FADAYOMI OLUWAFEOLAMI TOMISIN

LAW/2017/141

ENERGY LAW ASSIGNMENT

BUL 506

“The Organization of the Petroleum Exporting Countries (OPEC), is an intergovernmental

organization or cartel of 13 countries. The stated mission of the organization sation is to
coordinate and unify the petroleum policies of its member countries and ensure the stabilisation
of oil markets, in order to secure an efficient, economic and regular supply of petroleum to
consumers; a steady income to producers, and a fair return on capital for those investing in the
petroleum industry. Indeed, the formation of OPEC not only marked a turning point toward
national sovereignty over natural resources, the organization has indeed turned out as a good
example of a cartel that cooperated to reduce market competition and a significant provider of
information about the international oil market.”

Discuss. Do you think Nigeria should remain in OPEC?

Introduction

The petroleum industry is one sector that has progressively gained global traction since the
discovery of underground oil by the Chinese several centuries ago. This is basically so because
of the huge benefits/potentials inherent in the sector which analysts consider useful for human
existence. For instance, the crude oil from the industry “is a central part of modern life and the
world’s most important energy resource which we rely on in many ways for the food we eat, the
clothes we wear and the electronic we use at home and in the workplace”. Also products such as
heating oil, jet fuel, kerosene, dentures, diapers, fertilizer, lipstick, shampoo, deodorant, shaving
cream, crayons, musical devices, cameras, computers, glue, contact lenses, toothpaste, synthetic
fibres, tyres, artificial hearts and even aspirin are equally produced from the industry. Given this
importance, attempts had always been made by the industrialized world to control the activities
of the industry to the detriments of those Third World Countries whose soils the oil is extracted
from. This was the prevailing situation where the “Seven Sisters” international oil companies
owned by the West dominated and dictated the fortune of the industry up until the Third World
Countries rose to challenge the status quo by establishing the Organisation of Petroleum
Exporting Countries (OPEC) in 1960 “to coordinate and unify the petroleum policies of its
Member Countries and ensure the stabilization of oil markets in order to secure an efficient,
economic and regular supply of petroleum to consumers, a steady income to producers a fair
return on capital for those investing in the petroleum industry”.

So far, the organization has succeeded in reasserting the right of the Third World Nations in the
petroleum industry. It has also brought great influence to bear on the international oil market as it
is reported to have “possessed 79.3% of global proven crude reserves and was responsible for
60.3% of the world’s crude oil export” in 2009.

Nigeria joined the organization on the 10th of July, 1971 as the eleventh member with the
purpose of trading her natural resources to improve on her exchange earnings and to boost her
economy. Since then, the country has been playing prominent role in promoting the activities and
existence of the organization with high regards and admirations by member countries. Nigeria
has also gained a lot from being a member of the organization as the platform has given her a
unique voice among the comity of nations and influence in the world institution such as UN.

The Formation of OPEC

The Organization of Petroleum Exporting Countries, like every other international organization,
was established after due consultations with the pioneer member countries. Accordingly, it is
reported that the idea was first conceived by the government of Venezuela who then approached
Iran, Iraq, Kuwait and Saudi Arabia in 1949 requesting their support for “regular and closer
cooperation on oil matters. But the actual move for the creation of OPEC came as a result of the
nefarious activities of the so-called “Seven Sisters” International Oil Companies (IOC) namely;
Exxon, Texaco, BP, Shell, Gulf, Standard Oil, and Mobil Oil that were detrimental to the
economic interest of the oil producing states majorly from Third World Countries which they
wanted to put an end to. As noted by Shihab-Eldin these “major oil companies from the
industrialized world determined the quality of crude oil produced from the poorer nations; the
price at which this oil was sold, and to cap it all, what share to give to the owner of the natural
resources. This was part of the one-sided concessionary agreement made under mostly colonial
rule. And with this accord binding, the impoverished producer nations were limited on what they
could do.”

