ENEMS PROJECT: 2021

Friday, 31 December 2021

THE EFFECT OF EXCHANGE RATE FLUCTUATION ON THE NIGERIA ECONOMY

ABSTRACT

This research work is centered on examining effect of exchange rate fluctuation on the Nigeria’s economic growth from 2007 to 2018. The specific objectives of the study is to determine the effects of exchange rate fluctuation on the Nigeria economy, evaluate the effects of interest rate on economic growth in Nigeria and examine the effects of inflation rate on economic growth in Nigeria. The main type of data used in this study is secondary; sourced from Central Bank of Nigeria Statistical Bulletin of various issues. The regression analysis was used to analyze the data. The result revealed that exchange rate fluctuation has significant effects on Nigeria economic growth and development, interest rate has no significant effects on Nigeria’s economic growth (GDP) and inflation rate has no significant effects on Nigeria’s economic growth (GDP). Therefore, the study recommended that the effort of the government should be geared towards maintaining a stable and sustainable exchange rate, since the stability of these could enhance industrial output. There should be an increase in the exchange rate of Naira in order to enhance economic growth, Interest rate should be at a minimum, in order for the purchasing power of an average Nigeria to increase. And that the government should encourage domestic production and consumption of goods and services and necessary policies in place to improve the value of Nigerian currency so as to reduce inflation.

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The exchange rate is perhaps one of the most widely discussed topic in Nigeria today. This is not surprising given it’s macro-economic importance especially in a highly import dependent economy as Nigeria (Olisadebe, 2015). Macroeconomic policy formulation is a process by which the agencies responsible for the conduct of economic policies manipulate a set of instrumental variables in order to achieve some desire objectives. In Nigeria these objectives include achievements of domestic price stability, balance of payment equilibrium, efficiency, equitable distribution of income and economic growth and development.

Exchange rate policy involves choosing where foreign transaction will take place (Oladipupo, & Onotaniyohuwo, 2016). Exchange rate policy is therefore a component of macroeconomic management policies the monetary authorities in any given economy uses to achieve internal balance in medium term. Specifically internal balance means the level of economic activity that is consistent with the satisfactory control of inflation. On the contrary, external or sustainable current account deficit financed on lasting basis expected capital inflow. Exchange rate is the price of one country’s currency expressed in terms of some other currency. It determines the relative prices of domestic and foreign goods, as well as the strength of external sector participation in the international trade (Obadan, 2016). Exchange rate regime and interest rate remain important issues of discourse in the International finance as well as in developing nations, with more economies embracing trade liberalization as a requisite for economic growth (Obansa, Okoroafor, Aluko and Millicent, 2013).

In Nigeria, exchange rate has changed within the time frame from regulated to deregulated regimes. Ewa, (2011) agreed that the exchange rate of the naira was relatively stable between 1973 and 1979 during the oil boom era and when agricultural products accounted for more than 70% of the nation’s Gross Domestic Products (GDP). In 1986 when Federal government adopted Structural Adjustment Policy (SAP) the country moved from a peg regime to a flexible exchange rate regime where exchange rate is left completely to be determined by market forces but rather the prevailing system is the managed float whereby monetary authorities intervene periodically in the foreign exchange market in order to attain some strategic objectives (Mordi, 2006).

The key element of structural adjustment programme (SAP) was the free market determination of the naira exchange rate through an auction system. This was the beginning of the unstable exchange rate; the government had to establish the foreign exchange market (FEM) to stabilize the exchange rate depending on the state of balance of payments, the rate of inflation, Domestic liquidity and employment. Between 1986 and 2018, the federal Government experimented with different exchange rate policies without the any of them to make a remarkable effects in the economy before it was changed. For instance from 1982 – 1983, the Nigerian currency was pegged to the British pound sterling on a 1.1 ration. Before then, the Nigerian naira has been devalued by 10% and also between 2015 to 2018 the Central Bank of Nigeria fixed the Nigeria Naira at between N300 to N350 against one dollar ($1) (CBN, 2015). Apart from this policy measures, the Central Bank of Nigeria (CBN) applied the basket of currencies approach as the guide in determining the exchange rate which was determined by the relative strength of the currencies of the country’s trading partner and the volume of trade with such countries. Specifically weights were attached to these countries with the American dollars and British pound sterling on the exchange rate mechanism (CBN, 2016). One of the objectives of the various macro–economic policies adopted under the Structural Adjustment Programme (SAP) in July, 1986 was to establish a realistic and sustainable exchange rate for the Naira; this policy was recommended in 1986 by the International Monetary Fund (IMF). On exchange mechanism and was adopted in 1986. This inconsistency in policies and lack of continuity in exchange rate policies aggregated unstable nature of the naira rate (Gbosi, 2014). It is against this background that this study seeks to examine the effects of exchange rate fluctuation on the Nigeria economy.

1.2 STATEMENT OF THE PROBLEM

Exchange rate fluctuation is generally considered undesirable in any economy because of its perceived effects on the economy. The fluctuation of exchange rate in Nigeria therefore, raises an important research and policy problem on its effects on the economy. The use of exchange rate to stimulate economic growth is as old as the history of international trade. For instance, extensive literature has documented different exchange rate regimes adopted by countries, in order to stimulate economic growth. Exchange rate volatility might strongly affect the growth performance of open economies through the trade channels on the short-run (IMF 2014, European Commission 1990). From a long-term perspective, fluctuations in the exchange rate level constitute a risk for growth in emerging markets economies as they affect the balance sheets of banks and enterprises where foreign debt tends to be denominated in foreign currency (Eichengreen and Hausmann, 2015). That is, exchange rate fluctuation inflates the liabilities in terms of domestic currency thereby increasing the probability of default and crisis. Thus, it has become imperative to empirically establish the effects of exchange rate fluctuation on the Nigerian economy. Relying on past empirical evidence on this subject matter given so recent developments in the economy might be misleading. It is against this problem that this study seeks to examine the effects of exchange rate fluctuation on the Nigeria economy.

1.3 OBJECTIVE OF THE STUDY

The objective of the study is to examine the effects of exchange rate fluctuation on Nigeria economy. The specific objectives of the study include:

To determine the effects of exchange rate fluctuation on the Nigeria economy.
To evaluate the effects of interest rate on economic growth in Nigeria.
To examine the effects of inflation rate on economic growth in Nigeria.

1.4 RESEARCH QUESTIONS

The researcher seeks to find the answer to the following three questions:

Does exchange rate fluctuation in Nigeria have any significant effects on economic growth?
Is there any significant relationship between interest rate and Nigeria’s economic growth?
Does inflation rate have any significant effects on Nigeria’s economic growth?

1.5 RESEARCH HYPOTHESES

Based on the objectives of the study, the following hypotheses were formulated.

H_o1: Exchange rate fluctuation has no significant effects on Nigeria economic growth and development.

H₀₂: Interest rate has no significant effects on Nigeria’s economic growth (GDP).

H₀₃: Inflation rate has no significant effects on Nigeria’s economic growth (GDP).

1.6 SIGNIFICANCE OF THE STUDY

The significance of this research work lies in the fact that if the cause of the unstable exchange rate of the naira is identified and corrected, the economy will rapidly grow and develop into an advance one. This is so because if the unstable exchange rate of naira is proved to be affecting the macro- economy major variables badly, including Real exchange rate, Real interest rate, inflation rate, gross domestic product and trade openess of the country, attempts should be made to stabilize the exchange rate. This is because these variables are gauge for the measurement of growth and development of any economy.

Importantly, this study would help the government and the central bank of Nigeria (CBN) to identify the strength and weakness of each foreign exchange system and hence adopt the policy that suits the economy best. This will definitely enhance growth and development of the economy, the study will also serve as a guide to future researchers on this subject.

