THE IMPACT OF INSURANCE IN THE GROWTH OF THE PETROLEUM INDUSTRY IN NIGERIA
(A CASE STUDY OF LEADY WAY ASSURANCE AND I.G.I)
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The impact of insurance in the growth of petroleum industry in Nigeria, insurance plays a vital role in the petroleum sector from the mining of petroleum products to its final use. Petroleum industry is the major source of income in Nigeria, therefore there is a need for proper protection of the industry. This project examines the impact of insurance in the petroleum industry. It also identified the various services insurance company will render to the petroleum industry. It also create awareness on the importance of insurance in the petroleum sector. The method use in analyzing this data includes the descriptive method and questionnaire method. The tools used are: figures, percentages and tables, chi-square (x2) method was used in testing the hypothesis. Based on the data collected and analyzed in this study, the following findings were made: that there are various units which are exposed to risk during the offshore operations. It was also noted that the local content implementation has a positive impact in the development of the petroleum industry. I also recommend that insurance companies should design adequate policies to cover the various units that are exposed to risk during offshore operation.
TABLE OF CONTENTS
Table of contents
1.1 Background of the study
1.2 Statement of the problems
1.3 Objectives of the study
1.4 Research questions
1.5 Research hypothesis
1.6 Significance of the study
1.7 Scope and limitation of the study
1.8 Definition of the operational terms
2.1 History of petroleum industry
2.3 History of Leadway Assurance in Nigeria
2.31 History of Industrial and General Insurance (I.G.I)
2.4 The impact of insurance in the growth and development of the petroleum industry
2.5 An overview of the oil industry risk exposures
2.6 Insurance coverages
2.7 Insurance and the oil industry
2.7.1 Major classes of oil insurance
2.8 Oil insurance underwriting
2.9 Physical damage insurance
2.10 Local content and the Nigerian insurer
2.11 Local content policy implementation
2.12 Reasons behind government intervention
3.1 Research design
3.2 Area of study
3.3 Source of data
3.3.1 Primary data
3.3.2 Secondary data
3.4 Population of the study
3.5 Sample size and sample techniques
3.6 Instrument used
3.7 Reliability/validity of the instrument
3.8 Method of data presentation and analysis
4.1 An overview
4.2 Data preservation and analysis
4.3 Test of hypothesis
Summary of findings, conclusions and recommendations
5.1 Summary of findings
5.4 Suggestions for further studies
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.
1.2 STATEMENT OF THE PROBLEM
1. The impact of the insurance services is not adequately felt in the oil and gas industry
2. Petroleum industry do not know how to handle their various insurance policy document.
3. Nigerian insurance industry are not actually practicing local content policy to its fullest.
1.3 OBJECTIVE OF THE STUDY
i. To examine the impact of insurance services in oil and gas industry.
ii. To educate workers in petroleum industries on how to handle various insurance policy documents.
iii. To make sure that Nigerian insurance industry actually participate fully in the development of the local content initiative.
1.4 RESEARCH QUESTIONS
1. Do you know why insurance services are not adequately felt by oil and gas workers?
2. Why is it that oil and gas workers does not known how to handle various insurance policy document?
3. Nigerian insurance industry are not adequately participating in local content policy, what are the reasons for this?
1.5 RESEARCH HYPOTHESIS
Ho: Nigerian insurance services are not felt by the oil and gad workers.
Hi: Nigerian insurance services are felt by the oil and gas workers.
Ho: Nigerian oil and gas workers do not known how to handle insurance policy documents properly
Hi: Nigerian oil and gas workers know how to handle insurance policy documents properly
Ho: Nigerian insurance industry do not actually practicing local content policy to its fullest
Hi: Nigerian insurance industry do actually practicing local content policy to its fullest
1.6 SIGNIFICANCE OF THE STUDY
i. To reveal the risk exposure units in the petroleum industry, to enable them make decision on which one to recommend for insurance protection.
ii. The study will show the level of development achieved in the industry by the implementation of the local content policy.
iii. This study will act as a means of creating more awareness on the importance of insurance to the petroleum industry as well as the general public.
iv. This study will serve as a foundation for further study
v. The recommendations made at the end of this study will be a great importance to the insurance industry, graduates, the government as well as general public.