The implication of this was that oil prices were at exclusively low levels, with minimal returns
for those countries within whose borders the crude resources lay. This, therefore, necessitated the
urgent step by the founding member states in order to salvage the situation. Consequently, the
governments of Iraq, Kuwait and Saudi Arabia met in Cairo in 1959 in what became known as
the First Arab Petroleum Congress with Iran and Venezuela in attendance and took a resolution
requesting the International Oil Companies (IOC) to consult with the oil producing countries
before altering the posted price of oil as the IOC had done in 1959. However, IOC disregarded
the call and went further to lower the price of oil in August, 1960. This was “the final straw” that
broke the camel’s back. In response, the five founding countries represented by the following
delegates: Faud Rouhani from Iran, Dr Tala’at al-Shaibani from Iraq, Ahmed Omar from Kuwait,
Abdullah Al-Tariki from Saudi Arabia and Dr Juan Pablo Perez Alfonzo from Venezuela
convened a meeting from September 10-14, 1960 in Baghdad, Iraq and established OPEC on the
10th September, 1960 as a permanent intergovernmental organisation 2018.

After the formation, the organization’s headquarters was first located in Geneva, Switzerland
but after five years it was moved to Vienna, Austria. The decision to relocate the OPEC
headquarters from Geneva to Vienna as explained by one OPEC official was for the organisation
to have a neutral country. It was also because Austria was willing to grant diplomatic status to
the organization and its officers.

OPEC used its early years of formation to consolidate itself so as to meet the aspirations of its
members in a market dominated by the “seven Sisters” international oil companies. But by 1970s
the organization began to rise in influence as its members took control of their domestic
petroleum industries and had a major say in the pricing of crude oil on world market. It is
important to stress that that influence has continued even till date with support from member
countries, including Nigeria who has been noted for this influential role.

Membership of OPEC

OPEC is currently composed of 13 member countries. These comprise the five founding
members of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela as well as others that later joined the
organization, including Libya, United Arab Emirates, Algeria, Nigeria, Ecuador, Gabon,
Equatorial Guinea and Republic of Congo. Two former members of the organizations–Qatar and
Indonesia are not included here because they have withdrawn their memberships. While the
withdrawal of Indonesia took effect from the 31st of December, 2016, Qatar’s commenced on 1st
of January, 2019.

Organs of OPEC

There are basically three organs of OPEC. These are: The Conference, The Board of Governors
and The Secretariat. These are discussed fully below:

The Conference

This is the supreme authority of the organization. It is made up of Heads of delegations from
each member states, and it is responsible for the formulation of the organization’s general
policies. It meets twice a year in ordinary times and can also meet at extra-ordinary times.
According to Article 15 of the OPEC Statute the Conference shall Formulate the general policy
of the Organization and determine the appropriate ways and means of its implementation, Decide
upon any application for membership of the Organization, Confirm the appointment of Members
of the Board of Governors, Direct the Board of Governors to submit reports or make
recommendations on any matters of interest to the Organization etc

The Board of Governors

The Board of Governors is composed of representatives nominated by member countries and

confirmed by the Conference. It is the managerial branch of the organization. The meeting of this
organ requires two-third members to hold. Each Governor is entitled to one vote while decision
is reached via a simple majority. Also, unlike the Conference, the Board of Governors is a
permanent organ. Article 20 of the organization’s Statute outlines the functions of the Board of
Governors to include the followings: direct the management of the affairs of the Organization
and the implementation of the decisions of the Conference, consider and decide upon any reports
submitted by the Secretary General, submit reports and make recommendations to the
Conference on the affairs of the Organization, draw up the Budget of the Organization for each
calendar year and submit it to the Conference for approval, approve the appointment of Directors
of Divisions and Heads of Departments, etc.

The Secretariat

Generally speaking, the Secretariat performs the executive function of the organization. It is
headed by the Secretary General who functions as the Chief Executive of the Secretarial and the
legal representative of the organization. He is appointed for the period of three years and the
appointment is renewable.

