goal of

developing sustainable and efficient economy.

Natural resources economics is the study of natural resources with respect to conservation,

exploration, exploitation and the economic benefits or relevance

3. BRIEF BACKGROUND INTO NATURAL RESOURCE ECONOMICS:

The perpetual resource concept is a complex one because the concept of resource is complex and changes

with the advent of new technology (usually more efficient recovery), new needs, and to a lesser degree

with new economics (e.g. changes in prices of the material, changes in energy costs, etc.). On the one

hand, a material (and its resources) can enter a time of shortage and become a strategic and critical

material (an immediate exhaustibility crisis), but on the other hand a material can go out of use, its

resource can proceed to being perpetual if it was not before, and then the resource can become a pale

resource when the material goes almost completely out of use (e.g. resources of arrowhead-grade flint).

Some of the complexities influencing resources of a material include the extent of recyclability, the

availability of suitable substitutes for the material in its end-use products, plus some other less important

factors.

Nigeria’s economy is struggling to leverage the country’s vast wealth in fossil fuels in order to displace

the crushing poverty that affects about 57 percent of its population. Economists refer to the coexistence of

vast wealth in natural resources and extreme personal poverty in developing countries like Nigeria as the

“resource curse”. Nigeria’s exports of oil and natural gas—at a time of peak prices—have enabled the

country to post merchandise trade and current account surpluses in recent years. Reportedly, 80 percent of

Nigeria’s energy revenues flow to the government, 16 percent covers operational costs, and the remaining

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4 percent go to investors. However, the World Bank has estimated that as a result of corruption 80 percent

of energy revenues benefit only 1 percent of the population. In 2005, Nigeria achieved a milestone

agreement with the Paris Club of lending nations to eliminate all of its bilateral external debt. Under the

agreement, the lenders will forgive most of the debt, and Nigeria will pay off the remainder with a portion

of its energy revenues. Outside of the energy sector, Nigeria’s economy is highly inefficient. Moreover,

human capital is underdeveloped—Nigeria ranked 151 out of 177 countries in the United Nations

Development Index in 2004—and non-energy-related infrastructure is inadequate.

4. RELEVANCE OF THE STUDY OF NATURAL RESOURCES ECONOMICS

The central concern of economics is the allocation of scarce resources. It does not require much

reflection to realize that our natural and environmental resources are scarce. Minerals, fossil fuels, fish,

forests, clean air and water, the diversity of species, and perhaps even a stable global climate are clearly

not available in unlimited supply. Perhaps economics has something useful to say about the management

of our environment and natural resources. This is indeed the case. Economics has three fundamental

messages for natural resource utilization and environmental protection.

First, economics makes a basic and persuasive case for the need for public intervention in the

form of natural resource and environmental regulation: Economic analysis makes a compelling

case for the proposition that an unfettered market system will often inefficiently exploit natural

resources and generate excessive pollution. The incentives provided by a market system for natural

and environmental resource exploitation can explain much of the degradation that we see in the world

around us. Thus, economics makes a basic and persuasive case for the need for public intervention in

the form of natural resource and environmental regulation.

Second, guidance for the setting of standards for natural resource usage and environmental

quality: economics provides some guidance for the setting of standards for natural resource usage

and environmental quality. For example, economics provides one approach to answering the

question, “how clean should the environment be?” Often this approach is simply an application of the

more general economic principle that any activity should be extended to the point where marginal

benefits equal marginal costs. For some resources (e.g., fishery stocks), this principle must be

amended in present value terms to account for the intertemporal (and biological) connection between

actions taken today (e.g., harvesting) and the level of economic opportunities tomorrow.

Third, economic analysis suggests how we can structure policy measures so as to realize our

natural resource and environmental goals in the most effective and least cost ways: once we

have determined the standards for resource usage or environmental quality, economics has some

important things to say about the design of policy instruments to achieve these standards. In

particular, economic analysis suggests how we can structure policy measures so as to realize our

natural resource and environmental goals in the most effective and least cost ways. The purpose of

this course is to apply microeconomic analysis to a variety of important natural and environmental

resources in order to more deeply understand the causes of resource and environmental degradation

and evaluate the potential success of policy measures designed to protect and improve these critical

resources.

(B) SCHOOL OF THOUGH ON RESOURCES CONSERVATION

There are two opposing schools of thought on natural resources conservation. There are:

a. The Optimistic School: They are argued that there is no limit to natural resources endowments, and

as such, man can continue to use and reuse natural resources.

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b. The Pessimistic School: The pessimistic school advocates restraint in the use of natural resources to

avoid excessive use and abuse of natural resources. They are of the view that natural resources should

be conversed to ensure the preservation of its value and availability for use of future generations.

