EFFECT OF INVESTING ACTIVITIES ON THE RETURN ON ASSETS OF OIL AND GAS FIRMS IN NIGERIA

Abstract

Most entity are unwilling to borrow to finance its economic activities due to the terms and conditions attached the loans. Therefore the study empirically and statistically evaluate the implication of investing activities which is represented by equity to capital ratio (ECR) and debt to equity ratio (DER) and the performance which is represent by return on equity (ROE) of oil and gas sector firms listed on Nigeria exchange group, eight (8) firms was used for the study such as: 11 Plc Formally Mobil Oil Nigeria Plc, Anino International Plc, Coinoil Plc, Eterna Plc, Ardova Plc Formally Fortoil, Japaul Oil and Maritime Service Plc, Seplat plc and Total Nigeria Plc. With data ranging from 2013 to 2020. The result showed that the companies experience a weak level of activities between the period of 2014 and 2015. ECR has a coefficient of -7.393806, and statistical value of 0.0405 while DER has a coefficient of -2.922808, and statistical value of 0.0247, the study also showed that Nigeria oil and gas sectors experienced a slow economic activities between 2015 and 2016 however the entities employed external sources of finance which was matched to the company’s investing activities and also with the help of relevant stakeholders, the entities where revitalized financially. Therefore we conclude that investing activities has statistical significant impact on performance. We therefore recommended that: creditors should not hesitate to give loan to firms and most especially the oil and gas companies because they play a great role in the economy; managers should source for external sources of financing to boost its activities before internal sources, the findings also revealed that the external sources has helped revitalized the sector; the government should create an enabling environment for firms in this sector to operate effectively and efficiently; government should also make soft loans available to entity during a financial challenging periods; and manager should match its investing activities properly to avoid over matching and mismatching of financial resources, if this is not done it may affect company going concern. The study also contributed to existing literature by revealing that external finance has contributed to revitalizing the oil and gas companies during the nosedived of the oil price, production and export between 2015 and 2016. However if an entity want to borrow they should consider the cost and benefits, terms and conditions associated with such sources of external finance. In summary the study revealed that investing activities has a significant impact on performance therefore stakeholders such as creditors, government to mention but a few has crucial role to play in trying to revitalizing companies during slow economics activities, this can done by creating an enabling environment, giving grants and soft loans to help revitalizedthem.