The Secretary General is to organize and administer the work of the Organization, ensure that the
functions and duties assigned to the different departments of the Secretariat are carried out,
prepare reports for submission to each Meeting of the Board of Governors concerning matters
which call for consideration and decision, inform the Chairman and other Members of the Board
of Governors of all activities of the Secretariat, of all studies undertaken and of the progress of
the implementation of the Resolutions of the conference and ensure the due performance of the
duties which may be assigned to the Secretariat by the Conference or the Board of Governors.

Why Nigeria joined OPEC

No account of why Nigeria joined OPEC will be complete or accurate without the background to
the formation of OPEC. In order words, why Nigeria joined OPEC is almost synonymous with
why OPEC was formed. OPEC was formed on September 9, 1960 in Bagdad, Iraq, as a reaction
to the outraged sense of justice at the high handedness of the multinational oil companies which
at that time controlled all operations in the oil industry in the host countries, producing and
selling the oil in accordance with their own interests and the dictates of their governments'
foreign policies. Before OPEC came into existence, the oil companies fixed the quantity of oil to
be produced and fixed and varied the prices at which the oil was sold with utter disregard of the
interests of the host countries. Accordingly, when in 1959, and again in 1960 the oil companies
unilaterally reduced the prices at which they sold Venezuelan and Middle East Oil, the five
founding members, Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, met in Iraq capital and
formed a countervailing power block against the oil companies to protect their mutual national
interests. Thus, the primary and proximate cause of the formation of OPEC was to forestall the
downward trend in crude oil prices and the vulnerability of OPEC member economies to
diminishing oil revenues. Other factors responsible for the formation of OPEC include the need
to correct the inequity of oil concession agreements which favored the oil companies more than
the-host countries. For instance, the profit sharing arrangements made the host countries highly
vulnerable to oil price fluctuations. Mention should also be made of the growing consciousness
in the principal producing countries of the importance and immense contributions that the oil
industry could make to the economic development of their countries. The objectives of OPEC
have progressively evolved since its inaugural conference. The first set of objectives included the
stabilization of crude oil prices, the co-ordination and unification of the petroleum policies of the
member countries, the guarantee of a steady flow of income to the producing countries, ensuring
efficient and regular supply of petroleum to consuming nations and a fair return on investment to
the oil companies. A new set of objectives was introduced in June 1968. to cover direct
exploration and production activities, participation in the equity of existing concessions;
progressive and accelerated relinquishment of acreage of existing contract areas; the adoption of
conservation rules in the industry and the fixing of posted prices by the governments of member
countries. In a conference in Caracas in December 1970, a third set of objectives was formulated.
These were, to establish 55% as the minimum income tax rate; to eliminate existing disparities in
posted prices; to maintain a uniform increase in the posted prices; to adopt a new system for the
adjustment of gravity differential on posted prices; and from January 1971, to eliminate
completely the allowance granted to oil companies. The success of OPEC in realizing most of
the above objectives demonstrated its relevance to an oil producing developing country like
Nigeria. This explains why Nigeria joined OPEC. More concretely, Nigeria joined OPEC as a
result of the realization that the country was not gaining as much as the OPEC member countries
from its oil industry. Even before joining OPEC, Nigeria was benefiting from the Organization's
activities. For example, the principle of posted price determination and royalty expensing were
borrowed from OPEC. Indeed, the few concessions that Nigeria wrested from the oil companies
before joining OPEC were based on the most favored nation principle whereby any better terms
given to another producing country by the oil companies automatically became applicable to
Nigeria. In a nutshell, Nigeria joined OPEC because of the need to correct its faulty
administration of petroleum taxation such that the government receipts per barrel and posted
prices could compare more favorable with those of the OPEC members as well as the
advisability of aligning her aspirations with those of other oil exporting countries at similar
stages of development. Furthermore, since she had gained some benefits from the efforts of
OPEC even when she was not a member, it became necessary to remove the guilty complex of
being a "free rider" by joining and fully identifying herself with the organization in the just
struggle for wresting control of the oil industry from the foreign companies.