(C) PROPERTY RIGHTS, EXTYERNALITIES AND INDIVISIBILITIES

Property Right

A property right is the exclusive authority to determine how a resource is used, whether that resource is

owned by government or by individuals. Economist such as Armen Alchian, Yoram Barzel, Ronald

Coase, Steven N. S. Cheung, Harold Demsetz, Walter Block, and Hernando De Soto Polar have all

worked on the issue of property right. All economic goods have a property rights attribute. This attribute

has four broad components

Unlike most private goods characterized by attributes exhaustion, rivalry, divisibility, excludability and

individual property right; Most natural resources are characterized by common property rights with

inherent characteristic of non-excludability (anyone can use it), and non-rivalrous (no one has an

exclusive right over it). As such, natural resources could be excessively used and inefficiently allocated.

A very good example of common property natural resources is a fish lake. Anyone any one can catch an

eat fish from the lake but no one has exclusive property right over it. There is a common property

resource where there is a common property for all fishermen. Because the lake is a common property

resource where there is no mechanism to restrict entry to catch fish, the lake is often overexploited. This

is called the tragedy of common which leads to the elimination of social gains due to overuse of common

property.

Due to the inefficiencies associated with common property resources, property rights are usually given to

private firms and individuals with a view to the efficient and effective use of natural resources.

1. The right to earn income from the good

2. The right to transfer the good to others

3. The right to enforcement of property rights

The concept of property rights as used by economists and legal scholars are related but distinct. The

distinction is largely seen in the economists' focus on the ability of an individual or collective to control

the use of the good. For example, a thief who has stolen a good would not be considered to have legal (de

jure) property right to the good, but would be considered to have economic (de facto) property right to the

good.

Property-rights regime

Property rights to a good must be defined, their use must be monitored, and possession of rights must be

enforced. The costs of defining, monitoring, and enforcing property rights are termed transaction costs.

Depending on the level of transaction costs, various forms of property rights institutions will develop.

Each institutional form can be described by the distribution of rights. The following list is ordered from

no property rights defined to all property rights being held by individuals.

1. Open access (res nullius)

2. State property

3. Common property

4. Private property

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Open access (res nullius): Open-access property is property that is not owned by anyone. It is non-

excludable (no one can exclude anyone else from using it) and non-rival (one person's use of it does not

prevent others from simultaneously using it). Open-access property is not managed by anyone, and access

to it is not controlled. There is no constraint on anyone using open-access property (excluding people is

either impossible or prohibitively costly). The tragedy of the commons is a misnomer. It should really be

called the tragedy of open access. 'Open-access property may exist because ownership has never been

established, because the state has legislated it, or because no effective controls are in place, or feasible,

i.e., the cost of exclusion outweighs the benefits. The state can sometimes effectively convert open access

property into private, common or public property by legislating to define rights and enforce them'.

Examples of open-access property are the atmosphere or ocean fisheries.

State property: State property (also known as public property) is property that is owned by all, but its

access and use is controlled by the state. An example is a national park.

Common property: Common property is property that is owned by a group of individuals. Access, use,

and exclusion are controlled by the joint owners. True commons can break down, but, unlike open-access

property, common property owners have greater ability to manage conflicts through shared benefits and

enforcement.

Private property: Private property is both excludable and rival. Private property access, use, exclusion

and management are controlled by the private owner.

Property rights and the environment

Implicit or explicit property rights can be created by regulating the environment, either through

prescriptive command and control approaches (e.g. limits on input/output/discharge quantities, specified

processes/equipment, audits) or by more flexible market-based instruments (e.g. taxes, transferable

permits or quotas).It has been proposed by Ronald Coase (Jnl of Law and Economics, 5 October 1960)

that clearly defining and assigning property rights would resolve environmental problems by internalizing

externalities and relying on incentives of private owners to conserve resources for the future. However,

this assumes that it is possible to internalize all environmental benefits, that owners will have perfect

information, that scale economies are manageable, transaction costs are bearable, and that legal

frameworks operate efficiently. Strengthening markets and creating and strengthening property rights

could reduce, but not eliminate, such problems.

Externalities

In economics, an externality (or transaction spillover) is a cost or benefit, not transmitted through prices,

incurred by a party who did not agree to the action causing the cost or benefit. A benefit in this case is

called a positive externality or external benefit, while a cost is called a negative externality or external

cost.

Externalities refer to costs of benefits arising from any activity which does not accrue to the person or

organization carrying on the activity. Externalities are market perfections where market offers no price for

service or disservice. Externalities are also known as external economies and diseconomies.