1.7 SCOPE OF THE STUDY

This research work is designed to examine of the effects of exchange rate fluctuation on the Nigeria economy between 2001-2018 a period of seventeen years. The scope consist of the regulatory and deregulatory exchange rate period i.e. the fixed exchange rate and the floating exchange rate period. The main type of data used in this study is secondary; sourced from Central Bank of Nigeria Statistical Bulletin of various issues. The study is further limited to the following variables used in the models; dependent variable – Gross Domestic Products (GDP) while the independent variables are Exchange Rate (ENRT); Interest Rate (INRT) and Inflation Rate (INFRT) for the period 2001 – 2018.

1.8 DEFINITION OF TERMS

Gross Domestic Product (GDP): Gross Domestic Product is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.

Foreign exchange: Foreign exchange is a means of payment for international transaction; it is made up of currencies of other countries that are freely acceptable in settling international transactions.

Exchange control: This is a foreign exchange arrangement in which the government purchase all coming foreign exchange and is the only source from which foreign exchange can be purchased legally.

Exchange rate: An exchange rate is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in relation to another currency.

Interest rate: An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited or borrowed (called the principal sum)

Inflation rate: inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.

THE IMPACT OF ECONOMIC RECESSION ON GOVERNMENT EXPENDITURE IN NIGERIA

ABSTRACT

This study examines “the impact of economic recession on government expenditure in Nigeria”. To achieve this broad objective, the study seeks to ascertain the impact of economic recession on government recurrent and capital expenditure. The ex-post factor research design was adopted in gathering data necessary for the study. Data were obtained from secondary sources of data mainly from Central Bank of Nigeria’s Published Statistical Bulletin of 2018. In analysing the data, regression analysis was used with the aid of statistical package for social science (SPSS). The findings of the study shows that economic recession has no impact on government recurrent expenditure while it has significant impact on government capital expenditure. Finally, the study recommend that political office holder and leaders in governance should be retrained on policy making, and leadership to enhance their skills in the management of Nigeria economy especially during economic recession.

TABLE OF CONTENTS

Title Page- – – – – – – – – – – i

Declaration- – – – – – – – – – – ii

Approval Page- – – – – – – – – – iii

Dedication- – – – – – – – – – – iv

Acknowledgement- – – – – – – – – v

Abstract – – – – – – – – – – – vii

Table of Contents- – – – – – – – – – viii

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study- – – – – – – 1

1.2 Statement of the Problem- – – – – – – 5

1.3 Objective of the Study- – – – – – – – 7

1.4 Research Questions- – – – – – – – 7

1.5 Statement of Hypotheses- – – – – – – 7

1.6 Significance of the Study- – – – – – – 8

1.7 Scope of the Study- – – – – – – – 9

1.8 Limitation of the Stud- – – – – – – – 9

1.9 Operational Definition of Terms- – – – – – 10

CHAPTER TWO

REVIEW OF RELATED LITERATURE

Introduction

2.1 Conceptual Framework- – – – – – – – 12

2.1.1 Economic Recession- – – – – – – – 12

2.1.2 History of Economic Recession- – – – – – 17

2.1.3 Causes of Economic recession- – – – – – – 19

2.1.4 Economic Recession in Nigeria-An Overview- – – – 21

2.1.5 Concept of Government Expenditure- – – – – 22

2.2 Theoretical Framework- – – – – – – – 25

2.2.1 Keynesian Economic Theory in Recession- – – – – 26

2.2.2 Hangover Theory- – – – – – – – – 26

2.2.3 Peacock and Wiseman Theory of Public Expenditure- – – 27

2.3 Empirical Review/ Review of Previous Studies- – – – 28

CHAPTER THREE

METHODOLOGY

Introduction

3.1 Research Design- – – – – – – – 37

3.2 The Study Area- – – – – – – – – 37

3.3 Population and Sampling Procedure- – – – – – 37

3.4 Data Collection Techniques- – – – – – – 38

3.5 Data Analysis Techniques- – – – – – – 38

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS

Introduction

4.1 Data Presentation- – – – – – – – – 40

4.2 Data Analysis and interpretation- – – – – – 43

4.3 Test of Hypotheses- – – – – – – – 46

4.4 Results and Discussion- – – – – – – – 47

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

Introduction

5.1 Summary of Findings- – – – – – – – 49

5.2 Conclusion- – – – – – – – – – 50

5.3 Recommendations- – – – – – – – 50

REFERENCES- – – – – – – – – 51

ASSESSMENT OF THE IMPACT OF VACANCY AND OCCUPANCY RATE ON RESIDENTIAL PROPERTY INVESTMENT MARKET

CHAPTER ONE

Introduction

1.1 Background of the Study

A vacancy rate serves as an important indicator of the health of a real estate market. But we cannot draw sound inferences about a market just by observing the rate alone because many factors contribute to a vacancy rate. The same rate may tell different stories, and different rates may tell the same story. The vacancy rate is the percentage of all available units in a rental property, such as a hotel or apartment complex, that are vacant or unoccupied at a particular time. It is the opposite of the occupancy rate, which is the percentage of units in a rental property that are occupied. High vacancy rates indicate that a property is not renting well while low vacancy rates can point to strong rental sales.

The vacancy rate is calculated by taking the number of vacant units, multiplying that number by 100, and dividing that result by the total number of units. The vacancy rate and occupancy rate should add up to 100%.In real estate, the vacancy rate most often represents units that are vacant and ready to be rented, units that have been turned off upon the exit of a tenant, and units that are not currently rentable because they are in need of repairs or renovations. A property owner can use vacancy rates as a metric for analysis. Changes in the percentage of vacant units versus occupied units, the length of time occupied units are remaining active, or other rental conditions can provide guidance regarding how competitive a property owner has made the property. If a property owner is charging significantly more or less than the rest of the rental market, this may be reflected in the overall vacancy rates. It can also provide information regarding the effects of price changes or advertising on unit occupancy.

While vacancy rates are commonly used to assess an individual property’s performance, such as a hotel monitoring its nightly vacancy rate, aggregate vacancy rates are also used as economic indicators of a real estate market’s overall health. Many firms servicing the residential and commercial real estate space gauge the strength of the overall industry using metrics such as vacancy rates, rental rates and construction activity. According to the natural rate hypothesis, fluctuations in apartment rents are driven by deviations in the vacancy rate from equilibrium or “natural” levels. One reason to estimate natural vacancy rates is to confirm this hypothesis. Beyond that, however, estimates of the natural vacancy rate for a rental housing market provide information that is potentially useful for investors, lenders and other real estate professionals. Comparing the natural rate at a point in time to the actual vacancy rate provides some indication of future rent movements in that market. In addition to its effect on the movement of rents, the level of the vacancy rate has direct implications for the return on property investment. In long-run equilibrium, the lower the natural vacancy rate, the greater the amount of rent generated by a given rental property, everything else held constant. If the natural vacancy rate declines over time, the return on rental property investment will rise, ceterisparibus.

Housing markets are often modeled as a series of separate but related submarkets, with differing supply and demand conditions in each. In the case of a rental market, there may be separate submarkets for different apartment types (one-bedroom, two-bedroom, etc.), and for different geographic locations. If submarkets exist, it is possible that natural vacancy rates will vary by submarket. In that case, information on natural vacancy rates is made more useful if available at the submarket level.

Empirical support for the existence of a natural vacancy rate in rental housing dates back to Smith (1974). Since then, a number of studies have focused on variations in the natural rate across both space and time. For example, Gabriel and Nothaft (1988) provide evidence of substantial variation across major U.S. metropolitan areas. In a more recent paper, Gabriel and Nothaft (2001) find the duration and incidence of vacancies, and the natural vacancy rate, to vary across metropolitan areas with a number of factors including housing costs, heterogeneity of the housing stock, tenant mobility, and population growth. In an effort to decongest the population of Gwagwalada mini campus of the University of Abuja to enhance a conducive learning environment for its students, the university had relocated to its permanent site located at Ido Sariki, along airport road this have adversely affected the vacancy and occupancy rate in Gwagwalada while house rent in settlements around the permanent site of the university of Abuja has skyrocketed following the relocation of some departments of the university to that site. This has necessitated the need to carry out an assessment of the impact of vacancy and occupancy rate on residential property investment in the area.