What has Nigeria benefitted from OPEC membership?

As a member of OPEC, Nigeria has lost the freedom to unilaterally determine the price of her
crude oil in accordance with market forces. Also because of production sharing and cut back
agreements within OPEC, Nigeria's membership has deprived her of the freedom to fix her oil
production levels. It must, however, be stressed that these arguments are largely academic.
Nigeria could not lose what it did not have. Before the formation of OPEC, neither Nigeria nor
any other oil producing third world country had the power or freedom to determine production or
price levels. It was the oil companies which determined both the quantity and the price. It was
OPEC that wrested this power from the oil companies and it was as a result of Nigeria's
membership of OPEC that she, eventually, was able to exercise some control over the quantity
and price of her crude oil. It can, therefore, be said emphatically that the first benefit Nigeria
derived from her OPEC membership is the success in obtaining recognition of the principle of
consultation by the oil companies and thus a measure of control over, and share in the industry.
This was in the 1960s even before Nigeria became a member of OPEC. This was achieved under
the "most favored nation principle" mentioned above. Later in the 1970s, Nigeria, because of her
membership of OPEC, succeeded in the assumption of full control over the pricing of her crude
oil. Following the emergence of the Nigerian National Oil Corporation (NNOC) later
reorganized into the present Nigerian National Petroleum Corporation (NNPC), she gained some
control of the management of the "up-stream sector" of the industry. In this way, Nigeria, like
other OPEC member countries, succeeded in putting an end to what was to her a humiliating
spectacle of the unilateral determination of oil prices by the oil companies.

Secondly, and following from the above, we have the dramatic increases in oil prices which
OPEC has achieved since its inception most especially since 1973 when OPEC countries took
over price administration from the oil companies. Accordingly, OPEC marker price increased
from $5.397 per barrel in 1973 to $34.00 per barrel in 1982. Similarly the posted price of the
Arabian marker crude rose from $2.170 per barrel in 1960 to $18.00 per barrel in 1979. An
interesting feature of this price administration is OPEC's ability to maintain crude oil prices in
slack markets and increase oil prices in times of excess demand. As a member of OPEC, Nigeria
naturally benefited from this price manipulation. The sale price of its crude oil rose from $8.36
per barrel in 1973 to $36.52 in January 1982. As a result, oil revenue rose from tit: 1.02 billion in
1973 to tit: 9.2 billion in 1981.

Thirdly, as a member, Nigeria has enjoyed many of the achievements of OPEC since 1971 and
obtained benefits which would have been very difficult, if not impossible, to wrest unilaterally
from the oil companies. These include majority equity participation in existing oil concessions;
increased oil royalties and petroleum tax rates; increased oil exploration; a more efficient
conservation policy and the use of production and service contracts for operating the oil industry
instead of the traditional concessionary system.

Fourthly, OPEC membership has increased Nigeria's political stature in the comity of nations.
The oil power has established her as an African leader and afforded her the opportunity of
playing leading roles in African politics as exemplified in the struggle for Angolan and
Zimbabwean independence.

