Research Korner: Project Implementation Plan

The Impact and Application of Information Technology in Nigeria Petroleum Corporation plc

Introduction In the world oil market, demand stems from the decision of millions of individual firms and households, while supply decisions are made by few, specifically a few governments and the Organization of Petroleum Exporting Countries (OPEC) cartel. The result is an oligopolistic market for oil, supply is limited by a cartel to raise prices, and even non-OPEC countries do not always respond in an easily predictable way. Fundamental changes were taking place in the world oil market, as control of oil resources shifted steadily away from the major oil companies and toward the producing countries (1995). The public policy concern about petroleum import dependence arises because the world oil market is vulnerable to price shocks. Large and sudden increases in the price of oil inflict large economic costs on the U.S. economy. An important component of these costs is the dollars, which represent claims on goods and services that flow from U.S. consumers to foreign oil producers. For any particular price shock, higher levels of post shock imports result in greater transfers of wealth out of the U.S. economy (1995). The world oil market is the combination of various entities and organizations that produce, distribute and sell oil and other petroleum products.  The world oil market trades for oil products, any change in the world oil market affects the pricing of oil and other petroleum products. One country that is involved in the world oil market is Nigeria. This country is an emerging economy due to its petroleum production. This paper intends to determine the Impact and Application of information technology in Nigeria National Petroleum Corporation plc. Nigerian economy Nigeria's economy is one of Africa's biggest, a fact that partially explains the country's political significance. With an area of 357,000 square miles, Nigeria is not particularly large by African standards, but its 100 million people make it the largest demographically, providing a sizable workforce and domestic market. Variable climates ranging from sparsely populated Sahelian and savanna conditions in the north to densely populated rain forest in the south have had an impact on the range of agricultural products harvested. Colonialism, too, had a significant impact on agricultural production, marketing, and exports, which in turn influenced the shape of the emerging political economy (1998).  During the 1960s, a combination of factors contributed to a dramatic shift of economic profile, and agriculture was replaced by petroleum as the mainstay of the economy, in terms of both export revenues and attracting foreign investment--though, importantly, not in terms of employment. By the mid-1990s, Nigeria was the eighth largest producer of petroleum in the world, though only the thirtieth in gas production. Unfortunately, social indicators reflecting the quality of life for the average citizen remain poor (1998).               Half of the population lives below the poverty line of $1 a day, and the country's literacy and infant mortality rates are among the lowest in the world. Although petroleum has annually accounted for more than 90 percent of export revenues and 80 percent of government revenues over the past two decades, there was a very different economic picture before the 1970s. Unfortunately, as the 1980s wore on, the country's oil revenues continued to fall. The debt situation of the country worsened, and the deteriorating economy forced greater concessions to IMF demands. Nigeria's economic performance has not matched its potential (1995). From the standpoint of the 1970s, it is difficult to explain how the economy degenerated into its present condition. The large revenues from oil were and are being squandered, either in development projects that did not prove worthwhile or, sadly, in the obscene corruption of successive elites. Far from building an economy matching the champion of Africa, governments have helped relegate it to the status of chump. Political instability, uncertainty, and bankruptcy plague the economy, in which the World Bank has increasingly become the key player. And in the current climate, agreements with the IMF seem to be very difficult to achieve. Agriculture still lags, as do manufacturing and industry; and petroleum, though still the lifeblood of the country is open to many political pressures. One can hope that something called the Nigerian spirit or character will lift the country from the mire of pessimism. Until such issues are resolved, long-term confidence in Nigeria's economic development must remain in the balance (1995). Like most of the third world countries’ economies Nigeria has experienced different kinds of economic problems and has a significant amount of debts from foreign countries. It is doing the best it can to improve its economic status and reduce its foreign debt.  The country has made use of different techniques to solve such problems and create a better standing for its economy.  The country made sure that they make use of all resources to create a better economic standing. Emerging economy From an economic point of view, the most significant developing countries are those whose economies are 'emerging' both in terms of market opportunity and in the sense that they are coming out from the constraints of state administration and restrictions on foreign trade. These economies are now seeking to modernize rapidly with the assistance of foreign governments and companies (1998).  The faster rate of growth in emerging countries starts from a less-developed economic base, which means that they manifest a high level of demand for both consumer and industrial products and services. Their economies therefore offer the most significant opportunities for companies from the developed countries to expand their markets. While acquisitions are generally the favored mode of expansion into developed-country markets, cooperative forms such as joint ventures tend to be the most prevalent in emerging economies. This is partly a result of host government preferences for local firms to share in the ownership of foreign funded ventures in the expectation that such participation will increase their opportunities to acquire new technology, management skills, and other expertise (1998).     It also reflects a frequently found preference among foreign investing companies, at least in the early years, to reduce their exposure to risk, and to co-opt the assistance of a local partner in navigating through an unfamiliar environment. The cultural and institutional features of the emerging economy are normally quite different from those of the foreign partner's home country and this creates additional complexity for that partner (1997). Secondly, the nature of partner objectives and the achievement of complementarity between them differ from those applying to most alliances between partners from developed countries. Thirdly, the differences between emerging and developed countries in culture and environment, together with the fact that in some cases the emerging economy has a colonial legacy with the sensitivities attaching to this, can give rise to special difficulties in the process of managing alliances (1997). When one country is said to be an emerging economy it means that it has passed the different economic challenges that they have encountered. Nigeria has made sure that it uses appropriate strategies to surpass any economic challenges. The emerging economies have come back from problems in their economies and they find ways to conquer such problem. Major emergent economies are on the fast track to economic growth but yet beset by critical challenges to the sustainability of their business environment.   