CHAPTER ONE INTRODUCTION BACKGROUND OF THE STUDY:Oil is a major source of energy in Nigeria and the world in general. Oil being the mainstay of the Nigerian economy plays a vital role in shaping the economic and political destiny of the country. Although Nigerias oil industry was founded at the beginning of the century, it was not until the end of the Nigeria civil war 1967 1970 that the oil industry began to play a prominent role in the economic life of the country. Nigeria can be categorized as a country that is primarily rural, which depends on primary product exports especially oil products. Since the attainment of independence in 1960 it has experienced ethnic, regional and religious tensions, magnified by the significant disparities in economic, educational and environmental development in the south and the north. These could be partly attributed to the major discovery of oil in the country which affects and is affected by economic and social components. Crude oil discovery has had certain impacts on the Nigeria economy both positively and adversely. On the negative side, this can be considered with respect to the surrounding communities within which the oil wells are exploited. Some of these communities still suffer environmental degradation, which leads to deprivation of means of livelihood and other economic and social factors. Although large proceeds are obtained from the domestic sales and export of petroleum products, its effect on the growth of the Nigerian economy as regards returns and productivity is still questionable, hence, the need to evaluate the relative impacts of crude oil on the economy. In the light of the study, the main objective is to assess the impact of crude oil on the Nigerian economy.In the beginning, the very idea of poverty in Niger Delta was seen as a farfetched. Dream things could fall so much apart for poverty to become the ultimate guarantor of the elusive national unit and desperately sought manumit of purpose among the Niger Delta people. Niger Delta was believed to be one of the richest regions in Nigeria. The main reasons for such belief begin that she earned much foreign exchange from export of crudeoil products. As a matter of fact, she is naturally endowed with resources which could be harnessed and the process used to improve the peoples living standard. According to Fubara 2006, the Niger Delta covers an area of well over 70,000 square kilometres, and accounts for 7.5 percent of the total land mass in Nigeria, which extends from APOL to Bight of Benin. The region also covers as coastline,560km.The states that comprises of Niger Delta includes; Akwa Ibom, Bayelsa, Cross Rivers, Edo, Delta, Rivers, Abia and Imo states. The region consists of 40 different ethnic groups speaking 250 different languages. Their major occupations is farming and fishing.Consequently, the Niger Delta in recent times has become a strategic region in Nigerias social, political and economic framework due to the huge endowment in hydrocarbons. Thus, the region now commands a dominant position in the Nations political economy. This land brought about various levels of confrontations between the oil producing communities members and the oil multinational companies and between them and the government on the other hand. Van Buren 2001 However, the development profile of the Niger Delta presents a paradox despite the abundant natural resources prevalent in the region. The area is undermined by endemic poverty and its people are ranked among the poorest in the world. Since the 1990s, the Niger Delta has degenerated into a dangerous threat of violent conflicts which are sustained by ethnic militants, ethnic war wards and misguided youths. Therefore, there is no gainsaying to the fact that economy of the nation affects the Niger Delta negative owing to the fact that the resources that are generated from her land is being used to develop other states while she remains undeveloped.NNPC which stands for Nigerian National Petroleum Corporation was established on April 1, 1977 as a merger of the Nigerian National Oil Corporation and the Federal Ministry ofMinesand Steel. NNPC by law manages thejoint venture between the Nigerianfederal governmentand a number of foreignmultinational corporations, which includeRoyal Dutch Shell,Agip,ExxonMobil,Chevron, andTexaconow merged with Chevron. Through collaboration with these companies, the Nigerian government conductspetroleumexploration and production. In 2007, the head of the Nigerian wing ofTransparency Internationalsaid salaries for NNPC workers were too low to prevent graft. The NNPC Towers inAbujais the headquarters of NNPC. Consisting of four identical towers, the complex is located on Herbert Macaulay Way, Central Business District Abuja. NNPC also has zonal offices inLagos,Kaduna,Port HarcourtandWarri. It has an international office located inLondon,United Kingdom.