Assessment Answers | Impact Of Exxon Mobil On Africa: BEE3042

Running head: IMPACT OF EXXON MOBIL ON AFRICA
IMPACT OF EXXON MOBIL ON AFRICA
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Running head: IMPACT OF EXXON MOBIL ON AFRICA
IMPACT OF EXXON MOBIL ON AFRICA
Name of the Student
Name of the University
Author Note
1 IMPACT OF EXXON MOBIL ON AFRICA
Table of Contents
Introduction: ……………………………………………………………………………………………………………… 2
The research question: …………………………………………………………………………………………….. 2
Rationale of the study ……………………………………………………………………………………………… 2
Addressing the issue: ………………………………………………………………………………………………. 2
Hypothesis ………………………………………………………………………………………………………………… 3
Analysis and Discussion ………………………………………………………………………………………….. 6
Positive Impacts ………………………………………………………………………………………………….. 7
Negative impacts ………………………………………………………………………………………………… 9
Conclusion ………………………………………………………………………………………………………………. 11
References ……………………………………………………………………………………………………………….. 13
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Introduction:
The research question:
The case study will be focusing on the impact the US oil company ExxonMobil is
having on the Nigerian socio-economic segment. ExxonMobil is an American oil and gas
entity which is an MNC company and one of the global leaders in this said sector. Calculated
in 2021, this company acquired arevenue of $285.640 billion (Statista, 2022). With 62,000
employees this company ’soperational dynamic is excellent in the global market. Since 1973,
this company started its expansion to North Sea, Gulf of Mexico, Africa and Asia. In this
paper the research question will focus on how ExxonMobil had impacted the sustainability
and socio-economic aspects of Nigeria aAfrican nation as it has been witnessed by several
environmentalist and business experts that this particular US company was causing havoc on
the community of the country in terms of environment, society and economic segments.
Rationale of the study
This issue has major significance because the world today is promoting sustainability
measures in all aspects of the economies around the world (Ossebaard & Lanchman, 2021).
Since the last of 1990s, the entire world was focusing on lowering the carbon emission and
the sustainable goals were being adopted in almost every country in the world. Now, as
debated several times, the African countries have been suffering from pollution and
environmental problems, mainly caused by the MNCs. Thus, itis crucial to analyse this issue
critically to get to the root of the problem.
Addressing the issue:
This topic will be addressed using secondary qualitative data collected from
government websites, academic journals and newspapers. Qualitative data are the
characteristics any attribute possesses. After that the said data sets will be critically analysed,
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which means, both positive and negative aspects will be discussed and asuitable conclusion
will be drawn on the same on how ExxonMobil is impacting the African countries.
Hypothesis
The theory of capitalism traces back to the times, when merchants thought hoarding
gold and silver coins brought about prosperity. However, with the theories of Adam Smith,
the whole process of capitalized production methods came into being. It was this theory that
allowed the factories to have labours and through division of labour mass production was
made possible. The classical frameworks of capitalism, advocated that with the profits only
came the generation of future capital which could be utilized to increase the level of
production. The importance of profits was hence emphasized in this theory such that
merchants and producers could maximize their profits to grow. The Wealth of the Nations
emphasized on how big factories could be set up where division of labour could bring about
production using machines and other inputs so that, value can be added to the raw materials
needed in agood production. The motive to increase this value was inherently endowed with
the fact that marginal revenue ought to be higher than the marginal cost such that
supernormal profits could be earned (Magdoff & Foster, 2010).
The production of goods and services ought to be done to increase the welfare of citizens
because that seemed optimal. According to the mechanism as how equilibrium in markets are
achieved, the production too follows a self correcting form. By capitalism, profits are
maximized at points where the marginal cost and marginal revenues equalized. This is the
point at which each capitalist production firm would follow. This also meant that since profits
were maximized, the value of the inputs too maximized (Smith, 2010) and hence they were
efficiently used. The concept of efficiency is asole concept to capitalist mode of production
both in the short run and in the long run. The basic reason why there was a difference
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between the concepts of economic growth and economic development. Economic growth was
achieved by many nations which were built upon capitalism however the concepts of
development were deduced later. The distortions in the economic system grew large in most
high income nation where aspects related to environmental damage were not prioritised
(Marques, 2020). The core capitalism in giving importance to lowering the cost structure of
the firm’s have induced firms to use inputs which might not be environmentally sustainable or
friendly in nature. Furthermore whole looking at how the socio economic fabric gets distorted
through capitalism studies suggest that inequality in consumption and production in most
advanced nations have led to the increase in wealth for the top 10% of the population. The
inequality is pay increased mainly because the workers did not receive their marginal product.