External economies or benefits refer to effects of activities which are pleasant or profitable for other

people who cannot be charged for them. For example, cleaning of the environment to prevent the over

break of diseases.

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External economies diseconomies or costs are damages to the environment or other people which does

not have to be paid for by those carrying on the activity. For example: water pollution, and noise.

In these cases in a competitive market, prices do not reflect the full costs or benefits of producing or

consuming a product or service, producers and consumers may either not bear all of the costs or not reap

all of the benefits of the economic activity, and too much or too little of the good will be produced or

consumed in terms of overall costs and benefits to society. For example, manufacturing that cause’s air

pollution imposes costs on the whole society, while fire-proofing a home improves the fire safety of

neighbors. If there exist external costs such as pollution, the good will be overproduced by a competitive

market, as the producer does not take into account the external costs when producing the good. If there

are external benefits, such as in areas of education or public safety, too little of the good would be

produced by private markets as producers and buyers do not take into account the external benefits to

others. Here, overall cost and benefit to society is defined as the sum of the economic benefits and costs

for all parties involved.

Figure-1 External costs and benefits

Indivisibility

The problem of indivisibility arises in the production of those goods and services that are used jointly by

more than one person. An example is the use of a road by a number of persons in a particular locality. The

problem of indivisibility with regards to natural resources is closely related to the problem of common

property right.

External costs

The graph below shows the effects of a negative

externality. For example, the steel industry is assumed to

be selling in a competitive market – before pollution-

control laws were imposed and enforced (e.g.

under laissez-faire). The marginal private cost is less

than the marginal social or public cost by the amount of

the external cost, i.e., the cost of air pollution and water

pollution. This is represented by the vertical distance

between the two supply curves. It is assumed that there

are no external benefits, so that social

benefit equals individual benefit.

Figure-2 Demand curve with external costs

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If social costs are not accounted for price is too low to cover all costs and hence quantity produced is

unnecessarily high (because the producers of the good and their customers are essentially underpaying the

total, real factors of production.)

If the consumers only take into account their own private cost, they will end up at price Pp and

quantity Qp, instead of the more efficient price Ps and quantity Qs. These latter reflect the idea that the

marginal social benefit should equal the marginal social cost, that is that production should be

increased only as long as the marginal social benefit exceeds the marginal social cost. The result is that

a free market is inefficient since at the quantity Qp, the social benefit is less than the social cost, so society

as a whole would be better off if the goods between Qp and Qs had not been produced. The problem is

that people are buying and consuming too much steel.

This discussion implies that negative externalities (such as pollution) are more than merely an ethical

problem. The problem is one of the disjuncture between marginal private and social costs that is not

solved by the free market. It is a problem of societal communication and coordination to balance costs

and benefits. This also implies that pollution is not something solved by competitive markets.

Some collective solution is needed, such as a court system to allow parties affected by the pollution to be

compensated, government intervention banning or discouraging pollution, or economic incentives such

as green taxes.

External benefits

The graph below shows the effects of a positive or beneficial externality. For example, the industry

supplying smallpox vaccinations is assumed to be selling in a competitive market. The marginal private

benefit of getting the vaccination is less than the marginal social or public benefit by the amount of the

external benefit (for example, society as a whole is increasingly protected from smallpox by each

vaccination, including those who refuse to participate). This marginal external benefit of getting a

smallpox shot is represented by the vertical distance between the two demand curves. Assume there are

no external costs, so that social cost equals individual cost.

Supply curve with external benefits; when the market does not account for additional social

benefits of a good both the price for the good and the quantity

produced are lower than the market could bear.

If consumers only take into account their own private benefits

from getting vaccinations, the market will end up at price

Pp and quantity Qp as before, instead of the more efficient

price Ps and quantity Qs. These latter again reflect the idea

that the marginal social benefit should equal the marginal

social cost, i.e., that production should be increased as long as

the marginal social benefit exceeds the marginal social cost.

The result in an unfettered market is inefficient since at the

quantity Qp, the social benefit is greater than the societal cost,

so society as a whole would be better off if more goods had been

produced. The problem is that people are buying too few vaccinations.

The issue of external benefits is related to that of public goods, which are goods where it is difficult if not

impossible to exclude people from benefits. The production of a public good has beneficial externalities

for all, or almost all, of the public. As with external costs, there is a problem here of societal

communication and coordination to balance benefits and costs. This also implies that vaccination is not

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something solved by competitive markets. The government may have to step in with a collective solution,

such as subsidizing or legally requiring vaccine use. If the government does this, the good is called

a merit good.

(D) POLICY MEASURES ON NATURAL RESOURCES ENDOWMENT IN NIGERIA

The Nigerian state-run oil company, Nigerian National Petroleum Company, is reported to be insolvent.

