The Economy Of Delta State In Nigeria Economics Essay

The Economy Of Delta State In Nigeria Economics EssayNigerian economy, at first was based in general on agriculture it exported agricultural products interchange sufficient cocoa, rubber, palm products, cotton, groundnut, hides and skin etcetera. clean now past anele color was discovered in the south-south of Nigeria i.e. Rivers, Bayelsa, Edo and Niger Delta conveys, and agric product was aban dod. The seek question is What argon the economic cost and avails of petroleum persistence in Delta, Nigeria? The objective of this essay is to find out what the economy cost and benefits of the rock crude industry in Delta read, Nigeria, and to a fault I will examine just how the rural ara has coiffe up with the commerce of ve provokeable cover and similarly the do i.e. the cost and benefits.1.1 State BackgroundDelta State is named after the delta region of the River Niger. Its hood is Asaba1. It is found in the south-south argonas of Nigeria. Delta enunciate consist s of different ethnic groups like Urhobo, Igbo, Ezon, Isoko and Itsekiri solely consist main(prenominal)ly of the Igbo commonwealth.Nigeria has a population of 151, 870, 000 stack of which Delta conjure up has a population of 4, 098, 291 the males be up to 2, 674, 306 while the females atomic number 18 up to 2, 024, 0852. Delta cite is the second anele producing land in Nigeria after Rivers State, of which this anoint mathematical product tends to be the most dangerous business in this economy. The local establishments that start fossil inunct in the Delta state be Warri matrimony and South, Burutu, Isoko North and South, Ughelli North and South, Okpe, Ethiope East and West, Sapele and Ndokwa East and West3. The biggest vegetable oil refinery is found in Warri, which is a local governance in Delta.1.2 Map present the location of Delta state in Nigeria4Delta State.1.3 Re search MethodologyMy process of inquiry was divided into devil methods primary research and secondary research.1.3.1 Primary ResearchMy primary research involvedThe use of a questionn pedigreee The questionnaire was created addressing specific questions like what has the presidential stipulation put in place to help the economy? and also what has the economy benefited from the oil labor?A survey was utilise to get more in the flesh(predicate) selective in conditionation like presidential term sh atomic number 18 of income and income of Petroleum Company.Interview was done I interviewed the batch aliment in the villages, the steerers of the t receive/villages. communicate them what the be and benefits has been for oil merchandise. I also interviewed employees from the Petroleum fel minusculeship (SHELL)I took pictures of the benefits from the oil ware.1.3.2 Secondary ResearchSecondary information was gained from the various websites, textbooks and articles. The information includes a study of economic theory relating to externalities.Textbooks were uti lise to get definitions.The network was used to review other information that is relating to this topic. The reason for this is to see how this state is managing with its externalities.Internet was used to get background information on the stateInternet was also used to get the cost of oil event in the stateImages of the cost of oil deed in the villages were gotten form the internet.The use of articles in the newspapers was used to get information on the original situationProblemsProposed SolutionsInterviews and with the people in villages and the leaders of villagesLanguage barrier determination nighone to help in translating.Interview with the employees of SHELLRelease of one-on-one company informationUse of other sources to get information like the radio, internet, newspapers etceteraSharing of questionnaire and survey on landRiots in these areas were questionnaires were cosmos distri providededGo to areas where at that place is no riot to distribute questionnaires and d o a survey.1.3.3 Possible difficulties and proposed solutions.2 PRIMARY DATA ANALYSISThe employees and few people vivacious in Delta were given questionnaires to find out certain information, slightly what the oil industries and the presidential term have done with the economy from the benefit of oil production. The questionnaire was given to 20 employees at SHELL who were randomly selected from various departments and 20 people living in the economy. This section is wake the sets of results gotten from these individuals.Table 1 Results concerning responsibility by individuals in the friendshipIssuesNumber of peopleGovernmentPoliticiansOil IndustriesWho do you suppose is responsible for the befoulment in Delta?20201890% of the people living in the community believe that the oil industries are the set about of the pollution which is honorable, and it is wide-cut to know that only 20% believe that the politics is responsible which is non true.Table 2 Results concerning re sponsibility by SHELL employeesIssuesNumber of peopleAgree protestUnsureDo you think it is your responsibility to eviscerate it right?201046In the preceding(prenominal) pie chart 50% of the employees at scramble think it is their responsibilty to make things right in the economy that bureau they sould be able to stop the pollution the oil company is create. This illustrates that half of the people in company are winning respnsibility for their natural processs.Table 3 Results concerning responsibility by the individuals in the communityIssuesNumber of peopleAgreeDisagreeUnsureDo you think it is your responsibility to make it right?2057840% of the individuals in the community are non sure whose responsibility it is to stop the pollution in Delta, 35% of the individuals dont think it is their responsibility to influence pollution in the economy. This illustrates that most of the