Exploitation in corporate culture have been critically analysed to reveal that unskilled labours
and skilled labours differences exist to great extent and capitalism however do not advocate if
the development is spread over the population (Kirsch, 2014).
Capitalism had been complementary with negative externalities because, itdoes not count on
the costs imposed due to distorted distribution of resources that are generally paid by
consumers as a whole. The driving force behind capitalism is a continuous growth cycle,
where becoming cost efficient matters. However capitalism does not takes into account that
scarcity is evident and acontinuous cycle of growth gives rise to unsustainable consumption
amounts outreaching the natural capacity of the nation to sustain that high growth (Crook,
Short & South, 2018). Since Keynesian economics postulates that effective demand or
demand forms the basis of any supply, thew ever increasing demand of the consumers might
go against the very nature of balanced and responsible consumption that do not encroach on
natural resources. But evidences towards globalization and capitalist production have shown
that indeed there have been unsustainable consumption habits, inequality in access to
developmental resources and above all environmental damage that costs much higher than
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capitalism might be able to pay for (Hart, 2010). The overall cost effective and cost
minimizing approach have led to the high cost on averting climatic change, inequality in
consumption and income, poverty traps which slowed down growths. This created a
contradictory atmosphere where endless sustenance of capitalism has imposed costs on it
which are now made the system unstable enough for economies around the world to take up
different ideologies which take into account the environmental damage, inequality, unstable
consumption that in the long run would make it impossible for capitalism to grow (Oksala,
2018).
Multinational corporation are the major forms of capitalist production who hold immense
capacity to have multiple types of production activities spread around the world. These
enterprises, enter the markets of various developing and developed nations apart from their
nation of origin to increase their growth capacity. The essence behind moving into other
markets and nations are increasing their share in the trade and commerce, having a cost
effective structure which might be available in other nations and also laws and regulations
related to environment, labour laws, taxation laws and many other. For example, MNCs
move to developing nations where they get access to low wager labours, lesser stringent
environmental and labour laws. So the entrance of an MNC pose both positive and negative
impacts on the host nations, mainly due to free trade, or globalization of production. Major
MNCs either enter these developing nations ’ market through FDI, where they set up
production activities, employ labours that are main positive effects on the host nation apart
from increasing the capital accumulation, human capital accumulation, growth and increase
in the standard of living. Exxon Mobil is aoil exploration MNC, which produces oil as the
final good. So with oil exploration comes the fact that this MNC extracts non-renewable
resources, using big machines and technology that might not be available in Nigeria. The
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transfer of these production technology do pose a positive impact on the future economic
growth of the nation.
However the negative impacts of oil exploration ought to the checked and investigated into.
In this context the hypothesis arises that when MNCs like Exxon Mobil move to low cost
producing areas like African nations, what impacts are imposed on the socio-economic
structure of the nation. In regard the operations of Exxon Mobil in Nigeria, had had impacts
on the inequality, GDP and also the employment of the economy. The basic methodology to
show the impacts would be to show through aqualitative investigation into how its operations
have both positively and negatively impacted the growth and development of Nigerian
workforce, the environmental aspects and overall economy. The study would analyse the
impacts critically and test the hypothesis, that oil exploration had had positive impact on the
growth and development of Nigeria, as capitalism brings about economic growth.
Analysis and Discussion
The section would explore the positive and the negative impacts of oil exploration by Exxon
Mobil in Nigeria by looking into how the firm first entered the nation for oil exploration and
the major bottlenecks they faced while oil exploration would also be discussed. This would
give ascenario as how hard or easy or cost effective is the operations of Exxon Mobil in
Nigeria so that the negative impacts can also be judged based on the positive impacts. The
operations of Exxon Mobil started during the 1955. The exploration of oil in Nigeria by
Exxon Mobil was mainly around the shallow offshore basins and also in the deep waters with
the corporate firm having its largest operations in QIT, where Qua Iboe is produced. The
MNC operates through various affiliate companies who are involved in oil exploration, crude
oil production, natural and condensate oil production along with retail sale of fuels and
lubricants. The Exxon Mobil is basically the joint venture or two exploration companies
namely, Mobil producing Nigeria and Esso exploration and producing Nigeria. Currently the
7 IMPACT OF EXXON MOBIL ON AFRICA
MNC as a joint venture between the government of Nigeria (with a 60% share and MPN
holding a40% share.) The production of the firm stands at about alandmass of 3200 sq km
with 100 offshore drilling platforms and acapacity of 900000 barrels per day of crude oil,
natural gas and condensate. The operational headquarters of Exxon Mobil in Nigeria is at qua
know terminal holding the capacity of about 4.5 million barrels (ExxonMobil, 2022) .