1.2 Statement of the Problem

The rental vacancy rate is the fraction of rental properties not rented at a point in time. This captures pressures in the residential property investment market. It matters for understanding the balance between supply and demand, future pressures on rental prices and the typical duration of vacancy for a landlord’s budgeting purposes. The relationship between the vacancy rate and the housing production rate is expected to be negative as well. If the vacancy rate is high, the supply of residential property will be higher than the demand for residential property, which means that the property prices are stable or decreasing. Consequently, developers won’t have much stimulus to engage in residential property development and the housing production rate will be relatively low. This study seeks to assess the impact of vacancies and occupancy rate on residential property investment market in Gwagwalada, FCT Abuja.

1.3 Aim and Objectives of the Study

The aim of this project is assess the impact of vacancies and occupancy rates on residential property investment market in Gwagwalada FCT Abuja.

The specific objectives of this are as follows:

To ascertain the extent of vacancies rate of residential property in Gwagwalada
To evaluate the causes of vacancies of residential properties in the study area
To assess the impact of vacancies and occupancy rates on residential property investment market in the study area.

1.4 Research Questions

The following research questions will serve as a guide to the researcher:

To what extent are vacancies rates of residential properties in Gwagwalada?
What are the causes of vacancy of properties in the study area
What are the impact of vacancies and occupancy rates to residential property investment market in the study area?

1.5 Significance of the Study

The findings of this research “Assessment of the impact of vacancy and occupancy rate on residential property investment market” will serve as a guide for investors to be able to make reliable investment decision that will ensure high return on investment.

The result of this study will serve as a guide to other researchers who are interested in further research into the impact of vacancy and occupancy rate on residential property investment market in Gwagwalada and Nigeria at large.

1.6 Scope and Limitation of the Study

The scope of this study covers only the assessment of the impact of vacancy and occupancy rate on residential property investment market in Gwagwalada, FCT Abuja. This further limited to old Kutunkun, Compensation layout.

Limitations

Some factors militated against the success of this work, though the researcher endeavoured to accommodate them. Thus, some of the constraints inherent in the course of carrying out the research include, among others, the peculiar nature of real property market. It is not like commercial markets where one can easily come face to face with both the buyers and sellers to get information he wants. In real property market, information is not easily circulated among Estate Surveyors. Vital information required by the researcher from some respondent Estate Surveyors were not collected due to pressure of work and other commitments facing them during the time the researcher required those information. The researcher also faces other challenges such as finance, time and the un-corporative nature of some respondents.

1.7 Operational Definition of Terms

Vacancy: Dictionary.com define vacancy as the state or condition of being vacant or unoccupied; emptiness.

Occupancy Rate: A measurement expressed as a percentage of the total amount of occupied space divided by the total amount of existing inventory. Occupied space is defined as space that is physically occupied by a tenant. It does not include leased space that is not currently occupied by a tenant.

Vacant Space: Vacant space is defined as space that is not currently occupied by a tenant, regardless of any lease obligation that may be on the space. Vacant space could be space that is either available or not available.

Percent Leased Rate: A measurement expressed as a percentage of the total amount of leased space divided by the total amount of existing inventory. Leased space is defined as space that has a financial lease obligation. It includes all leased space, regardless of whether the space is currently occupied by a tenant. Leased space also includes space being offered for sublease.

Investment: An investment is an asset or item that is purchased with the hope that it will generate income or will appreciate in the future.

Real Estate: Real estate is the property, land, buildings, air rights above the land and underground rights below the land. The term real estate means real, or physical, property.

Property: In common law, real property (immovable property) is the combination of interests in land and improvements thereto, and personal property is interest in movable property. Real property rights are rights relating to the land.

Investor: An investor is a person that allocates capital with the expectation of a future financial return. Types of investments include: equity, debt securities, real estate, currency, commodity, token, derivatives such as put and call options, futures, forwards, etc.

Availability Rate: A measurement expressed as a percentage of the total amount of available space divided by the total amount of existing inventory. Available space is defined as the total amount of space that is currently being marketed as available for lease in a given time period. It includes any space that is available, regardless of whether the space is vacant, occupied, available for sublease, or available at a future date, although it excludes space available in proposed buildings.

1.8 The Study Area

Before the creation of Federal Capital Territory, Gwagwalada was under the Kwali District of the former Abuja emirate now Suleja emirate. Gwagwalada Area Council was created on 15 October 1984. Its official population figure of 158,618 people at the 2006 census. The relocation of the seat of government from Lagos to Abuja in 1992 and the recent demolition of illegal structures within the Federal City Center brought a massive influx of people into the Area Council being one of the fastest growing urban centers in the FCT. The population of the Area Council has grown to over 1,000,000 people. Gwagwalada Area council is one of the five Local Government Area Councils of the Federal Capital Territory of Nigeria, together with Abaji, Kuje ,Bwari , and Kwali ; the FCT also includes the City of Abuja .Gwagwalada has an area of 1069.589 km 2.

EDUCATION AS A TOOL FOR WOMEN EMPOWERMENT AND COMMUNITY DEVELOPMENT IN BWARI AREA COUNCIL OF ABUJA

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Women education leads to increased contributions of women in community development. It is known that community development is a responsibility between men and women in the society. But we are in the world where men seem to dominate the affairs of the world in every country, including Nigeria (Onah, Ugwu, Chikwelu and Okide, 2014). Today there is need for women to be given opportunity to participate fully in national development through education which serve as a tool for women empowerment as it is has been advocated that the Nigerian woman should be exposed to qualitative, productive and activity-based education which will greatly enhance their role in community development that will return Nigeria to emerge as one of the high performing countries of the world (Atureta, 2017).

Women education can be seen as a process of inculcating worthwhile knowledge to women folk to be able to carry out one function or the other which will enable them to help themselves and contribute to the development of their community. Nwizu (2018) declared that “women education is the process of empowering women with the knowledge and skills they require for effective adjustment and functioning in the society”. Therefore, it is an act of ignorance and poverty of knowledge where in some areas of Nigerian they prefer to send their boys to school leaving their girls because of unscientific, traditional and religion beliefs. Experiences have shown that when woman are given qualitative competitive and productive education, they can excel and contribute greatly to community development efforts.

The need for women empowerment arises from the inability of an individual woman or a group of women to actualise their dreams and realise their potential due to artificial barriers created by individuals and organised groups within the same society. It is the manifestation of an incontrovertible inequality, segregation or marginalization (Okeke, 2015). Onu (2018) opined that “women are at the heart of development. They control most of the non-money economy (subsistence agriculture, bearing and raising children, doing domestic labor) and taking important part in the money economy (trading, the formal sector, wage employment)”. He further stressed that every where world, women have two jobs, around the home and outside it. This assertion implies that women have a lot of contribution to make towards the healthy socio-economic development of every country but women are constantly denied this opportunity by the nature of our societal organizations, and the cultural set up that makes it more comfortable for men to maintain the status quo.

Today, awareness has led to the recognition of the important role women can play in national development and this calls for an urgent need to address these critical areas that have hindered full recognition of women’s talents, women’s right, women’s development and empowerment and the ability to contribute meaningfully to community development. It is against this background that this study seeks to examine education as a tool for women empowerment and community development in Bwari area council of Abuja.

1.2 Statement of the Problem

The importance of empowering women for community development cannot be overstressed, this is because women generally are endowed with skills and abilities which if properly managed through formal training and informal training in the form of classroom education, entrepreneurial or skill acquisition programme she is mentally equipped to function better in every vocation she found herself and could improve their quality of life and behavioural disposition in the society.