people in this community could be seen as sensual since it is a few that are ready to apportion approximately responsibility to make things right.Table 4 Results concerning government action by the individuals in the communityIssuesNumber of peopleAgreeDisagreeUnsureIs the government doing anything about the situation?205123From the pie chart it has been shown that government is not taking action from the blackball externality taken place in the state which is not technical.From the primary data analysis it is seen that in that location are some problems Delta such(prenominal) as pollution etc and this is due to securities industry failure. From the economic theory it is seen that if the marginal sociable benefits is the marginal brotherly cost or vice versa there would be market place failure5. Market failure is due to the autocratic and shun externalities in the economy. The next section in this essay is going to state those economic cost and benefits of the oil production in Delta State.3 INDENTIFICATION OF economic COSTS AND BENEFITS.This section will contain the analysis of the economic be and benefits in Delta state. thither are a bent of problems in Delta state such as oil spills, waste dumping and gas flaring. The main problem in Delta is the oil spillage. The type of oil produced in the south-south is orphic sea oil, which causes oil spillage and then leads to pollution air, land and piss pollution, the cause of this pollution has direct to the damage of soil, wet and air. The oil spills has caused farmers in the area not to fish and farm again because the pollution has dot in their sea and lands, thus thousands of people have been affected curiously the short(p) people and those who rely on traditional way of living such as fishing and agriculture. But there are not only costs in the oil production there are also benefits in the fact that the state is making a dowery of coin in producing oil since oil is needed in a lot of countries. outerity occurs when the production or consumption of a in compress(p) or service has an motion upon a third party6. If this effect is dangerous it place therefore be called a contradict externality but if the effect is advantageous it is said to be a positive externality. Negative externalities solve about external costs and positive externalities bring about external benefits. The production of oil in Delta state whoremonger bring about both external costs and external benefits.3.1 External Costs from Oil Industries.The people in the economy have endured oil spillage for years now. Oil spills are caused by corrosion of oil pipes, poor maintenance of infrastructure, and leaks during processing at refineries.7This oil spillage usually happens on the land and in the sea. The cause of oil spills in water is that, the oil has contaminated the water, so the fishes in the sea would die that instrument there wouldnt be any fishing or it would become evil and if it is poisonous when it is eaten the people in the economy would get ill. It could also deadening the pl ants plants could die because of oil spills and also animals that drink from the water. alike some places in Delta are not yet developed in those places the people that hot there usually have their bath in the sea so if they do that where the water has been affected the people could get skin disease. The oil spills on land would destroy crops damage the soil the farmers use in farming for their family. The production of oil is making the rich to get richer and the poor to stay poor and die of poverty.Gas flaring is when gas is burned-out unsteadily. Gas flaring occurs when oil is pumped from the ground, this oil burnt then produces gas and the gas produced is burnt as waste in wonderful winks. Thus the impetuous of this gas results to the damage of the environment, especially the areas which are nigh to the oil industries. The government and the industries have done nothing to stop the people from burning the gases and also they havent given any solution to the situation. Peo ple in that area are now having health problems there would be air pollution thus leading to people inhaling chemicals that are not replete(p) for their health and sanitation problems there would be water pollution, chemicals from the gas burst out would make water dirty, that is the water the people in the area used to take their bath is going to affect their hygiene because the water would genuinely dirty. The people in this area do not have capital for medical bills and they do not have health insurance. The farms of these people living in this area have been finished so there is no other source of getting bills to pay medical bills so this leads to the increase in death rate in that area.When oil is make from the industries, waste are also produced these waste are then dumped on the land and in the sea, thus destroying the environment and weakening the peoples right in their amount of living. The government have not tried anything to stop people from disposing this waste on the land and the sea, they have not realised that the sea has been contaminated by the various mixture of the oil and if they had they would have inured their water. These chemical substances in oil are very toxic and it give notice affect the people living in the area.People in this areas are dying of hunger, because their farms have been destroyed so there is nowhere else to get fodder from, farmers are now unemployed because their plants are dying so they have nothing to plant and sell to make money, hunters are also unemployed because the animals are dying due to them drinking water from the sea or eating plants that were poisonous. The children of these hunters and farmers cannot go to school again because there is no money to pay their school fees. Poverty hits these innocent people who count on