Plagued by government mismanagement, corruption and cronyism, the NNPC has excess liabilities of at

least $5 billion and can’t afford its debts, in spite of Nigerian oil production being over two million

barrels per day. Oil makes up 95% of Nigeria’s export revenue and 65% of government revenue, and yet

in spite of this over-reliance the government continues to mismanage NNPC. The over-reliance on oil has

for decades prevented successive governments from implementing badly needed reforms to liberate the

domestic economy and to diversify the economy. Nigeria is currently ranked 125th in the world in terms

of economies in which to do business, five rankings worse than its 2009 ranking, according to the World

Bank Doing Business Report.

Nigeria, like the equally mismanaged Venezuela, proves that a bevy of natural resources is not an

automatic ticket to wealth and prosperity. Unless the rights to resources are well-defined and

governments respect the contracts and foreign investment that makes exploitation sustainable, natural

resources will become a curse that cripples growth and development.

1. WATER RESOURCES IN NIGERIA:

Nigeria’s water resource endowment comprises streams, wetland and rivers. Streams and lakes are evenly

distributed all over the country. Annual rainfall is highly variable across the different regions varying

from about 250mm in the extreme north of the country to about 500mm in the south. Rainfalls constitute

a significant source of water in the country with an annual renewable total estimated at about 319billion

cubic metres. Water resources can be broadly grouped into two categories:

a. Freshwater resources

b. Marine water resources

Freshwater Resources: Freshwater resources consist of rivers, streams, lakes, wetland and underground

water reservoirs. Rainfall can also be grouped under fresh water resources although men have no

influence over its availability. Fresh water resources provide the main source of safe drinking water for

human population, it supports agriculture activities through natural feeding and irrigation practices, and it

is far cheaper to use fresh water for industrial purposes. Fresh water resources particularly lakes and

rivers also perform recreation and transportation functions.

Marine Water Resources: Marin water resources include lagoons, seas and oceans. Marine water

resources are of vital important for transportation and it provides a natural habitat for exploitable fishery

resources.

Role of Government in Water Resource Sector

Government policy on water resource sector has been hinged on strategic and comprehensive

development of the country’s water resource endowment to.

a. Provide safe drinking water for the populace in both rural urban areas.

b. Make water available for agriculture through irrigation schemes

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c. Generation of power through the construction of hydro power plants.

Overall the years, several effort have been made by government towards the development of the country

water resources endowment with a view to achieving the objectives listed above the first national

development plant (1962-1968) allocates N48.6million representing 3.6% of total planned capital

investment to the development of water resources.

The second national development plan (1970-1974) allocates N148.6million to water resource

development representing 4.5% of total planned investment. Under the third national development plan

(1975-1980) N930.04million representing 2.83% of total planned capital expenditure was allocated to

water sector. Under the fourth national development plan (1981-1985) N3.12billion representing 4.4% of

total capital expenditure on water resource development.

In the 1990s, government allocations to water resources generally low. However, in 2001, the allocation

to the water resource sector increased by 7.2% also, in futurance of the objective of increasing the

population’s access to drinking safe water, the federal government in year 2003 has adopted a presidential

water initiative with the ultimate goal of increasing water access in all state capitals, urban and semi-

urban areas, and rural communities to at least 75% by the year 2007.

Other government programmes implicitly targeted towards water resource development include

a. River Basins Development Authority (RBDAs)

b. Agricultural Development project (ADPs)

Effectiveness of Water Resource Development Strategies

An assessment of government water resource development strategies would be done on the basis of the

objectives of Nigeria water resource development. These objectives have been broadly categories which

are: 1. Population’s access to safe water for drinking and industrial purposes. 2. To increase the supply

water through irrigation for agriculture purpose.

Compared to such countries as south Africa, Egypt, Libya, and coted’ ivoire whose relative water access

rates are higher than the African average for 1990 and 2000, only the rural population access estimated at

49% for 2000 is higher than the African average for Nigeria. In spite of the substantial resource made

available through grants and loans from external agencies such as world Bank, African Development

Bank and other agencies, the largest proportion of Nigerian cities still do not have reliable public water

supply and many resident produce water for consumptive use through individual Boreholes or buy at

high prices from vendors.