Fifthly, Nigeria, as a member, has succeeded with OPEC in establishing and consolidating links
with other developing countries, maintaining with them a common front on all global issues of
mutual concern. A most outstanding example is the "Solemn Declaration" in Algiers in 1975 by
the Sovereigns and Heads of State of OPEC member countries which later inspired the creation
of the conference on International Economic Cooperation (CIEC), otherwise known as the North
South Dialogue. In this way Nigeria has actively participated with OPEC and other third world
countries in the quest for a New International Economic Order (NIEO). Sixthly, while the search
for NIEC continues, Nigeria with other OPEC members and without waiting for the
industrialized countries took the initiative in the establishment in 1976 of "the OPEC Fund for
International Development". Originally envisaged as a temporary aid instrument, the Fund was
made permanent in January 1980 as an international agency for financial assistance to other
developing countries. 3 Finally, Nigeria has benefited immensely from OPEC membership by
her contribution, through OPEC, to world development and to the philosophy of interdependence
of nations. To quote Dr. Marc S. Nan Nguema, OPEC has changed the world! Or, to be more
precise, OPEC has had a profound and permanent impact on economic thinking throughout the
world... There are signs that OPEC's policies are coming to be recognized for what they are,
namely genuine pointers to the realities and challenges confronting world economic development.
Never before has there been such a high degree of energy-consciousness as there is today. And it
cannot be denied that OPEC has been the prime mover behind this awareness, the driving force
which has led governments, the media, and the general public to concern themselves not only
with the depletability of oil - although this resource is at present in the foreground - but with the
whole spectrum of the world's exhaustible natural resources.
The case for and against Nigeria’s continued membership

In the light of the above benefits which Nigeria derives from OPEC membership, the case for the
continued membership is undoubtedly overwhelming. But the proponents of Nigeria's
withdrawal from OPEC have their own arguments. The country for instance, can fix her crude oil
prices to reflect market conditions and can produce as much as she wants as long as the market
can permit without OPEC constraints. Furthermore, there will be no obligation to contribute to
the OPEC Fund which gives out loans to other developing countries some of whom are even
more developed than Nigeria. It is further argued that substantial savings can arise from these
and other financial contributions which Nigeria has had to make to OPEC.

In addition, the stigma of greed attached to OPEC can be shaken off since most of the industrial
and developing countries hold the view that OPEC crude oil prices are unjustifiably high. By
thus being acclaimed to be financially abstemious and hence "a good boy", Nigeria would then
most probably be seen as 'a friendly' nation by the industrial and some other developing countries,
and as such may obtain a greater level of co-operation from them, especially in areas of oil sales,
technical aid and transfer of technology. To all intents and purpose, the above "benefits" of
operating outside OPEC are merely heroic and definitely illusory.

First, Nigeria may be regarded as a friendly country, if, as the weakest link in the OPEC chain,
she succumbs to being used by the West to break and disintegrate OPEC. But the honeymoon
will surely be short-lived. In the medium and long-term, the West will join other OPEC members
and the rest of the third world countries in condemning and "blacklisting" Nigeria as being
instrumental to destroying the only effective hope the world has for bringing about the much
desired New International Economic Order (NIEO). Can the country stand such a stigma? Surely
not! Although by operating outside OPEC, Nigeria may not contribute to the OPEC Fund, she
will nonetheless continue to discharge her other International obligations such as contributing to
African Development Bank and other international bodies. In such a situation the savings from
non-contribution to the OPEC Fund will become so marginal, more apparent than real, and at
any rate, may not fully compensate for the consequent loss of face and debased international
stature of the country. Perhaps the strongest case the Nigeria-leave-OPEC proponents have is
over price and quantity i.e. that if she leaves OPEC she would be free to fix the price and
determine the quantity of her crude oil according to the dictates of the market without OPEC
constraints. But this argument is myopic. It assumes an unduly large price and income elasticity
of demand for Nigeria's crude oil; it assumes that other OPEC members, particularly Libya and
Saudi Arabia, will keep quiet if Nigeria starts a "price war"; and it assumes that Nigeria outside
OPEC can succeed in becoming a price setter rather than a price taker which she is inside OPEC.
Surely none of these assumptions are plausible. The price elasticity of demand for Nigerian oil is
not infinite. OPEC cannot be expected to be neutral if Nigeria starts a price war to destroy its
solidarity and Nigeria outside OPEC will remain a mere price adjuster rather than a price setter
to reflect OPEC and North Sea oil prices. But the price argument is myopic in yet another sense.
It ignores all the other benefits of OPEC membership which Nigeria outside OPEC would then
lose. It ignores the international stature of OPEC and the pride derived from its membership
which will also be lost. It ignores the fact that Nigeria outside OPEC would be very vulnerable to
the machinations of the industrial countries and the oil companies whose major objective is to
have lower crude oil prices and break-up OPEC; and it ignores the fact that Nigeria would lose
the protection against the oil companies afforded by OPEC membership. In the light of the above,
it becomes obvious that it will be a most regrettable retrogressive step for Nigeria to leave OPEC.
It will amount to setting the clock of progress many many hours behind.