livelihoodsDue to the ostracise impacts on the production of oil there have been a lot of complaints by the local communities, because of these complaints it has made some peopl e from this community to become militants. Since the production of oil has caused poverty it has led some of these militants too undergo criminal acts like stealing the oil that has been produced militants steal this to make money out of it, and also illegal bunkering of oil that is shipping oil illegally to another country to make money without the consent of the government. Also another cause of militancy due to the production of oil is because the government, the industries and the politicians have defyd to do something about the oil spillage, the government has not done anything to develop the state practically because they are gaining from the oil production and keeping the money to themselves the people from the economy have watched these politicians, governments and the industries get richer so this now leads the militants among them in kidnapping the rich peoples children, there are also armed robberies these militants rob the rich, and if people are being too competitive when they are being robbed then the militants might kill them, so this could lead to death, they also take on fights with the Nigerian security forces this makes the security force to fight back extremely and not considering the people in that area. Militants could go into imposture also known as 419 in Nigeria, they could do business that could cheat people and by cheating them, they could get money from them. entirely negatively charged things are done because of the government, the industries and the politicians ignorance to the situation. fork up under shows gas flare at Ughelli West, Delta State, Nigeria.8Picture be lower-ranking shows the militants with their guns9Picture down the stairs shows damage of crops because of oil spills.10 anatomy 1 Diagram demonstrate external cost of oil production in Delta State.Price of oil Welfare loss multiple sclerosis MPC Negative externalityP* ap1Q* Q2Quantity of oil.In encipher 1, it shows that the marginal clandestine cost of the industry is lower than the marginal well-disposed costs because of the pollution that was brought about when oil was produced, this pollution might have caused breathing problems for people and also poisoned food like fish. The industry would just be concentrating on its own privy costs because of this the industry would produce at Q1. At Q* marginal loving cost is equal to the marginal social benefit resulting to a market failure. Too much oil is being produced at too low a price this causes the misallocation of the societys resources. there is welfare loss i.e. where marginal social cost is greater than marginal social benefits.There are also negative externalities of consumption i.e. the pollution that is caused and how it affects the consumers. Negative externalities would make marginal social benefits less(prenominal) than the marginal private benefits.Figure 2 Diagram showing negative externality of consumption.Price of oil Welfare loss multiple sclerosisP1P* MPB Negative externalityMSBQ* Q1Quantity demanded.In figure 2 it shows that the oil industry keep on producing oil, and there is bland oil spillage, they pay no attention to the negative externality they are creating, Marginal social cost becomes equals to marginal private cost. There is over-use of oil from Q* to Q1, there is also a welfare loss because Marginal social cost is greater than Marginal social benefits.It is difficult to reduce this pollution. original of all the costs of pollution are external in the awareness that the cost of pollution are not paid for by the agents causing it, so there is no economic incentive in the market system to cause them to stopSecond of all the people benefiting from the activities those are the people producing the oil, they are causing pollution and imposing some costs on others. So the pollution needs to be reduced although the victims are meant to be compensated.3.2 External Benefits from Oil Industries.The oil industries may have destroyed the com munities in Delta but they have also made a lot of money for the state because of the production of their oil. As it is said above Delta state is the second oil producing state after Rivers state.The economy has benefited from the oil production. The money used from the oil production has been used for the improvements of infrastructural facilities such as spin of roads, bridges and provision of pipe borne water which benefits the villagers, increased use of electricity, give away transport facilities and usefulness of petroleum products.The biggest oil company in the Delta state, The smash Petroleum Development Company (Shell), a subsidiary of Royal Dutch Shell, is the main operator on land. Shell is located in Warri. legion(predicate) Nigerians specifically those from Delta state are employees of Shell, working in an oil company means that those employees would be making a lot of money this means that there would be an increase in income per capita thus an increase in urbaniza tion that means Delta would be more developed in the standard of living. Shell has provided a lot of benefits for the economy and for the workers. Such benefits is the provision of statement for the children of the employees at the shell company, provision of houses, cars and also they pay for all the bills of the employees.Shell has contributed money to the construction of new private and universe schools, schools for people of low and high classes. There are also schools for the residents of the state that is for those who could not dedicate to go to school. This is thus increasing the literacy rate in the economy. Educational competitions are organised and also sports to promote academic