THE ROLE OF INSURANCE IN THE PETROLEUM INDUSTRIES IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Before independence and shortly after the words, Nigeria depended solely on agricultural products for her foreign exchange earnings. The oil boom in the 70’s led to the Nigeria economy becoming an oil economy with a resultant neglect of the agricultural sector.
The boom, attracted many oil producing company to Nigeria, exploration and production of crude oil started on both onshore and coasts of Nigeria. Among the early oil production companies to insight crude oil in Nigeria are: The British Petroleum Company (now shell), Agip, Mobil, Total and most recent. Unipetrol, chevron, to mention but a few, the most recent development in the petroleum industry in Nigeria is the establishment of the petrochemical companies by the federal government.
It is a common knowledge that the sector is currently dominated by the international companies, which has the financial muscles and technical expertise to invest in this highly capital incentive, highly risk and technologically driven sector. It is unfortunate to note that after over five decades of oil exploration and production, Nigeria could only boast of less than 20% local input in the industry, that is generating over 90% of Gross National Product. On the other hands, countries like Brazil, Malaysia and Norway has grown their local content to enviable levels.
The poor participation of Nigerians in the oil industry led the federal government to initiate the “Nigerian content” development policy in 2001 by selling up the national committee on Nigerians contents (Adepoyigy 2006).
The committee has defined “Nigerian content as “the quantum of composite values added to, or created, the Nigerian economy through a deliberate utilization of Nigerian human and material resources and services in the exploration, development, exploration, transportation, and sales of Nigerian crude oil and gas resources, without compromising quality, health, safety and environment.
Petroleum products is used in all major aspect of human endeavors, this include household, manufacturing, transportation and communication. The petroleum industry has become an important ingredient in the modernization process and industrial growth of all nations. In addition, for developing countries, petroleum is a source of revenue generation, foreign exchange earner and a high contributor to the National Gross Domestic Product. Little wonder therefore that our age has being described as the “age of petroleum”. In their publication on “petrochemical and the Nigerian economy”, NNPC defined petrochemical as the product base on chemicals derived from oil and natural gas”.
As the country’s economy depend solely on oil, product chemical derived from oil and natural gas, then one wonders various types of risk that the petroleum industry are exposed to. The insurance industry ensures that oil companies which have enormous risk are insured. The insurance industry advice on.