2. FORESTRY IN NIGERIA:

About 14.8% of Nigeria, roughly 13,517, 000 hectares (33, 4400,000 acres) is classified as forest or

woodland. High forest reserves occur mostly in Ogun, Ondo, Ekiti and Oyo state; savanna forest reserve,

chiefly in the northern states are limited in value, yielding only firewood and local building materials. In

2000, 67,767,000 cu m (2.4 billion cu ft) of round wood were produced, 85% for fuel. That year,

Nigeria’s consumption of fuel wood and charcoal was third highest in Africa. Expert of timber and

finished wood product were banned in 1976 in order to preserve domestic supplies. The ban was

subsequently lifted and the forestry sector recorded gains. However, the country suffers from

desertification, anemic reforestation efforts, and high levels of domestic wood consumption

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Nigeria's forests can be divided into two principal categories:

a. Woodlands of the savanna regions

b. Forests of the savanna regions

Woodlands and forests of the savanna regions (fourfifths of the country's forest area) that are sources of

fuel and poles, and rainforests of the southern humid zone that supply almost all domestic timber and

lumber, with fuelwood as a byproduct. Nigeria's forests have gradually shrunk over the centuries,

especially in the north, where uncontrolled commercial exploitation of privately owned forests began in

the late nineteenth century. Toward the end of the 1800s, the colonial government began establishing

forest reserves. By 1900 more than 970 square kilometers had been set aside. By 1930 this reserve had

grown to almost 30,000 square kilometers, and by 1970 to 93,420 square kilometers, mostly in the

savanna regions.

Through the 1950s, forest regeneration was largely by natural reseeding, although the government

established some small plantations near larger towns for fuelwood and poles. In the early 1960s, the

government began emphasizing the development of forest plantations, especially ones planted with fast-

growing, exotic species, such as teak and gmelina (an Australian hardwood). By 1976 about 115,000

hectares had been planted. During the late 1970s and 1980s, state plantations became an important source

of timber, paper pulp, poles, and fuelwood. Despite these developments, forestry's share of Nigeria's

expanding GDP declined from 6 percent in the late 1950s to 2 percent in the late 1970s and 1980s.

Earnings from the export of timber and wood products--6 percent of export income in 1960-- declined to

1 percent of export income in 1970 and virtually nothing in the late 1970s and 1980s, as domestic needs

increased rapidly. The oil boom of the 1970s slowed exports further, as more and more wood was

diverted to the domestic construction industry.

In the 1980s, Nigeria's demand for commercial wood products (excluding paper pulp and paper)

threatened to exhaust reserves before the year 2000. To reverse this process, especially in the northern

savanna, the government needed to double the rate of annual plantings it set in the 1980s. In June 1989,

the government announced receipt of a World Bank loan for afforestation to stabilize wood product

output and forest reserves.

3. PETROLEUM RESOURCES IN NIGERIA:

The petroleum industry in Nigeria is the largest industry and main generator of GDP in the West African

nation which is also the continent's most populous. Since the British discovered oil in the Niger Delta in

the late 1950s, the oil industry has been marred by political and economic strife largely due to a long

history of corrupt military regimes and complicity of multinational corporations, notably Royal Dutch

Shell. Despite this, it was not until the early 1990s that the situation was given international attention,

particularly following the execution by the Nigerian state of playwright and activist Ken Saro-Wiwa,

provoking the immediate suspension of Nigeria from the Commonwealth of Nations. Nigeria is identified

by the international community and the firms in operation there as a major concern with regard to human

rights and environmental degradation. The Nigerian government, oil corporations, and oil-dependent

Western countries have been criticized as too slow to implement reforms aimed at aiding a desperately

under-developed area and remediating the unsustainable environmental degradation that petroleum

extraction has wrought.

Production and exploration

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As of 2000, oil and gas exports accounted for more than 98% of export earnings and about 83% of federal

government revenue, as well as generating more than 40% of its GDP. It also provides 95% of foreign

exchange earnings, and about 65% of government budgetary revenues.

Nigeria's proven oil reserves are estimated by the U.S. United States Energy Information Administration

(EIA) at between 16 and 22 billion barrels (3.5×109 m3),[1] but other sources claim there could be as

much as 35.3 billion barrels (5.61×109 m3). Its reserves make Nigeria the tenth most petroleum-rich

nation, and by the far the most affluent in Africa. In mid-2001 its crude oil production was averaging

around 2.2 million barrels (350,000 m³) per day.

Nearly all of the country's primary reserves are concentrated in and around the delta of the Niger River,

but off-shore rigs are also prominent in the well-endowed coastal region. Nigeria is one of the few major

oil-producing nations still capable of increasing its oil output. Unlike most of the other OPEC countries,

Nigeria is not projected to exceed peak production until at least 2009. The reason for Nigeria's relative

unproductivity is primarily OPEC regulations on production to regulate prices on the international

market. More recently, production has been disrupted intermittently by the protests of the Niger Delta's

inhabitants, who feel they are being exploited.