Positive Impacts
Looking at the operations as how positively Exxon Mobil have impacted the social economic
landscape of Nigeria it has been found that the MNC works in close contact with the
community in the areas of operation like the Owowo fields. The MNC have contributed to the
future fuel need for the nation along with many other oil exploration projects that increase the
production of oil from Nigeria. As of 2017 the exam mobile has started the phase 2of Erha
North project which includes of should drilling in the deep waters in the Erha field (Ugolo,
2021). This project of new offshore installation and exploration accounts for about 2billion
of the investments that happened in the nation which had direct and indirect impacts on the
economy growth and employment. Since 1961 the Nigerian National petroleum corporation
along with have increased the value in the state of Akwa Ibom of Nigeria. Company report
however the current state of business has fallen since oil prices of decline globally with about
a75% reduction profits in its joint venture as compared to 2015. The major positive impact
of Exxon Mobil operations in Nigeria or what the fact that fuel independency would lead to
higher economic growth for a less developing nation like Nigeria government approach
(Haley, & Haley, 2013) towards oil exploration hence meant that the natural resources have
been efficiently utilised so that the growth in other sectors might also be achieved. The
contribution of exam Mobil is not limited to only providing employment or bringing foreign
direct investments to Nigeria so that the energy dependency of Nigeria can be reduced but it
also spends over educational initiative taken by the corporation. The organisation have
8 IMPACT OF EXXON MOBIL ON AFRICA
invested about 15 billionaire for increasing the educational opportunities among the students
of Nigeria and also youths who are looking for jobs. With this investment about 8000
students have been benefited along with providing about 14 billion naira
(Corporate.exxonmobil.com, 2021) on scholarships across all types of programs like
Geoscience training and about 1.6 billionaire in educational infrastructures where Exxon
Mobil has become atop contributor and support or of education in Nigeria. Exam mobiles
impacts on the social economic framework of Nigeria has had important implications because
local communities are important for any sea which is entering from outside for exam mobile
mitigating an avoiding the negative aspects of their operations on the communities are
important because there are high risks in successful exploration development and long-term
growth of the energy sector in Nigeria (ExxonMobil, 2022) . Being a multinational
corporation holding aleadership position in oil exploration and manufacturing of oil globally
Exxon Mobil holds an important role in maintaining the sustainable business and
development of the community and societies with which the work there are important
implications on the stakeholders where identification of issues needs and values of the areas
and mutual respect for each other ’sgoals are important (ExxonMobil,2021) .