The Prospects

The answer to Nigeria's present economic problems therefore is not in opting out of OPEC but in
effective management of the oil economy. Since 'oil is the main engine of growth of the
economy and since it is Government policy to use the oil resources to transform the country into
a modem state, technologically and industrially and 'to develop the productive capacity of the
economy and thus permanently to improve the standard of living of the people the prospects lie
in the efficient and effective use of the oil resources. Available estimates indicate that despite
competing substitutes, oil will still occupy its position as a major source of world energy by the
year 2,000 although its percentage contribution is projected to decline from 45% in 1990 to 37%
in the year 2009. Thus, increases in oil production from non-OPEC sources notwithstanding,
OPEC still accounts for a substantial proportion of total world production of crude oil,
accounting for 55% in 1973 and 44.3% in 1980. OPEC oil is expected to remain an important
factor in total world energy supply in the 1980s and 1990s. It is also estimated that Nigeria's
reserves of oil (proven plus probable) are more than 115 billion barrels. The proven reserves
alone are estimated to last Nigeria more than 25 years from now at a daily production rate of 2
million barrels. Besides, as at 1st January, 1981, Nigeria's natural gas reserves stood at 88 trillion
standard cubic feet, equivalent to about 15 billion barrels of crude oil. It follows, therefore, from
all these that crude oil will continue to be a major source of world energy in spite of competing
substitutes and that Nigeria will remain a major exporter of crude oil for many years to come
because of her abundant proven and probable oil and gas resources. The question then is price.
Because Nigeria produces under competitive conditions, she cannot unilaterally significantly
influence the prices of her oil. This is where and why solidarity with OPEC becomes imperative
in order to use the combined weight of OPEC to maintain reasonable prices for her crude oil. But
the politics of oil pricing must not be taken lightly. OPEC, for instance, is accused of over-
pricing her oil and many argue that the high price partly explains Nigeria's current decrease in oil
sales. It is nevertheless the fact that, apart from the worsening economic recession in the
industrialised countries, the main consumers of oil, the present slump in the demand for oil is a
direct consequence of the reaction by consuming countries against what they consider to be the
high price of oil. Indeed, ever since the oil price explosion of 1973, the major oil consuming
countries have been making strenuous efforts to reduce their dependence on OPEC oil. To this
end, the previous loose co-operation between these countries under the umbrella of the OECD
took a new tum. A tighter co-operation framework has been introduced under the International
Energy Agency whose primary function is to co-ordinate the energy policies of its members with
a view to reducing excessive dependence on oil imports and to increasing energy conservation.
Other objectives, include the development of alternative sources of energy and the setting up of
an oil consumption sharing system during supply emergencies. Accordingly, in the United States,
Western Europe and Japan, measures to substitute domestic coal, gas, nuclear power, solar
energy and hydro-electricity for oil, have been pursued with vigor. Not only have these measures
resulted in a 12% reduction in their total oil consumption and 17% fall in their total oil imports
over the last two years, but they have also helped to increase the energy options available to the
major consumers. These efforts at substitution, together with increased oil production from the
North Sea, Alaska, and Mexico have helped to depress the demand for OPEC oil, and ipso facto
for Nigerian oil. This development is significant in assessing the prospects for OPEC oil in
general and for oil in the Nigerian economy in particular because there is a presumption in some
circles that the present slump in the oil market may be temporary. A closer examination may, in
fact, indicate that it may not be temporary. OPEC may, through its production cut-backs,
stabilize current oil prices; and there may certainly appear some recovery in oil demand when the
economic recession is over; but the present efforts by the consuming countries to develop and
expand substitutes for oil, to develop domestic oil resources, to achieve greater economy in oil
consumption and to enforce more stringent conservation measures, must be expected to continue.
In these circumstances the growth in demand for OPEC oil is very unlikely to resume its pre-
recession rates. And when sooner or later Iran, whose disrupted oil production helped many other
countries to maintain their output, re-enters the world market, the competition for oil sales may
be much more intense.