Nigeria has a total of 159 oil fields and 1481 wells in operation according to the Ministry of Petroleum

Resources. The most productive region of the nation is the coastal Niger Delta Basin in the Niger Delta or

"South-south" region which encompasses 78 of the 159 oil fields. Most of Nigeria's oil fields are small

and scattered, and as of 1990, these small unproductive fields accounted for 62.1% of all Nigerian

production. This contrasts with the sixteen largest fields which produced 37.9% of Nigeria's petroleum at

that time. As a result of the numerous small fields, an extensive and well-developed pipeline network has

been engineered to transport the crude. Also due to the lack of highly productive fields, money from the

jointly operated (with the federal government) companies is constantly directed towards petroleum

exploration and production.

Nigeria's petroleum is classified mostly as "light" and "sweet", as the oil is largely free of sulphur. Nigeria

is the largest producer of sweet oil in OPEC. This sweet oil is similar in composition to petroleum

extracted from the North Sea. This crude oil is known as "Bonny light". Names of other Nigerian crudes,

all of which are named according to export terminal, are Qua Ibo, Escravos blend, Brass River, Forcados,

and Pennington Anfan.

The U.S. remains the largest importer of Nigeria's crude oil, accounting for 40% of the country's total oil

exports. Nigeria provides about 10% of overall U.S. oil imports and ranks as the fifth-largest source for

oil imports in the U.S.

There are six petroleum exportation terminals in the country. Shell owns two, while Mobil, Chevron,

Texaco, and Agip own one each. Shell also owns the Forcados Terminal, which is capable of storing 13

million barrels (2,100,000 m3) of crude oil in conjunction with the nearby Bonny Terminal. Mobil

operates primarily out of the Qua Iboe Terminal in Akwa Ibom State, while Chevron owns the Escravos

Terminal located in Delta State and has a storage capacity of 3.6 million barrels (570,000 m3). Agip

operates the Brass Terminal in Brass, a town 113 km southwest of Port Harcourt and has a storage

capacity of 3,558,000 barrels (565,700 m3). Texaco operates the Pennington Terminal.

Offshore

Oil companies in Africa investigate offshore production as an alternative area of production. Deep-water

production mainly involves underwater drilling that exists 400 m or more below the surface of the water.

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By expanding to deep water drilling the possible sources for finding new oil reserves is expanded.

Through the introduction of deep water drilling 50% more oil is extracted than before the new forms of

retrieving the oil. Angola and Nigeria are the largest oil producers in Africa. In Nigeria, the deep-water

sector still has a large avenue to expand and develop. The amount of oil extracted from Nigeria is

expected to expand from 15,000 bbl/d (2,400 m3/d) in 2003 to 1.27 Mbbl/d (202,000 m3/d) in 2010.[5]

Deep-water drilling for oil is especially attractive to oil companies because the Nigerian government has

very little share in these activities and it is more difficult for the government to regulate the offshore

activities of the companies. Also, the deepwater extraction plants are less disturbed by local militant

attacks, seizures due to civil conflicts, and sabotage. These advancements offer more resources and

alternatives to extract the oil from the Niger Delta, with hopefully less conflict than the operations on

land.

Natural gas

Natural gas reserves are well over 187 trillion ft³ (2,800 km³), the gas reserves are three times as

substantial as the crude oil reserves. The biggest natural gas initiative is the Nigerian Liquified Natural

Gas Company, which is operated jointly by several companies and the state. It began exploration and

production in 1999. Chevron is also attempting to create the Escravos Gas Utilization project which will

be capable of producing 160 million standard ft³ of gas per day.

There is also a gas pipeline, known as the West African Gas Pipeline, in the works but has encountered

numerous setbacks. The pipeline would allow for transportation of natural gas to Benin, Ghana, Togo,

and Cote d'Ivoire. The majority of Nigeria's natural gas is flared off and it is estimated that Nigeria loses

18.2 million USD daily from the loss of the flared gas.

The Nigerian oil industry

The Nigerian oil industry is divided into two sectors; the upstream sector (deals with Exploration and

Production) and the downstream sector, which deals with refining of crude oil for domestic consumption.

In this paper, I intend to focus on the downstream sector as it has a great impact on the lives of all

Nigerians.

The government of Nigeria has decided to emulate other developing and developed nations by privatizing

and liberalizing the country’s downstream sector which was hitherto managed by the Nigerian National

Petroleum Corporation (NNPC) on behalf of the government.