Empowering women through informal and informal education has become the focus of considerable discussion and attention all over the world as the inequalities between men and women and discrimination against women are an age-old issue all over the world. In the study of Eseyin, Okafor and Uchendu (2014), they examine community development through women empowerment and utilization of literacy and vocational skills services of an educational project in Yemen, Egbai and Otu (2017), carried out an analysis of women education role as community based development for sustainable culture in Calabar; Ovute, Dibia and Obasi (2015) carried out a study on empowering Nigeria women for national development: State of the art, challenges and prospects; Olakulehin and Ojo (2018) investigated distance education as a women empowerment strategy in Africa and analysis.

All these studies discussed the relevance of women education in national or economic development of the nation but without necessarily considering education as a tool for women empowerment and community development in the grass root, this create a gap for which this study seek to fill. It is the light of this that this study seeks to examine education as a tool for women empowerment and community development in Nigeria

1.3 Objective of the Study

The general objective of the study is to examine the role of education as a tool for women employment and community development in Bwari area Council of Abuja.

The specific objectives include:

To find out how women can be empowered educationally in Bwari local government area of Abuja.
To find out ways women can contribute to the development of Bwari local government area of Abuja.
To suggest strategies that can be adopted to enhance women’s participation in community development in Bwari.

Research Questions
How can women be empowered educationally in Bwari local government area of Abuja?
What ways can women contribute to the development of Bwari local government area of Abuja?
What are the strategies adopted to enhance women’s participation in community development in Bwari area council?

1.5 Significance of the Study

The findings of this research will be of great significant or important to the following set of people or organization:

The study is expected to benefit the government at both federal, state and local government level by availing them the relevant information on how education serve as a tools for women empowerment and community development; and why their participation in project implementation should be accelerated through various empowerment programmes.
The study will be of great use to various Non Governmental Organizations (NGOs) and community based women empowerment bodies by getting insight information on the better strategic practices in relation to women empowerment and the roles played by empowered women in community development. These bodies shall be able to understand the steps that can be taken to empower the women in marginalized communities and how these women can be drivers of community development.
The study will be very useful to future researchers and scholars. It is worth nothing that no similar study has been done in this locale of study and therefore the research findings will add very rich literature to the scholarly world significantly.
Finally, this study will benefit the women folks as it will improve on their awareness of the relevant roles played by education as a tools for women empowerment and community development. This will in turn improve the standard of living, enhance rural community resources and add to national development and a successive continuation of human race.

1.6 Definitions of Terms

Education: Education is the process of facilitating learning, or the acquisition of knowledge, skills, values, beliefs, and habits (Dewey, (2017).

Community: A social group of any size whose members reside in a specific locality, share government and often have a common cultural and historical heritage.

Development: The gradual growth of something so that it becomes more advanced, stronger. This is also defined as skill and capacity, greater freedom, creativity, self discipline, responsibility and material well-being.

Empowerment: To give someone the power to do something. To give somebody more control over their own life or the situation they are in.

Women: It is the plural of woman. It is defined as an adult female human being. Women all over the world constitute a gender group; they are a disadvantaged group based on their sex.

Women Network: Women coming and working together in a group to achieve an objective.

AN APPRAISAL OF THE ADMINISTRATION OF PERSONAL INCOME TAXATION

A CASE STUDY OF ABIA STATE BOARD OF INTERNAL REVENUE

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

In developed and developing countries there are wide range of taxes and levies that affect individuals and companies, citizens and foreigners, manufacturers and marketers, workers and pensioners . In Nigeria taxes range from petroleum profits taxation to tenement rate imposition, and taxes are imposed at different levels to enable the government provide certain essential services and facilities to the population. Some of the issues involved are legal, economic, others are political, sociological, while others are historical.

The study will begin the appraisal by examining related taxes and levies applicable in Abia State and the legal instruments governing them. The government plays the piper and dictates the tune. Ogundele (1999:8) states that government intervention in an economy takes many forms. The degree of intervention differs from country to country, depending on the form of political model adopted in the governance of the country. The intervention referred to is tax, which in a well planned economy affects every aspect of human endeavour. On the subject of intervention which differs from one form of government to another, and the form of intervention, they either intervene for the wrong reason or adopt the wrong strategies when intervention is justified. Mbanefo (1999:21) posits that the implications of government tax intervention are many and will be expatiated in this study.

Anyanwu (1997:18) opines that fiscal administration is tax policy making and collection as well as expenditure programming at all levels of government. It involves the controlling, organizing, directing, monitoring, planning and management of government revenues and expenditure. Furthermore, the long term role of fiscal administration is to collect all registered taxes at minimum cost, as well as execute government programmes as efficiently as possible by avoiding waste.

1.2 STATEMENT OF THE PROBLEM

Among the many problems confronting tax administration in Abia State, is how to ensure voluntary compliance on the part of the tax payers. Tax being a commodity nobody want to buy, the tax man is hardly liked by tax payers who perceive him as government toll collector. The problem of the tax man is worsened by poor performance of most state governments in terms of provision of amenities for the tax paying public. Lack of confidence and mutual distrust in government represented here by the tax man, gave rise to voluntary compliance difficulties.

Tax laws in Nigeria are complex and difficult for the common taxpayer to understand, and some cases are problematic even for literate official. In addition to lack of understanding, many taxpayers are unaware of the existence of certain tax. This couple with the lack of information, laziness of the tax official, uncooperative taxpayers and the habit of ‘quick –fix’ solutions-encourages the use of the best judgement approach. This may be a manifestation of the poor tax education and weak fulfillment by tax authorities of their responsibilities with regard to public awareness.

Ocheoha (2000) asserts that tax is a commodity nobody will want to buy if buyers are given the opportunity of choice because tax is an imposition. He explains that government imposes taxes primarily to raise the revenue required to cover the cost of general administration and defense. He contend that the cost of general administration includes paying of personnel emoluments, salaries, wages of leaders or those in authority, their aides, as well as the salaries of civil servants, police and military personnel.

Today the purposes of taxation have assumed a wider dimension hence the government uses it as a veritable tool of administration. Therefore, the status and standing of taxation as a subject worthy of study cannot be overemphasized. Abudulrazaq (2002) asserts that the way Nigerian taxation should be studied and practiced remains a broad and demanding one. He suggested there must be technical competence with a positive group of primary sources that the competence can be tested in many ways regarding form, elementary computation to planning transactions. Tax is imposed by those in authority for a variety of reasons and charges. Musgrave (2004) posits that taxes and charges are withdrawn from the private sector without leaving the government with liability to the payee. However, tax is a compulsory imposition, whereas charges and borrowing involve voluntary transactions. In other words, a major distinguishing factor of tax from other charges is that tax is not a quid proquo expenditure, thus implying that a tax payer should not demand or expect a commensurate exchange of goods or services for the tax paid.

In view of the above, this study will attempt to answer the following questions which form the bedrock of the problems raised by the study.

What classes of people are liable to which type of taxation and what is the level of their compliance to the personal income tax in the state?
What is taxation, and what purposes does taxation serve?
How have multiplicity and duplication of taxes, levies by the other levels of government made the administration of personal income tax by Abia state difficult?
High level incidence of corruption in the administration of personal income taxation gave rise to increased tax evasion, avoidance and ineffective and inefficient personal income tax administration in Abia state.

Noticeable inefficacy as evidenced in the increasing number of tax defaulters, evasion and avoidance are attributable to corruption and other vices in the administration of personal income tax in Abia state.

1.3 OBJECTIVES OF THE STUDY

The objectives of the study are as follows:

To review out, in detail, the operations of personal income tax in Abia State in order to establish their success or otherwise in the generation of revenue for Abia state government.
To ascertain the meaning and nature of tax, especially the context of administration of personal income taxation in Abia State.
To determine which and what income are liable to tax and the level of compliance by those who are liable.
To identify the factors that impinge on the effective administration of personal income tax in Abia State.

