Current Debts and Productivity of Firms in Nigeria Petroleum Industry
- Post by: airjournal
- September 7, 2022
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The study explored the relationships between current debts and the productivity of oil and gas firms in Nigeria. The specific objectives of the study are, to explore the relationship between short-term borrowing and production cost of oil and gas firms in Nigeria, to examine the relationship between account payable and production cost of oil and gas firms in Nigeria, and to analyze the relationship between tax payable and production cost of oil and gas firms in Nigeria. The study sampled 5 oil and gas firms, out of a total population of 11 oil and gas firms listed on the Nigeria Stock Exchange during the period. Secondary data were obtained from the annual reports and accounts of the selected firms for the period 2010 to 2019. Pearson’s correlation matrix was used to analyze the data collected. Results of the analysis show that the relationships between accounts payable and tax payable with the cost of production are respectively negative and weak while the relationship between short-term borrowings and cost of production is positive and strong. It was recommended that oil and gas firms operating in Nigeria should fund their production with more long-term borrowings and equity to bring down their production cost. This is because as short-term borrowing rose, production costs rose, and vice versa. It was also recommended that oil and gas firms in Nigeria should use more of the account payable to finance the production of oil and to bring down production costs per barrel of crude oil. The study demonstrates that account payable is a cheap source of short-term funding when compared with short-term borrowing. It was further recommended that oil and gas firms in Nigeria should also provide for a different level of taxes and use the proceeds (tax payable) to fund oil and gas production until the taxes are due for remittance to the relevant tax authority. These when done will go a long way in reducing the cost of oil and gas production in the country and placing the firms at a competitive advantage locally and internationally.
Keywords: Current Debts; Firms Productivity; Nigeria Petroleum Industry
Authorship: Ezeh, R., Inyiama, O. I., and Ugwu, T. C. | FULL PDF