This is a journal critique which examines a journal article on oil growth prospects and gas abundant economies with a special reference to Nigeria. This paper briefly summarizes the main findings of the article. The strengths and weaknesses of the article are brought out with reference to the methodology used. The paper will bring out the significance of the study in context of today’s society.
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The article author is introduced as Musa Jega Ibrahim. It is written in the article that while working on the article the author got some assistance from one professor Roger Sandilands. The credentials of the author are not given which can be regarded as a weakness on the article. It is not enough to just mention that professor Rogers took time to look at the drafts of the article but rather the author ought to give out his credentials. The above weakness laid aside the author has written on a very relevant topic which has affected most of the underdeveloped nations especially in the third world countries. The case picked up by the author is quite exemplary taking into considering the social strife which has ruled the oil rich country of Nigeria. The recent events which have occurred in the country of Nigeria bring up the question of the role of oil in Nigeria (Musa, 2008). (1)
The author makes a very good introduction of the article by touching on the country of Nigeria with respect to its richness of oil. He gives clear statistics concerning the country of Nigeria on its revenue particularly from oil. The statistics span from the year 1970 to recently in the year of 2000. At the very introduction stages the author argues that though oil resources have got very high resource revenue, there is a big need for the authorities to take measures and ensure that the sound policies are enacted to ensure that the oil and gas bring robust growth to the economy (Musa, 2008).
The author carried out a quality approach in tackling the topic. The methodological and analytical approach used in carrying out this research was that of building blocks of standard economic growth models and the consequences that natural resources have. The qualitative analysis was carried out through the use of relevant macroeconomic indicators. The study picked a good range period for the collection of data (Musa, 2008).(2)
The research finding showed that was a close link between the oil and gas and the economy in general and thus it becomes possible for the gas and oil to have a potential huge impact on the rest of the economy if not well managed. The article argues that the extraction and export of oil and gas has the effect of subverting technological progress and stifling the revenue potential of a nation. This affects the effectiveness of the factors of production and a result retards the economy (Musa, 2008).
From the findings of the article, it is argued that it is needless to rely on the exchange of foreign revenue from oil and gas but rather it the oil should be channeled internally to stimulate internal growth: this will boost what the article refers to as inter-sectoral linkages which are considered as more virile strategy for the economies which are based on oil and gases (Musa, 2008).
The Research limitations
The research encountered a number of challenges which could have likely lad to the compromising the quality of the paper. The most notable challenge recorded by the author was incurred in the writing of the article was the unavailability of the information on the technological input in the oil and gas activities. It is argued in the article that the changing patterns of productive capacity more specifically in the downstream sectors can be used to measure the technological change. It is also argued that positive externalities for learning which arises from this process is likely to lead to endogenous technological progress which will likely lead to the driving of sustainable growth (Musa, 2008).
The author uses quite technical language in the analysis of the article especially on the part of talking about the economy in relation to Nigeria and the oil reserves that it has. This makes it quite for a person with no skills in the field of economics to understand the analysis part of the article. There are equations which have been used in the article which may not make any sense to people outside the field of economics. The analysis of the article brings to surface a number of issues concerning oil rich countries and their inability to grow with special reference to Nigeria. The author gives an explanation on how a leading sector in the economy can be turned into one which will spring up the economy and make it grow quite quickly. He argues that there is need for the stabilize the economy of a nation away from being dependent on natural resources like oil and gas because of the simple fact these natural resources are not forever available but rather are scanty and need to be taken care of. The author argues that the presence of oil in a nation will not necessarily mean that the economy: the natural resources need to be integrated well with the other sectors of the economy in order to bring a real boost to the economy in general and make it diversified and one which is independent of one particular sector (Musa, 2008).
The author advocates for the establishment of a balanced safeguard for what the article refers to as the inter-generational equity at the same time in pursuit of sustainable growth. The author strongly argues for the use of the revenue from exports in the construction of the internal social facilities. He argues that investment which can be made out of oil revenue can easily stabilize the economy of a nation. The author argues that activities that are low level of valuing adding activities have been found to undermine technological progress. The activities in the gas and oil sector have been claimed to produce both the negative and positive externalities. This calls for the enacting of policies to ensure that a sustainable growth is attained. The article clarifies that the upstream activities of gas and oil are mainly primary with the downstream activities being mainly secondary in nature with most of them being manufacturing in their nature. The author carefully notes that this is the case with the nation of Nigeria (Musa, 2008).
In Nigeria, the upstream activities involve pre-drilling activities (these activities involve the issues of exploratory whereby surveys, field development among others are undertaken). The activities at this point require huge capital input as well as advance application of technology. Down the stream the activities which are mainly engaged are those which involvee the change in the form of crude oil to various useful forms. The products formed in the downstream stages include refinery of oil into products such as heating oil, gasoline, bitumen, wax, lubricants. The author discusses the point of backward linkage by claiming that the absorption of the oil resources by the domestic production which leads to utilizing of outputs. The author explains to some extent the efforts being made by the Nigerian nation in trying to diverse their economy from total dependent on the economy. He mentions the four refineries that are associated with this project.(3) The author claims that the spill over which are brought about by the surging needs for responses to boost the economy (Musa, 2008).
The author further claims that the that the effective operation of the oil resources can lead to the emergence of other industries such as plastics, textiles, bitumen production among others activities which have a direct relationship with the will are a big boost to the stabilization of the economy. The author argues that such kind of environment makes it possible for various investments to stem and thus creating a good business environment which makes it possible for a nation’s economy to be stabilized (Musa, 2008).
The author believes that the government has a duty to ensure that management of the natural gases is carried out well without any interference which may lead to ineffective investment or misappropriation of the resources. In the case of Nigeria the author argues that there has its economy which highly depends on the natural resource. Further arguments from the author show that the economy of Nigeria is highly susceptible to be affected by the international price changes of oil. The author gives an analysis of the trend of the economy of Nigeria economy with respect to its dependence on the oil resources. From the dependence rates of fifty nine percent in the 1970s the dependence rate rose to almost seventy eight percent by 2000. This pattern of the economy increasingly depending on the oil reserves shows the susceptibility of the Nigerian economy to uncertainties which are associated with the changing prices of oil. The economy is most likely to be affected most in a significant way if the there is fluctuation in the prices of oil at the international market. The author also brings out the fact that the Nigerian government has continually invested less in the areas away from the oil sector (Musa, 2008). (4)
The above article brings into light some of the significant facts which have made the economies of some of the countries with oil fields to lag behind in their economies. The fact that a country may have some oil reserves may not guarantee that its economy of that nation will be stable. The presence of natural resources needs to be carefully managed in order to ensure that they stimulate the growth of the economy. The mistake that many nations especially the developing nations seem to be undergoing is bad management of the resources. In the case of Nigeria the country has been depicted to be overly and continually increasingly relying on the oil and gas resources. The economy has not been diversified as there are claims that not much investments have been made outside the sector of oil and gas resources. This is considered risk since the oil prices are prone to fluctuate.