Downstream

Nigeria's total petroleum refining capacity is 445,000 barrels per day (70,700 m3/d), however, only

240,000 bbl/d (38,000 m3/d) was allotted during the 1990s. Subsequently crude oil production for

refineries was reduced further to as little as 75,000 bbl/d (11,900 m3/d) during the regime of Sanni

Abacha. There are four major oil refineries: the Warri Refinery and Petrochemical Plant which can

process 125 million barrels (19,900,000 m3) of crude per day, the New Port Harcourt Refinery which can

produce 150 million barrels per day (24,000,000 m3/d) (there is also an 'Old' Port Harcourt Refinery with

negligible production), as well as the now defunct Kaduna Refinery. The Port Harcourt and Warri

Refineries both operate at only 30% capacity.

It is estimated that demand and consumption of petroleum in Nigeria grows at a rate of 12.8% annually.

However, petroleum products are unavailable to most Nigerians and are quite costly, because almost all

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of the oil extracted by the multinational oil companies is refined overseas, while only a limited quantity is

supplied to Nigerians themselves.

4. FISHERY IN NIGERIA

Fisheries may large commercial fisheries, recreational fisheries or small substance fisheries (fishing to

provide the basic needs of the fishing community). The term fishery is also used to describe the waters

where fishing takes place or the species of fish being harvested such as the Alaska halibut fishery.

Fisheries include familiar finned fish species, like cod and flounder; mollusks, including oysters and

squid; and crustaceans, such as shrimp and crabs. Lesser-known fisheries include echinoderms, like sea

urchins; some amphibians including frogs, and cnidarians, such as jellyfish. Even the harvest of whales is

usually considered a fishery.

Economic Importance

a. Fisheries are an important source of food, jobs, and recreation for people around the world. This is

particularly true in island nations, such as Japan and Iceland seafood is eaten as a major source of

protein.

b. Fisheries are difficult to manage effectively because they exit in a complex ecosystem and are often

considered a common property resource (owned by all citizens of all nation). Some management

practice include gear control, such as regulating the size and shape of the roles in fishing nets

seasonal fishery opening and closings and critical habitat area closures to protect the breeding

grounds of threatened fish, restricting the size of the fish that can be harvested; establishing quotas

that limit the number of fish that can be caught; and limiting the number of days that a vessel can fish.

Aquaculture

Aquaculture or fish farming, in which aquatic organisms are under controlled conditions in ponds, tanks,

or floating net pens, is becoming a part of fisheries management. Aquaculture techniques, which help

increase stock populations control predators are use in the oyster, clam, and mussel fisheries, fish farming

may help reduce harvest pressure on the remaining wild stocks. In Japan, the chum salmon fishery and

several other fisheries depend upon hatcheries –where fish reproduction and survival is enhanced—to

provide the young fish. In fact, aquaculture production is becoming essential part of the world fish supply.

The share of the total world harvest produced through aquaculture has increased over the past two

decades and now accounts for nearly 20 percent of world harvest.

Fisheries are influence by more than just fishing activity. Fishery manager must also manage activities on

land, such as agriculture irrigation, pollution and development which may impact critical fisheries habitat.

Finally, exit in an environment that naturally fluctuates.

Even such as changes in ocean currents and temperatures can dramatically influence the size and health of

fish stocks, making them more of challenge to manage effectively

5. SOLID MINERALS IN NIGERIA

Nigeria is richly endowed with a variety of solid minerals of various categories ranging from precious

metals to various stones and also industrial minerals such as barytes , gypsum, kaolin and marble. Much

of these are yet to be exploited. Statistically, the level of exploitation of these minerals is very low in

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relation to the extent of deposits found in the country. One of the objectives of the new national policy on

solid minerals is to ensure the orderly development of the mineral resources of the country.

There are tremendous opportunities for investments in the solid mineral sector in Nigeria. Prospecting

licenses for investors (both local and foreign) to participate in the exploitation of the vast mineral

resources in Nigeria is granted by the Federal Ministry of Solid Minerals.

Mineral resources that are present in Nigeria but not yet fully exploited are coal and tin. Other natural

resources in the country include iron ore, limestone, niobium, lead, zinc, and arable land. Agricultural

products include groundnuts, palm oil, cocoa, coconut, citrus fruits, maize, millet, cassava, yams and

sugar cane. Nigeria also has a booming leather and textile industry, with industries located in Kano,

Abeokuta, Onitsha, and Lagos.

Opportunities exist for the exploitation and export of natural gas, bitumen, limestone, coal, tin, columbite,

gold, silver, lead-zinc, gypsum, glass sands, clays, asbestos, graphite, and iron ore, among others

In the 14 years since its creation, the ministry of mines has had at least 10 ministers. However, the solid

minerals sector only began to see some advancement in 2001 when Modupe Adelaja was sworn in as

minister.