The MNC is driven by its core principles of integrity safety with utmost importance to
execution of projects ethically. The MNC have given importance to the Operations integrity
management systems of the economy of Nigeria, which is aligned with the international
standards of business conduct. Oil exploration is full of risks and hazards where OIMS drives
the MNC to uphold their commitment to manage the risks and also to achieve excellence in
its performance. Hence the MNC from the very beginning of its operations seems to have
abided by the rules and regulations imposed in Nigeria with oil exploration and along in
committing to raise their standards of Operations such that community participation and
engagement is upheld. Studies suggest that these rules and regulations as described by Exxon
9 IMPACT OF EXXON MOBIL ON AFRICA
Mobil in its operations are highly dependent on the fat that the work force which are involved
in handling the risks related to oil exploration crude oil manufacturing and its shipping
through the seas what to be aware of the process and the safety policies around the maritime
industry. Safety policies are mainly implemented such that major accidents and injurious to
crew can be reduced because oil exploration and shipping are mainly conducted by people
who safely matters not only to the multinational enterprises but also to the government. It has
been found that Exxon mobile sthe level of safety cultures that are being implemented and
the management is highly committed to the workers and safety of the clients from the
strategic point of view. There has been display of implementation and actions of the
organisation such that these commitments are made (Efiok, et al., 2015)
Negative impacts
However there have been instances which have failed to prevent the damage of vessels cargo
and the crew so that there have instances which pose high risk to the workers working in the
organisation. Studying the level of awareness among the workers authors are found that
workers are aware of the safety practices that aneeded to handle the cargo the vessels filled
with oil however adherence to these policies are we because there is lack of staff and less
employees ’satisfaction due to lower wages(Omeje, 2006). Furthermore, contract labours a
generally not much trend in maritime handling and hence they are inadequate in knowing
about the safety regulations and compliance from literature it has been identify that
communication is the main way which can reduce the accidents in Maritime handling of oil
related products and minimising the death at sea (Albert, Amaratunga & Haigh,
2018). Politically Nigeria is a troubled state with conflicts between having the type of
governance that brings development. However there have been issues related to the ruling
elites and the capitalists, where the ruling elites do not seek for the development of the whole
state (Iwuoha, 2021). They have engaged in lobbying various developmental policies which
10 IMPACT OF EXXON MOBIL ON AFRICA
are however highly biased and seek weak industrial policies implementation that led to
market failures. Studies suggest that oil sector, being also run by the ruling elites faced
increasing rents while allocation being done, and led to poor development of these oil block
allocations. There is significant polarization of power in the hands of the elites who have used
violence as means to gain dominance (Gaiya, 2021) along with the fact that policy making
and implementation face huge difficulties from these elite groups who continuously exert
power on the people ’sresources. This shows that there is ahuge gap in the realization of the
distribution of power and developmental policies which create bottlenecks in effective nation
building strategy.
Operation have always upheld the rules and regulations of the government along with
following environmental sensitivities. However there have been incidence of oil spills in the
company specialities between 2000 to 2010 for which lawsuits were filled. With the oil spill
from the corporation impacted the fishing and farming of the community of Akwa Iboa state
and it has also destroyed the rivers streams and other sources of water. The livelihood the
victims of oil pollution have been suffering due to this heavy oil spills and destruction of their
livelihoods have result in protest from NGOs and environmental organisations (Ugochukwu
& Ertel, 2008) .Studies on the oil spills indicate that continuous and prolonged oil spills
devastated the Niger Delta. These accidents were termed as the worst manmade disasters
which have had aglobal impact. These accidents of oil spill only lead to the protest agitations
and violence by the community in the delta region. The unrest and unstable social atmosphere
led to the reduction of mutual trust between the Exxon Mobil and community of the Akwa
Iboa region (Okolie-Osemene, 2015) .Studies are found that the severity of the impact was
much higher than only the economic impact where there was enjoying injection of
contaminated food conflicts among the community frustrations depletion of wildlife and
extinction of aquatic plants and biodiversity of the region. Literature and studies suggest that
11 IMPACT OF EXXON MOBIL ON AFRICA
the impact on the livelihoods and especially on parental values were higher than any other
impact like on jobs and employment, tourism and compensation. Qualitative analysis of data
revealed that this oil spills basically reduced the capabilities of parents to provide for their
children, their education, and their overall well-being. Loss of biodiversity led to inability of
economic activities like fishing and farming. The direct impact on water bodies was yet
another embodiment of how oil exploration led to unsustainable business practices.
Conclusion
The critical analysis of how the Exxon mobile MNC have impacted the economy of Nigeria
true or qualitative analysis have led to the fat that the operations of exam Mobil have a
positive impacts on economic growth of Nigeria along with the fact that the MNC have
facilitated for empowerment of women education of the students along with reduction of the
dependency of Nigeria for fuel. The exploration of health Nigeria to gain self-sufficiency in
full and energy such that is economic growth in near future cannot be hampered due to lack
of energy. Furthermore having environmental resources which can be used for economic
growth needs to be sustainably utilized so that negative impacts are lesser than the positive
impacts. However due to capitalist mode of production there have been less importance given
to the fact that education of workers were important in handling product like crude oil and
natural gas. Hence there were instances which late to accidents leading to oil spills from 2000
to 2010. the negative impacts on livelihood and environment have been much higher than the
positive impacts because these negative impacts were permanent in nature where justice and
compensation from the MNC came late while the survival of the communities were at stake
hence it can be concluded that immense like Exxon Mobil which operates in oil exploration
generally have a negative impact on the Nations development and social economic fabric
(Ugochukwu & Ertel, 2008) .
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