1.4 SIGNIFICANCE OF THE STUDY

Practically the study will assist the Abia State Board of Internal Revenue in positively administering their responsibilities in raising revenue through personal income taxation and conducting other tax duties.

It will also help policy makers in adopting appropriate policy on tax personal income tax and sanctions against violation or evasion of taxes by individuals, groups or companies. It will also help the officers of the Board of Internal Revenue to adopt new strategies in ensuring compliance of individuals, groups and companies in fulfilling their responsibilities as citizens of the country.

Theoretically, it will help in the education of the management, administrators and tax officers on the need for continuous tax assessment towards increasing the revenue base of the government. It will also assist in the education of the general public and tax payers on the need to carry out their responsibility as citizens of the country.

The study will be of great importance in providing information to readers, especially those involved in financial administration to gain knowledge on the administration of personal income taxation.

It will increase the data base for scholars and practitioners interested in the field of revenue generation through personal income taxation.

Finally, it will serve as a reference point to scholars, and students who want to conduct research in future in the field.

1.5 SCOPE AND LIMITATIONS OF THE STUDY

The scope of this study covers only the staff of Abia State Board of Internal Revenue. The senior staff from grade level 10 and above, will be considered from other ministries and agencies of government for this study.

Some factors that constituted hindrance to success of this work include the following:

The time this study is expected to be completed is very short compared to the enormous work involved.

Limited financial resources also constituted a hindrance to the success of this study. A lot of money was required for transportation to various branches and zones of the Board of Internal Revenue.

FINANCIAL LEVERAGE AND FINANCIAL PERFORMANCE OF THE ENERGY AND PETROLEUM SECTOR COMPANIES

ABSTRACT

The main objective of a firm is maximization of shareholders wealth. In attempt to achieve this objective the shareholders appoint management board to oversee the firm’s operations. This study was anchored on the following research objectives; to establish the effect of debt ratio, debt -equity ratio and interest coverage ratio on financial performance of energy and petroleum sector companies listed in the Nigeria Securities Exchange. The study utilized secondary data that was mainly collected from the published financial statements of these companies. Explanatory research design was used. Quantitative secondary data was collected and analyzed using statistical package for the social sciences. This data was also represented using measures of central tendency such as mean, frequencies, percentages and measures of dispersion such as standard deviation. The study ran a multiple regression equation to determine the relationship between the variables in the study and to estimate the models for the study. Descriptive statistics was used to analyze data. In order to draw a conclusion and make recommendations, the analyzed data was further presented in tables, charts and graphs. On the effect of debt ratio on return on assets the study indicated that as the debt ratio increased the return on assets decreased. On the effect of debt equity ratio on return on return on assets the study indicated that as debt equity ratio increased the return on assets decreased. In summary the results indicated that there is a negative relationship between financial leverage and financial performance of petroleum and energy sector firms listed in the Nigeria Securities Exchange.

CHAPTER ONE

INTRODUCTION

1.1 Background of Study

Firms use either debt/ financial leverage or owners’ capital to finance a firm. Financial leverage refers to application of debt financing and borrowed capital in an attempt to increase firm’s operations and profitability. Financial leverage is majorly measured through expressing long term liabilities to equity of a firm. A firm is considered leveraged when the firm is partially financed by both debt and equity. Most firms survive with a significant liquidity level which is mainly achievable through use of debt. Many companies use debt to leverage their profits and capital. This means companies are likely to use debt/leverage to increase assets which in turn increase production and profits.

Debt bears a fixed cost. This means that when a firm increases debt level, the financial leverage level increases. Leverage is the use of borrowed funds for investment purposes (Gatsi, Gadzo & Akoto, 2013). When firm’s management increases the firms profit by using debt element it is an indication of quality corporate governance (Singapurwoko & El-Wahid, 2011). Firm’s investments can be finance by use of either debt or equity. When a firm uses fixed-charged funds especially preference capital and debt along with the shareholder’s equity this is referred to as financial leverage or gearing (Moses and Steve, 2010). When a company’s capital structure is made of only shareholders / owners’ equity only it’s said to be unlevered firm whereas when a firm’s capital structure is made of both debt and owners’ equity it is said to be levered (Olweny and Mamba, 2011). Financial leverage can be informed of a loan or inform of debt (other borrowing). Financial leverage proceeds are reinvested to earn a greater return more than interest expense and cost incurred due to debt acquisition. (Chengand Tzeng, 2010). This means that if a company’s marginal rate of return on asset is higher than the company’s marginal rate of interest expense payable on the debt, then the company should increase the debt level since it will also increase return on equity. Contrary, when the company’s return on asset is lower than the interest rate payable on debt/loan acquisition, the firm should not borrow since borrowing will reduce the firms return on equity, (Athanasoglou, Brissimis and Delis, 2006).

Leverage gives room for increased returns to the investor if available, however it can lead to greater potential loss especially when the investment becomes worthless and the borrowed amount have to be paid with the interest, Andy et al., 2002). This leads to potential financial risk that may lead to financial loss, (Pandey; 2008). The degree of this potential financial risk is associated to the company’s capital structure.

A firm’s financial structure in most instances consist of preferred stock, common equity and the long term and short-term liabilities. This means that the means and ways in which a company finances its assets then constitutes to the company’s financial structure. Consequently, if the company’s short-term liabilities are excluded from the company’s financial structure we obtain the company’s capital structure. In other words, the company’s long-term liabilities consisting of preferred stock, common equity, and long-term debt/loan is referred as capital structure (Banice Olive, 2012). Therefore, the main objective of financial management in a company is structuring the company’s capital structure components in a manner that ensure maximization of shareholders wealth as the key measure of management’s performance. This study will therefore analyze the effects of financial leverage on financial performance which is an indicator of shareholders wealth maximization, Molyneuxandm Thorton, 1992).

Financial leverage is the company’s ability to utilize fixed financial charges to increase the earnings before interest and tax of a company’s earnings per share. In the event that a company does not utilize fixed cost bearing securities, earnings before interest and tax will change and consequently lead to change in earnings per share. If a firm has no fixed financial charges especially preference dividend and interest it’s an indication of financial leverage (Pandey, 2019). Financial leverage gives a firm the ability to magnify its earnings before interest rate and tax thus increasing earnings per share (Saleem, Rahman & Sultana, 2014).

Financial performance refers to firm’s ability to achieve its financial goals and objectives (Yahaya & Lamidi, 2015). Kajirwa (2015) deduced that a firm’s financial performance is depended on firm’s assets utilization in carrying out its income generating business activities. Financial performance can also be explained as the firm’s general wellbeing, that is, the availability and generation of more finances by a firm over a certain period of time. Financial analyst mostly uses financial performance as a measure to gauge and compare performance of different firms either in the same industry or different industries. This is a key tool in making sound investment decisions. Financial performance is, in summary, is a crucial objective that firms especially the profit-oriented firms desire or aim at to achieve (Yahaya & Lamidi, 2015). Financial performance is a key measure of the performance of any firm. Firm’s ability to make and increase profits depends on the business activities and business capacity. Business capacity is the competence of the financial management to source finances when required from the cheapest source/right source to finance firm’s assets. Business activity refers to the company’s efficiency in utilization of assets to increase production capacity. (Vijayalakshmi & Manoharan, 2014).When a firm is making great profits it is able to tolerate high debt levels since it has higher ability to meet financial obligations arising from debt acquisition.This means that the profit earning firms are more likely to add more debt in the capital structure as compared to firms making losses, this shows that financial performance is key in making financial leverage decisions. Financial performance is measured in terms of return on equity expressed as a ratio of earnings before interest and taxes to total equity.

1.2 Statement of the problem

It is indicated by Dittmar (2004) argued that debt level in a firm determines the amounts of fixed costs paid by the firm. This fixed cost associated with the debt/borrowed finances is referred to as cost of debt which is generally called interest amount. Padron and Santana (2005) asserts that companies that borrow so much from their creditors incur high cost of debt hence lowering the profits/net income. This supports research findings by SooCheong and Eunju (2005) who concluded that their financial leverage/debt affect company’s financial performance and income levels.