In assessing the prospects of oil in the Nigerian economy, therefore, certain factors have to be
borne in mind.

The first is that the present slump in the demand for oil may not be temporary after all. Even if,
as expected, demand picks up after the recession, it is unlikely to reach its pre-recession levels. It
follows that Nigeria's future revenue and expenditure possibilities are not as bright as they were
in the past decade.

Secondly, Nigeria must explore other markets· and other uses for her oil. The present over
dependence on one market-The US-is most unhealthy. Indeed, while the major oil consuming
countries are searching for alternative substitutes, oil producing exporting countries should be
developing alternative uses for oil.

Thirdly, in addition to developing alternative uses and markets for their oil, Nigeria and other
OPEC countries should expand their domestic consumption and refining capacity. Indeed, the
bane of OPEC is that it produces a product it does not use or refine in any significant extent but
relies almost exclusively on its raw or crude state. If OPEC increases her domestic consumption
and refining capacity significantly, she can, at least, maintain current production levels and
export some refined products if and when the demand for crude becomes depressed. Finally,
since Nigeria is the weakest link in the OPEC chain by being the most vulnerable to a decline in
demand for oil, she should embark on a deliberate policy of building up reserves so as to be able
to withstand future shocks arising from fluctuations in the international oil market. Her hitherto
neglected agriculture should be revamped to diversify sources of reserve earnings. Although
OPEC has recently proposed the establishment of a compensatory facility to assist its members
in difficulty, such assistance cannot be limitless. Only robust reserves can maintain Nigeria's
prestige and stature not only in OPEC but also in the comity of nations.

In conclusion, it is seen from the above that the solution to Nigeria's current economic problems
is not to pull out of OPEC. That would be a very regrettable, retrograde step. The answer lies
rather in the judicious management of her oil resources, diversifying her uses and markets for oil,
building up robust reserves to withstand future oil shocks, diversification of the economy and
massive expansion of her agriculture to reduce the heavy dependence on oil. Rather than pull out,
Nigeria should continue to help to strengthen OPEC. Without OPEC, the oil exporting countries
of the third world in general and Nigeria in particular could not have achieved the success in the
fight against imperialism and the multinationals in the control of their natural resources. Nigeria
has a lot to lose by operating outside, and more to gain, by operating inside OPEC.
References

1. The Economist: London, May 1982, p.20.

2. Shatzl, L. Petroleum in Nigeria, NISER, Ibadan, July 1968, p.119.

3. Dr. Marc S. Nan Ngumena: 'Twenty One Years of OPEC-OPEC Bulletin', October 1981, p.23.
4. Similarly the argument that Nigeria outside OPEC may be regarded by the West as a friendly
nation and therefore attract a higher level of co-operation, technical aid and transfer of
technology is not borne out by the experience of non-OPEC developing countries.

5. Third National Development Plan 1975-80, p.135.

6. Second National Development Plan, p.135.

7. Petroleum Intelligence Weekly (PIW) Special Supplement March 24, 1980.

8. E.O. Ehbogah (1978), Petroleum and Natural Gas Development in Nigeria, World Oil, in Press,
p.5.

9. Demand Elasticities for Petroleum Exports of OPEC - IMF: Middle Eastern Dept., Sept. 1981,
p.13, etc.

10. World Energy Options and Policies: An address by HE Sheikh Ahmed Zaki Yamani, Saudi
Arabia's Minister of Petroleum and Mineral Resources, to the Oxford Energy Seminar, Sept. 25,
1981, published in OPEC Bulletin, October 1981, pp.7-15.