Oil and Gas Production Industry

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MKIB 160
DEVELOPMENT OF INTERNATIONAL BUSINESS
MKIB 160
DEVELOPMENT OF INTERNATIONAL BUSINESS

Competitiveness of Oil and Gas Production Industry in Nigeria Competitiveness of Oil and Gas Production Industry in Nigeria

LIST OF CONTENTS

Introduction………………………………………………………………….3

Nigeria
1.1 Background of Country………………………………………….4 1.2 Economic Overview…………………………………………………..4 1.3 Global Competitiveness………………………………………….5

Porter’s Diamond Framework
2.1 Context for Firm Strategy and Rivalry…………………….6 2.2 Demand Conditions……………………………………………….8 2.3 Factor (Input) Conditions……………………………………….9 2.4 Related and Supporting Industries………………………….10

Conclusion…………………………………………………………………..12

Bibliography………………………………………………………………13

INTRODUCTION

Oil and gas are the key generators of the world nowadays that helps to uphold the concept of globalization. The flow of goods and capitals that require transportations and energy depends directly from the oil and gas production. As the main sources of energy and its nature of scarcity, this commodity is vulnerable to fierce competition in the global market. One of the major producer and global exporter of oil and gas is a country in Sub Saharan Africa, Nigeria. This report seeks to analyse the business structures and the competitiveness of oil production in Nigeria. It will be based on Professor Michael Porter’s ‘Diamond’ Model of International Competitiveness whereby it will look into all the four main theories in the diamond with additional factor of government and chance.

Source: Harvard Business Review, Competitive Advantage of Nations, Michael E. Porter, March-April 2009

1.1 BACKGROUND OF COUNTRY
Nigeria is a country located in Western Africa with Niger at the north, Cameroon at the east, Benin at the west and with Gulf of Guinea at the south. The country’s total area is 923,768 square kilometres with the population of 155,215,573 people estimated in July 2011. In 2011, the population growth rate is estimated to increase by 1.935%. It has abundant natural resources like natural gas, petroleum, and other mining products. Sources: CIA; World Factbook 1.2 ECONOMIC OVERVIEW

Nigeria has been known for its state of corruption, political instability, insufficient infrastructure and poor management of macroeconomic governance. But since 2008, the government has taken initiative to reform market-oriented approach as urged by the International Monetary Fund. The government also has taken the initiatives to pursue economic reforms by abolishing former military ruler’s focus on the main oil sector and started to diversify in other economic sector. However, as seen from the table below, there has been a significant increase for the crude oil contribution to Gross Domestic Product and a gradual decline by the agriculture sector from 1960 to 2002. Sector| 1960| 1970| 1980| 1990| 2000| 2002|

Agriculture| 64.1%| 47.6%| 30.8%| 39.0%| 35.7%| 28.35%| Manufacturing| 4.8%| 8.2%| 8.1%| 8.2%| 3.4%| 5.5%|
Crude Petroleum| 0.3%| 7.1%| 22.0%| 12.8%| 47.5%| 40.6%| Others| 30.8%| 37.1%| 39.1%| 40.0%| 13.4%| 25.55%|
Nigeria: Sectoral Contribution to Gross Domestic Product (GDP)

Source: Central Bank of Nigeria, Changing Structure of the Nigerian Economy (2000) and Annual Report & Statement of Accounts (2002). This specifically shows that the government had failed to diversify the other sectors thus; the fuels and mining products remain to be the Nigerian main economy contributor. The table below shows that economy’s total export shares in 2010 are significantly dominated by Fuels and mining product with 87.7% which leaves only 5.2% to agricultural products and 7.1% in manufacturing product. Source: World Trade Organisations, October 2011

1.2 GLOBAL COMPETITIVENESS
Due to its overdependence on one sector which is the...
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