Nigeria’s listed firms mainly consider four key elements of debt financing, these elements are: tax considerations, business risk, shareholders risk, and the need for financial flexibility. Listed firms adopt more debt so that they can enjoy less income tax. However; the firm is more exposed to financial risks, Nduati (2010). Debt is worthwhile and helpful if a company will increase its profits levels and increase return on equity/shareholders upon acquisition of debt, Kale (2014). He further explains that most local firms utilize debt for their future plans because fixed cost of debt is usually predetermined, and this enables the firm to plan since the cost is apparent.

Mahira (2011) did a study on the effect of firm financial performance and its financial leverage on capital structure in the automobile sector companies in Pakistan. The study found out that financial leverage and firm’s financial performance have no significant effect on the firm’s capital structure. Akhtar (2012) did a study the impact of leverage on corporate financial performance applied on oil and energy companies’ sector. The study showed that financial leverage leads to improved performance. Maltona (2012) carried out a study to examine and determine the relationship between financial leverage on return on assets. The study involved firms in the three economics sectors of Kuwait. In conclusion the study found out that a positive relationship exists between financial leverage and return on assets. Nduati (2010) investigated on the relationship between leverage and financial performance of listed firms. It was found that there was a positive correlation between leverage and financial performance. Kale (2014) examined the impact of financial leverage on firm performance: the case of non-financial firms in Nigeria. The findings showed existence of a significant relationship between leverage and return on assets in non-financial firms in Nigeria.

The above studies show that little has been done in relation to financial leverage and financial performance of energy and petroleum sector companies listed firms in the Nigeria Securities Exchange. Further, the studies did not factor in liquidity which is important in establishing whether firms that utilize financial leverage are able to meet their financial obligations. This study therefore attempted to establish the relationship between financial leverage and financial performance of the energy and petroleum sector companies in the Nigeria Securities Exchange.

1.3 Objectives of the study

1.3.1 General Objective

The general objective of the study was to establish the influence of financial leverage on the financial performance of energy and petroleum sector companies listed in the NSE.

1.3.2 Specific Objectives

The study was guided by the following objectives;

To establish the effect of debt ratio on return on assets of energy and petroleum sector companies listed in the NSE
To examine the influence of debt-equity ratio on return on assets of energy and petroleum sector companies listed in the NSE
To examine the influence of interest coverage ratio on return on assets of energy and petroleum sector companies listed in the NSE

1.4 Research Questions

The study sought to answer the following research questions;

What is the effect of debt ratio on the return on assets of energy and petroleum sector companies listed in the NSE?
How does debt-equity ratio influence return on assets of energy and petroleum sector companies listed in the NSE?
How does interest coverage ratio influence return on assets of energy and petroleum sector companies listed in the NSE?

1.5 Significance of the Study

This study is helpful to listed firms as it shows the impact of cost of financing and financial leverage to profitability and financial performance. The research findings will be useful in guiding firms listed in the NSE especially in maintaining a balance between debt and equity, that is, it will guide listed companies in areas of financial management and financial decision making. This study will help firms understand the importance of maintaining optimal capital structure that maximizes market value and shareholders wealth of companies listed in NSE

The study will also help companies in other sectors of the economy to learn how to utilize financial leverage and how its impacts on profitability. The findings of this study might be used as a reference point to firms seeking to finance their projects using financial leverage. The study also adds to the existing body of knowledge on the significance use of financial leverage to the firm and how this contributes to financial performance of the firm. Future researchers and academicians interested in this area of study or other related topics will use the findings of this study as a reference point. In addition, this study can be used as a basis for further research.

1.6 Scope of the Study

The study was carried out on all the energy and petroleum companies listed with the NSE. The population consisted of the energy and petroleum companies listed with the NSE. Secondary data was obtained from published financial statement of these companies. The study sought to determine the role of financial leverage on the financial performance of energy and petroleum listed companies in NSE.

1.7 Limitations of the Study

Creative accounting greatly affects the quality of financial accounting information. Creative accounting is where management of a firm misrepresents facts about the financial position of a company with an aim of showing that the firm is in a better financial position. This limitation was handled by using audited published financial statements sourced from Capital Markets Authority. Audited financial statements provide more reliable and accurate information.

1.8 Organization of the Study

The study comprises of three chapters: chapter one, chapter two and chapter three. Chapter one comprises of the following subsections: background of study, statement of the problem, objectives of the study both the general objective and specific objectives, research questions, significance of the study, scope of the study and limitations of the study.

Chapter two comprises of theoretical review, empirical review, and summary of literature review, research gaps and conceptual framework. Theoretical review discusses theories that the study is anchored on. Empirical review discusses previous studies done concerning financial leverage and financial performance. Chapter four entails the data analysis, presentation and interpretation while chapter five comprises of summary of findings, conclusions and recommendations.

Chapter three discusses the research methodology that will be used to carry out the study. The chapter comprises of the following: the research design, the target population, the sampling procedures and design, data collection instruments and data collection procedures, data analysis and presentation and ethical consideration

CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA

Abstract

There exists divergence of opinion in literature on the relationship between capital structure and firms financial performance. This mix of opinions makes the direction of the relationship between debt holders and equity holders to be controversial. Therefore, this study investigated the impact of capital structure on financial performance of listed manufacturing firms in Nigeria. The study formulated four hypotheses and used generalized least square multiple regression to analyze the secondary data extracted from the annual reports and accounts of the 31 sampled firms for the period 2009 to 2014. The study found that total debt, long-term debt and short-term debt have significant impact on the financial performance of listed manufacturing firms in Nigeria. The study also found that total debt to total equity has no significant effect on the financial performance of the firms. In view of the findings, it is recommended among others that the management of listed manufacturing firms should work very hard to increase the short term debt to total assets component of their capital structure, since it has positive impact on their financial performance. Also, the firms should reduce the level of total debt to total assets and long term debt to total assets in their capital structure components, because they affect their financial performance negatively.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The nature and extent of relationship between capital structure and financial performance of firms have attracted attention in the literature of finance. Capital structure involves the decision about the combination of the various sources of funds a firm uses to finance its operations and capital investments. These sources include the use of long-term debt finance called debt financing, as well as preferred stock and common stock also called equity financing. One of the most important goals of financial managers is to maximize shareholders wealth through determination of the best combination of financial resources for a company and maximization of the company’s value by determining where to invest their resources.

Capital structure represents the major claims to a corporation’s asset. This includes the different types of equities and liabilities (Riahi-Belkaoui, 1999). The debt-equity mix can take any of the following forms: 100% equity: 0% debt, 0% equity: 100% debt; and X% equity: Y% debt. From these three alternatives, the first option is that of the unlevered firm, that is, the firm shuns the advantage of leverage (if any). Option two is that of a firm that has no equity capital. This option may not actually be realistic or possible in the real life economic situation, because no provider of funds will invest money in a firm without equity capital. This partially explains the term “trading on equity”, that is, the equity element that is present in the firm’s capital structure that encourages the debt providers to give their scarce resources to the business. The third Option is the most realistic one in that, it combined both a certain percentage of debt and equity in the capital structure and thus, the advantages of leverage (if any) is exploited. This mix of debt and equity has long been a subject of debate in finance literature concerning its determination, evaluation and accounting.

Financial performance is the measure of how well a firm can use its assets from its primary business to generate revenues. Erasmus (2008) noted that financial performance measures like profitability and liquidity among others provide a valuable tool to stake holders which aids in evaluating the past financial performance and current position of a firm. Financial performance evaluation are designed to provide answers to a broad range of important questions, some of which include whether the company has enough cash to meet all its obligations, is it generating sufficient volume of sales to justify recent investment. Capital structure is closely linked with financial performance (Tian and Zeitun, 2007). Financial performance can be measured by variables which involve productivity, profitability, growth or, even, customers‟ satisfaction. These measures are related among each other. Financial measurement is one of the tools which indicate the financial strengths, weaknesses, opportunities and threats. Those measurements are return on investment (ROI), residual income (RI), earning per share (EPS), dividend yield, return on assets (ROA),, growth in sales, return on equity (ROE),e.t.c (Stanford, 2009).