THE NIGERIAN 34 SOLID MINERALS AT A GLANCE

Solid Mineral Deposits in Nigeria

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1. Talc: Over 40 million tonnes deposits of talc have been identified in Niger, Osun, Kogi, Ogun

and Kaduna states. The raw materials research and development council (RMRDC)’s 3,000 tonnes

per annum catalytic plant is the only talc plant in the country. The talc industry represents one of the

most versatile sectors of the industrial minerals of the world. The exploitation of the vast deposits

would therefore satisfy local demand and that for export.

2. Gypsum: Gypsum is an important input for the production of cement. It is also used for the

production of Plaster of Paris (P.O.P) and classroom chalks. A strategy for large-scale mining of

gypsum used in the cement industries is urgently required to sustain the existing plants and meet the

future expansion. Currently, cement production is put at 8 million tonnes per annum while the

national requirement is 9.6 million tonnes. About one billion tonnes of gypsum deposits are spread

over many states in Nigeria.

3. Iron Ore: There are over 3 billion metric tonnes of iron ore in deposits found in Kogi, Enugu and

Niger States as well as the Federal Capital Territory. Iron Ore is being mined at Itakpe in Kogi State

and is already being beneficiated, up to 67 per cent of iron. The Aladja and Ajaokuta Steel complexes

are ready for consumers of billets and other iron products for down-stream industries.

4. Lead/Zinc: An estimated 10 million tonnes of lead/zinc veins are spread over eight states of Nigeria.

Proven reserves in three prospects in the east-central area are 5 million tonnes. Joint venture partners

are encouraged to develop and exploit the various lead/zinc deposits all over the country.

5. Bentonite and Baryte: These are the main constituents of the mud used in the drilling of all

types of oil wells. The Nigerian baryte has specific gravity of about 4.3. Over 7.5 million tonnes of

baryte have been identified in Taraba and Bauchi States. Large bentonite reserves of 700 million

tonnes are available in many states of the federation ready for massive development and exploitation.

6. Gold: There are proven reserves of both alluvial and primary gold in the schist belt of Nigeria

located in the south-western part of the country. The deposits are mainly alluvial and are currently

being exploited on a small scale. Private investors are invited to stake concessions on these primary

deposits.

7. Bitumen: The occurrence of bitumen deposits in Nigeria is indicated at about 42 billion tonnes;

almost twice the amount of existing reserves of crude petroleum. Analytical results suggest that this

potential resource can be used directly as an asphalt binder. Most bitumen used for road construction

in Nigeria is currently imported.

8. Coal: Nigerian coal is one of the most bituminous in the world owing to its low sulphur and ash

content and therefore the most environment-friendly. There are nearly 3billion tonnes of indicated

reserves in 17 identified coal fields and over 600 million tonnes of proven reserves.

9. Rock Salt: The national annual demand for table salt, caustic soda, chlorine, sodium bicarbonate,

sodium hydrochloric acid and hydrogen peroxide exceeds one million tonnes. A colossal amount of

money is expended annually to import these chemicals by chemical and processing companies

including tanneries and those in food and beverages, paper and pulp, bottling and oil sector. There are

salt springs at Awe (Plateau State), Abakaliki and Uburu (Ebonyi State), while rock salt is available

in Benue State. A total reserve of 1.5 million tonnes has been indicated, and further investigations are

now being carried out by Government.

10. Gemstones: Gemstones mining has boomed in various parts of Plateau, Kaduna and Bauchi

states for years. Some of these gemstones include sapphire, ruby, aquamarine, emerald, tourmaline,

topaz, garnet, amethyst; zircon, and fluorspar which are among the world’s best. Good prospects exist

in this area for viable investments.

11. Kaolin: An estimated reserve of 3 billion tonnes of good kaolinitic clay has been identified in many

localities in Nigeria. Lift from page 4 and 5 of Local Sourcing of Raw Materials.

(E) ENVIRONNEMENTAL MANAGEMENT AND ISSUES OF NATURAL RESOURCES

Of all environment resources, water probably one that is most abused through human activities. Some of

the environment challenges with regards to water resources include:

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a. Emission of organic pollutants as a result of industrial activities is responsible for rapid

deterioration of water quality which poses health challenges on human population as well as

industrial, recreation and fishing diseconomies

b. Scarcity of water particularly in urban center complicates the problem of sanitation thereby

posing a threat to public health.

c. Lack of access to safe water in rural areas leaves dwellers with no option than to drink water

from polluted streams and stagnant water bodies. This often leads to water related disease such as

cholera, river blindness, and guinea worm infestation.

Reference

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Cambridge University Press. ISBN 9780521700801

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