and physical excellence which benefit the individuals in the state.SHELL has also benefited from its own production of oil such as increased revenue from sales their increase in production brings about huge profits to the company. There is also an increase in development in the SHELL Company t here is now provoke technology like drilling equipment in which they can use to baffle or stop the oil spills. There is also an improvement in Inter matter relations such as an increase in production which has led to an agreement with oil consuming economies such as the get together States and China.The oil company shell has tried to do its best in developing the economy but because of the corruption problems in Nigeria it affects the economy. The money used for infrastructure development has been taking by the government or the politicians for their own benefits. Pipe borne water that has been installed for the villagers has broken and the government take the money that has been boastful to use it to fix it. Oil spills caused by the production of oil has risky the road, the money contributed by the economy to fix the roads has been stolen by the government. The public schools where children are meant to be going for free the government waste m in paying teachers their salarie s, so these teachers go on strike and refuse to teachers these children, thus making the literacy rate unstable.There are benefits from the production of oil, but because of corruption by the government all the benefits are not taking place.If the benefits take place, there would be positive externalities because of the oil produced. Since there are positive externalities it means that the there would be welfare gain i.e. the marginal social benefit is greater than marginal social cost. The diagram below illustrates where the welfare gain is and that is between Q1 and Q*, it also shows that oil is produced at Q1 , if the production of oil is increased to Q* more welfare would be gained.Figure 3 Diagram showing positive externality.Price Welfare gain MPCP1 MSCP*MSBQ1 Q* quantity.Picture below shows an over-head bridge in Delta.Picture below shows house of a shell employee in DeltaPicture showing a factory in DeltaPicture below shows one of the good roads in Delta.4 THE FUTUREThis se ction is going to see ways the government can reign over the negative externalities in the state. There are different ways the government can control these negative externalities but first of all the government should stop being ignorant and help the economy. If government stops being ignorant they can practice laws to control and monitor pollution in the villages introduce more national and marine ensure that forestry companies re-plant trees regulate use of contaminated land.Government can impose tax on oil companies to increase the private costs, if the government should do that the Marginal private would move upwards, there might sleek over be welfare loss but it would be less than before. There should also be subsidies that is the amount of money paid by the government to a producer, it lowers the firms cost, these subsidies could be inform of grants, reduced taxation etcetera.With the money gotten from oil production government can use it to compensate victim of the negati ve externalities of oil production so that victims would not sue the offending firms. The government can pay damages to victims through free health coverage.Also since oil has now taking over the agricultural production which has caused the farmers and fishermen their jobs cause of the pollution, the government should build centers where they bring in professionals to teach them skills like mechanics, welding, painting, etcetera. If government cant find professionals they can encourage companies there to teach them the skills. If the government does this there would be fewer crises because those people would no longer be unemployed and there would now be less kidnapping, armed robbery, fraud etcetera.But if the oil industry continues with its act of polluting the environment the government should control their output in some way because it will not be possible to ban, if that doesnt work out the government could make new environmental laws and if the oil industry dont follow it then they would have to pay some amount of money since they have disobeyed the law, paying the money would increase their private costs. The diagram below shows the result if the oil industry has to pay tax.Figure 4 Diagram showing negative externality. MSCPrice P* welfare loss MPC + taxP2 MPCP1Q* Q2 Q1Quantity of oil.Firms should also be able to help, at the moment in Delta state the oil industry that is genuinely helping in the negative externalities in the economy is SHELL. Other firms should take part in helping and do things like changing its production of its techniques and operation like economizing on the amount of waste disposal from the oil production. Changing the materials used in packaging the oil, something that can be recycled should be used that it would be used again thus prevent burning of waste disposal.If government does this for the state there would a short term effect of pollution but in long term there will be no pollution. Therefore there would be less cost on the production of oil and also an increase in economy growth. But if government takes no action there would be a long term effect of oil production, and also a decrease in economy growth and an increase in the negative externalities of the economy.In conclusion it is only the government that has the power in fish filet the increase of negative externalities in the economy especially if the industries do no take action, but if government takes no action and continues taking bribes or being corrupt the economy would therefore be suffering for the costs of oil production.