One of the main factors that could influence the firm’s performance is capital structure. Since bankruptcy costs exist, deteriorating returns occur with further use of debt in order to get the benefits of tax deduction and interest. Therefore, there is an appropriate capital structure beyond which increases in bankruptcy costs are higher than the marginal tax-sheltering benefits associated with the additional substitution of debt for equity. Firms are willing to maximise their performance, and minimise their financing cost, by maintaining the appropriate capital structure or the optimal capital structure.

Short term debt to total assets is another item in a firm’s capital structure that affects its financial performance. Short term debts to total assets affect the financial performance of a firm either negatively or positively. Short-term debt to total asset measures the relative short-term debts to total assets of a firm are to meet it financial obligation over the accounting period. Some scholars argue that the shorter the debt the better the firm is in improving its performance.

Understanding the relationship between long term debt to total assets and performance of various sectors of an economy is important to all stakeholders. Long-term debt to total assets measures the relative weight of long-term debt to the capital structure (long-term financing) of the firm in long run. The level of long-term debt of a firm is also believed to be one of the forces expected to influence the performance of a firm. A firm that has a higher long-term debt as proposed by previous studies would have little resources to take care of some other objectives and vice versa (Kurfi, 2013).

As firm financial capital is an uncertain but critical resource for all firms, providers of finance are able to exert control over firms. Debt and equity are the major classes of capital structure, with debt holders and equity holders representing the two types of investors in a firm. Each of them is associated with different levels of control, benefits and risk. While debt holders exert lower control, they earn a fixed rate of return and are protected by contractual obligations with respect to their investment. Equity holders are the real owners of a firm, bearing most of the risk and correspondingly, have greater control over decisions (Aliu, 2010).

The capital structure theory originated from the famous work of Modigliani and Miller (M & M) (1958). They argued that, under certain conditions, the choice between debt and equity does not affect a firm’s value and hence, the capital structure decision is irrelevant; but in a world with tax-deductible interest payment, firm value and capital structure are positively related. M & M (1958) pointed out the direction that capital structure must take by showing under what conditions the capital structure is irrelevant. Titman (2001) lists some fundamental issues that make the M & M proposition hold as: no taxes, no transaction cost, no bankruptcy cost, perfect contracting assumptions and complete and perfect market assumption. The M & M presentation became a subject of considerable debate both in theoretical and empirical research. The work of M & M has been criticized by many scholars in view of the fact that in the real world situation, the main assumptions never hold. They argued that in a non-perfect‟ world, there are factors influencing capital structure decision of a firm.

The fact that manufacturing firms in Nigeria frequently use leverage to finance their operation through debt or equity or both, the extent to which capital structure affects their operation has been an issue of concern. It has been argued that the fastest trend through which a nation can achieve sustainable economic growth and development is neither by the level of its endowed material resources nor that of its vast human resources but technological innovation, enterprise development and industrial capacity. In the modern world, manufacturing sector is regarded as a basis for determining a nation economic efficiency.

Arising from the strategic importance of the manufacturing sector to an economy such as Nigeria’s, it is important for investors and shareholders to understand the effect of capital structure on the performance of manufacturing firms. This is because capital structure decision on how to finance their assets by debt or by equity will affect relationship with the final result for any given period since it influences the returns and risks of shareholders and consequently affects the market value of the shares. In view of this, it becomes imperative to study the relationship between capital structure and financial performance of manufacturing firms in Nigeria.

1.2 Statement of the Problem

There has been an ongoing debate on the issue of capital structure and financial performance of firms. This controversy is further narrowed down to identifying which of the variables debated is most influential in predicting and determining the capital structure of manufacturing firms. The choice of optimal capital structure of a firm is difficult to determine. A firm has to issue various securities in a countless mixture to come across particular combinations that can maximize its overall value which means optimal capital structure. Optimal capital structure also means that with a minimum weighted-average cost of capital, the value of a firm is maximized. According to Rahul (1997), poor capital structure decisions may lead to a possible reduction in the value derived from strategic assets. Hence, the capability of a company in managing its financial policies is important if the firm is to realize gains from its specialized resources. The nature and extent of relationship between capital structure and financial performance of firms have attracted the attention of many researchers. The studies, which are largely foreign based, have however revealed conflicting findings.

In Nigeria, most of the studies did not use other components on capital structure and financial performance. The studies which include Bello and Onyesom (2005), Salawu (2007), Olokoyo (2012), Babalola (2012), Yinusa and Babalola (2012), Sabastian and Rapuluchukwu (2012) and Idode, Adeleke, Ogunlowo and Ashogbon (2014) have left a gap that need to be filled. For example, Salawu (2007), who studied the effect of capital structure on financial performance of selected quoted companies in Nigeria between 1990 and 2004 concentrated on short term debt. His study did not extend to other forms of financing, thus the finding could only be used in the context of short term debt financing. This means even within the purview of debt financing; only the short term aspect of the debt was covered in his study. In reality, a study on capital structure is supposed to cover both types of debt financing.

Babalola (2012) who also studied the effect of optimal capital structure on firm’s performance in Nigeria between 2000 to 2009 using samples of 10 firms, concentrated on total debt to total assets. His study excluded the aspect of total debt to equity, short term debt to total assets and long term debt to total assets financing despite the fact that both types of debt financing are used by the sampled firms. More so, his study and those of Bello and Onyesom (2005) and Olokoyo (2012) used Chi-square technique to analyze their data. Chi-square is considered deficient in terms of reflecting time variant and specific characteristic issues. Studies on capital structure and performance of firms are supposed to use parametric techniques that measure both time variant and specific characteristic issues. Owing to these identified gaps, a study that will cover the various forms of financing mix in order to address the following questions that remain unanswered is desirable: to what extent do total debt to total assets ratio, total debt to total equity ratio, and the ratios of short-term and long term debt to total assets affect the performance of manufacturing firms in Nigeria? This study attempts to provide answers to this fundamental question.

1.3 Objectives of the Study

The overall objective of this study is to examine the impact of capital structure on the financial performance of listed manufacturing firms in Nigeria. Specifically, the study sought to:

i. evaluate the extent to which total debt to total asset ratio affect financial performance of listed manufacturing firms in Nigeria;

ii. determine the effect of total debt to total equity ratio on financial performance of listed manufacturing firms in Nigeria;

iii. examine the impact of short-term debt to total assets ratio on financial performance of listed manufacturing firms in Nigeria; and

iv. assess the influence of long-term debt to total assets ratio on financial performance of listed manufacturing firms in Nigeria.

1.4 Statement of Hypotheses

To achieve the above mentioned objectives, the following hypotheses were formulated.

H01 Total debt to total assets ratio has no significant impact on financial performance of listed manufacturing firms in Nigeria.

H02 Total debt to total equity ratio has no significant impact on financial performance of listed manufacturing firms in Nigeria.

H03 Short-term debt to total assets ratio has no significant impact on financial performance of listed manufacturing firms in Nigeria.

H04 Long-term debt to total assets ratio has no significant impact on financial performance of listed manufacturing firms in Nigeria.

1.5 Scope of the Study

The study is designed to examine the impact of capital structure and financial performance of listed manufacturing firms in Nigeria. The study covers the period of six (6) years from 2009 to 2014. The study chooses the manufacturing firms as its domain because it covers the larger proportion of industry in Nigeria. The independent variables of the study are capital structure proxied by total debt to total assets, total debt to total equity, short-term debt to total assets and long-term debt to total assets, and the dependent variable is represented by financial performance proxied by return on assets. The period of the study is considered appropriate because it coincides with the period within which major reforms took place in the manufacturing sector.