Nigeria is an emerging economy it has faced different kinds of economic problems over the years. It is still facing some of the economic problems and they are finding solutions for it.  The blockages for the continuous growth of the countries ‘economy is the corruption happening in the country, its lack of drive to live up to the things expected of them and  the different debts they have incurred over the years. The different blockages cause doubts about how stable the country’s economy would be. The different blockages should not be a problem for the country; it is supposed to be a challenge to them so that in the future the country will be economically mature.  Economic growth Economic infrastructure, such as telecommunications, power, transportation, and municipal services, are necessary for economic growth, but too often governments are unable to supply the needed levels of infrastructure. Governments must open the provision of economic infrastructure to the private sector. Mobilizing finance for infrastructure, in turn, requires the development of capital markets. Privatization has a macroeconomic impact on the development of capital markets. As described in the preceding section, privatization of State owned Enterprise (SOEs) and economic infrastructure reduces deficits and inflationary pressure, which builds a stronger foundation for capital markets (1996). Privatization can be a means of deepening domestic capital markets. Public share sales and mass privatization help create broad and diversified share ownership, new companies listed on the stock exchange, and new investment funds. These forms of privatization stimulate the creation and scope of operation of capital market agents, including critical back office operations. The usual candidate companies for privatization are just the ones needed to add liquidity and stability to the stock market (1996).   Many of the SOEs were created to give government control of the commanding heights of the economy. Although such SOEs invariably require restructuring after privatization, selling SOEs in the telecommunications, power, banking, petroleum, cement, and other sectors will increase market capitalization and liquidity, and add stability to the stock market. Privatizations by share sale can help to transfer the financial technology of initial public offerings (IPOs) to the fledgling local securities industry, and have a demonstration effect by encouraging private sector companies to undertake their own IPOs and secondary offers to raise equity financing. These are new vehicles to channel savings into productive investment, which is a key to economic growth. In general, the role of capital markets is to facilitate the transfer of funds from savers to long-term investors who invest in the physical capital needed to increase productive capacity and generate economic growth ( 2000). Capital markets deal in instruments of a year or more, and include long-term debt obligations, such as corporate and government bonds, and equity instruments, such as common stock in companies. Compared to money markets, capital market instruments involve longer maturities and relatively high degrees of risk; therefore, they must provide higher rates of return for investors. Capital markets invigorate the financial system (Barclay 2000). Any growth in the economy means that there is an increase in the average standard of living. Different factors contribute to economic growth; each factor may make the economic growth faster or slower depending on the circumstance.   One economic growth factor is the Gross domestic product (GDP).  The GDP serves as an indicator of the increase in average standard of living.  Nigeria’s economic growth relies on how successful and saleable its GDP of petroleum products is. The petroleum products tend to dictate whether the country will be in an economic slump or it will attain economic growth. The petroleum products are a good source of income because of its worldwide demand. Competitive economy Even in advanced countries technological developments, where they tend to increase the degree of complementarity between different investment decisions, may have a profound effect on market structure. There exist between the firms in a modern competitive economy complex interrelationships of ownership and control, which are abstracted from in much of our more formal analysis; their justification derives, in part, from the need to co-ordinate complementarity activities. And the optimum size of the firm may be determined, not so much by the scale economies associated with any particular operation, but by the number of operations which require planned co-ordination (1997). Nevertheless, as we have seen, all the forces do not work in the direction of integration. The inevitable imperfection of the entrepreneur's knowledge, both about technical conditions and about the prospects of other firms, checks his willingness both to make long-term binding commitments and to throw in his lot with that of others. The counterpart of entrepreneurial reluctance to make binding commitments will be a policy of deliberately limiting the degree of integration provided for in the plan (1997).    Close complementarity between several investments is equivalent to a conductor of error; some degree of independence acts as insulation. The greater the extent to which the profitability or propriety of any one investment depends on others being implemented exactly according to plan, the wider will be the area over which the consequences of any particular failure will be felt. The absence of a sufficiently wide consensus about the profitability of simultaneous investment in related directions is also a check to concerted activity in both kinds of economy; in a planned system the combined investment can still proceed, provided the controlling authority issues the appropriate fiat. Whether this is a desirable outcome, however, depends of course on whether its assessment of the situation is correct (2001). Opinions about the best allocation of resources are weighted in a competitive economy by the wealth and the credit which those holding them can command; in a planned system, by the position of those holding them in the hierarchical structure. In a competitive economy, the command over resources exercised by any particular entrepreneur, and therefore the weight to be given to his estimates depends on the extent of his capital and of his credit. In the competitive economy, the ultimate tribunal is composed of particular owners of wealth who feel able to form an opinion on the matter ( 2001). To have a competitive economy means that the country can match with the kind of economy other emerging economies are having. It shows how well the country has performed and maintained its status. It shows how effective a country’s economic policies and procedures are.  Nigeria is attempting to be a competitive economy that can conquer any attempts to destabilize its economy and prevent it from gaining economic growth. The country can attain economic competitiveness through improving its products for exports and improving the services of its stock markets.  Through the use of information technology the country can achieve higher levels of competitiveness; this could be used in the global market. Industrial development The globalization of markets, manufacturing and techno-industrial innovation therefore gives particular importance to the different kinds of networking. In contrast to previous forms of the international division of lab our, location participation is less denned by contributing products than by contributing to the various processes of production. These highly globalize processes are decisive for both different types and different opportunities for industrial development that can be identified at different industrial locations (2003). Global tendencies in industrial development are leading to a more complex form of the international division of labor. While the relocation of mature and old industries has induced regional crisis in the traditional industrial centers, now the transfer of such industrial capabilities provides the basis for advanced industries to keep costs under control and to gain competitiveness based on low production costs at locations where suppliers for these parts are based. This kind of hierarchical integration is based on different production costs and demands successful networking between locations that are on different levels of industrial development. Depending upon the competitive situation and the opportunities to gain benefits from relocating manufacturing, there is a tendency towards the integration of new industrial locations (2003).   Even though there is a new pattern of integration due to both international production networks and processes of globalization, this does not relate to a complete change in industrial development. The continuation of key strategic centre or of the manufacturing of key elements at established locations, competing against relocated advanced production units in new locations, is sharpening the regional expression of the international division of labor that can be understood only if the underlying processes of organizing global manufacturing are analyzed National strategies for techno-industrial innovation are inevitably picking particularly appropriate cases for success ( 2002). The pre-existing regional structure, the very specific requirements for these new technologies and new forms of industrial development, and the need for immediate realization of these processes consequently do not take into regard attempts at regional development. Developments in certain industrial sectors have a regional expression, and these regions also form the basis for uneven economic development. Whilst not denying the importance of public policies, regional development to a great extent follows from the geographical expression of national industrial capabilities. Even though many of the previous centers of industrial development reemerge in relation to current innovations, the regionalized division of labor changes with regard to new technologies ( 2002). Industrial development in Nigeria was had its attention on the making sure that the country will have better relationship with the private sector. The government wants to make sure that all profitable resources of the country will be used for Nigeria’s development. The government also intends to fully develop its oil and gas resources so that the country can recover from its economic slump.  The focus of the country is changing the methods used by businesses in the petroleum industry. Capital Markets             Almost without exception, contemporary economic theory extols capital markets as the financiers and controlling mechanism of the capitalist system. The financial failures of government-owned enterprises and the less developed countries are commonly attributed to the absence of capital market constraints on their profligacy. The main condition for the development of equity markets, the joint stock system of company ownership, did not become legal for industrial companies in industrialized countries until the 1860s (2000). Even then, the key actual function of the capital market was not the creation of a market that would allow capital to be switched between companies, but the tapping of the wealth of the old, principally landed, upper classes, in order to provide finance for the enterprises needed to establish the new capital-intensive industries of the second half of the nineteenth century. Through the capital market, those owners may more easily liquidate their interests in a company experiencing difficulties, providing there are buyers of their stock (2000).   If there are no buyers, then the shares are in effect suspended and the owners of such a company have to liquidate the company to retrieve their money. Thus the benefits of greater access to finance for companies that a capital market affords are offset to some degree by the weaker commitment of the owners to their enterprise. This increases the risks attendant upon capital market financing of fixed capital investment, and is the reason why rational entrepreneurs occasionally go private by buying out their less committed shareholders ( 1999). Although the issue of capital market instruments raises cash, that ash is the asset counter-part of the capital market liabilities. If the company buys other assets for that cash, the return on them must be at least as good as its payments commitments to the capital markets. There may appear to be many such opportunities in the boom, but they will almost inevitably bring reduced returns in a recession. If the proceeds of a capital market issue are retained as cash, then the credit represented by the bank deposits remains the asset counterpart of capital market liabilities. But because it is on the company’s account at the bank, it is indistinguishable from internally generated funds, so that it is more likely to be used speculatively on ventures which bring little or no return, or used to service capital market obligations which cannot be rolled over’ when the capital market is illiquid ( 1999). In a recession, the demand for capital market finance tends to dry up, as firms concentrate on maintaining payments on commitments already entered into. Furthermore, the returns from fixed capital investments completed in the recession are now lower than anticipated, providing a less convincing case to the markets for subscribing to new stock that a company may try to issue. Eventually it may squeeze reserves and oblige companies to lower or even pass their dividends ( 2000). The capital market serves as added measure for governments and businesses to liquidate their interest in a certain company that has experienced various kinds of problems.

The Impact and Application of Information Technology in Nigeria Petroleum Corporation plc

Introduction In the world oil market, demand stems from the decision of millions of individual firms and households, while supply decisi...