1.6 Significance of the Study

The outcome of this study would contribute to the existing body of knowledge. Because, though there are a lot of studies on capital structure and financial performance around the globe, there is dearth of evidence using data on manufacturing firms in Nigeria. The outcome of the study would therefore serve as a reference material for subsequent researchers and would provide a basis for further research in this area.

It is the hope that the result of this study will be beneficial to both internal and external parties (i.e managers in maximizing investors return, owners in making an informed decision, creditors in ascertaining credit worthiness of a firm, Government in making favorable financing policies etc) to improve on the GDP contribution by the manufacturing sector and also improve on employment rate once the sector is viable since the stake holders are interested in knowing the impact of such decisions on an organization performance.

Also, the government and its agencies will somehow benefit from this study because the study will highlight the need from its findings if necessary for the government to formulate more favorable financial and economic guidelines as the sector demands and this will sustain the operations of Nigerian Manufacturing firms, especially the potential firms yet to be quoted in the stock market and resultantly contributing to GDP of the nation which have been on the decline hitherto.

The results of this study would also be of benefit to managers, shareholders and creditors of manufacturing firms in Nigeria. Managers would be placed on a sound footing to understand the effect of various financing mix on the operations of their firms.

Shareholders would be able to make an informed decision with regard to their equity interest in relation to the debt financing options available to their firms, while creditors would be able to identify the firms that are financially strong enough to settle their claim as at when due.

THE IMPACT OF INFLATION ON PROPERTY VALUE IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Inflation is commonly taken to be an appreciation on real value whereas it is an increase in the volume of money and credit leading to a rise in the general level of prices and consequent erosion of purchasing power. Inflation is characterized by a fall in the value of the country’s currency and a rise in her exchange rate with other nation’s currencies. This is quite obvious in the case of the value of the Naira (N), which was N1 to $1 (one US Dollar) in 1981, N100 to $1 in year 2000 and over N128 to $1 in 2003. In 2014 it was N161 to $1, in 2016 it was N 298 and presently it is over N450 to $1. During inflation prices rises and prices of some goods and services rise faster than others while some may remain unchanged at the same time wages and salaries are more or less fixed but the prices of commodities continue to rise. This is evident in the prices of goods and services which has made it almost difficult to an average Nigerian to meet up the basic requirement of a decent livelihood.

The impact of inflation on the value of assets is considered one of the primary financial concerns of long term investors. While actual and expected inflation have slowed considerably since the early 1980’s, concern over future increases is still a consideration for long term investors. Ibbotson and Siegael (1995) conclude that real estate compensates the investor for inflation risk. When real estate is added to a mixed-asset portfolio, the inflation risk of the expanded portfolio is substantially below that the original portfolio (expanded real estate). In recent years, during which we have inflation seen the incidence of inflation falling to low levels and fairly static property markets, the conventional wisdom has means low, or no growth in property values. There are many benefits from investing in property in a low inflation environment and particular risks in investing in a high inflation environment.

The key to understand the impact inflation on property values is found in two factors in particular. Firstly, the benefit from real estate is maintaining a hedge against inflation and over and above that, increasing the purchasing power of capital by having it increase in value ahead of the rate of inflation, any change in value for a given period above or below the rate of inflation is called the “real” growth rate. Parkin, J. Micjeal (1975) Historically Kwara houses prices have increased over the long term at around 10% per annum compound. Inflation during the same period has averaged around 7% per annum growth, that is, the growth above the inflation rate which is increasing the purchasing power of our capital and therefore our “real “ wealth, has averaged around 3% per annum. If in every year inflation was 12% and prices increased by 15% giving us a 3% real increase, this will be telling us that the property market is booming. Chris and Ola (2001) Why then, when inflation is saying 2% and values increases 5%, again giving us a 3% real increases do they adopt a negative view? The result is virtually the same.

The second key to understand the impact of inflation on property values is on the aspect of home owners’ wealth in housing is currently the largest part of Nigeria households’ investment portfolios. After stock prices collapsed in 2009 and mortgage rates hit historically low levels, investment in residential housing picked up. This increase, coupled with higher home prices, boosted household wealth in real estate from $6.6 trillion in 2000 to $10.5 trillion in the second quarter of 2005 and an increase of more than 58 percent. Over the same period, household wealth in corporate equities lost a fourth of its value, falling from $8 trillion to $6 trillion.

Housing price bubbles occur when home prices grow at a rate exceeding the inflation rate in an area, especially the inflation rate for construction materials and labor. In such situations, higher home prices generally reflect increased demand (Chris and Ola, 2001). For world economic markets, Inflation is a fairly new experience as for much of the pre-twentieth century there had been little upward pressure on prices. These limit governments’ abilities. Inflation reflects a situation where the demand for goods and services exceeds their supply in the economy (Hall, 1982). It causes could be triggered by the private sector and the government spending more than their revenues, or by shortfalls in output. Price increases could also be triggered by increases in costs of production. For instance increases in prices of imported raw materials will cause inflation if not managed. Whatever the initial cause, inflation will not persist unless accomplished by sustained increase in money supply. In this case, inflation is monetary phenomenon. But what effect does inflation have on property values. Inflation causes many distortions in the real estate market. It hurts people who are retired and living on a fixed income. When prices rise these consumers cannot buy as much as they could previously. It is on this note that this study seek to examine the impact of inflation on property value in Nigeria.

1.2 Statement Of Problem

Inflation is one of the challenges facing property values any urban areas in the World. The first is through increased costs: higher wages for construction labor, higher construction material costs and higher land prices. When the prices of new houses and old houses are compared, new houses are more expensive on average than old houses, and the price difference to a great extent reflects higher construction labor and material costs. Inflation as affected property values in terms of rent. Irving Fisher (2010), a noted American economist, put forth a theory about the relationship between interest rates and inflation rates that can be applied to housing market rents.

According to Fisher (2010), when lenders loan money, they consider the expected inflation over the term of the loan and add that expected inflation rate to the interest rate they charge. If lenders want to charge 2 percent interest and expect a 3 percent rate of inflation, they charge 5 percent interest on the loan. A similar process takes place in housing markets. When landlords rent housing units, they consider recent inflation rates as well as expected inflation rates over the terms of rental contracts. They increase rents to meet their inflation expectations. Higher rents translate into higher home prices because the price of a home is equal to the present value of future streams of actual or imputed rents (gross rents minus maintenance costs, taxes, depreciation and so forth).

1.3 Aim And Objectives of the Study

The aim of this study is to examine the impact of inflation on property values in Nigeria. To this end, the study shall focus on the following specific objectives;

To identify the different types of properties in the study area
To identify the types and causes of inflation
To examine the impact of the inflation on property values.

1.3 Research Questions

In other to have a deep insight about the impact of inflation on the property values in the study area. The following issues must be properly addressed;

What type of properties are in the study area?
What are the types and causes of inflation?
How does inflation affect property values?

1.4 Significance Of The Study

This research work is significance to the government for decision making, student, practicing estate surveyors and valuers, investors, researcher etc as the findings of the study will enable them make informed decision of the impact of inflation on property value in Nigeria.

In addition, the study will enable property developer know how to go about their investment in real estate despite the challenges of inflation and rising cost of building materials and construction in general

Lastly, this research work will help to determine the effect of inflation and other factor influencing property value in Nigeria which is an essential pre-requisite to successful property investment as well as stimulating interest in the students to carry out further research on the topic.

1.5 Scope Of The Study

The study addresses the impact of inflation on property value in Nigeria. The scope of this research is restricted to Nasarawa town in Nasarawa State, this is to enable the research have an indepth evaluation.

Some obstacles encountered in the course of carrying out this research were as follow:

Time factor was the major constrain couple with multiplicity of other classroom work and lecture requirement were a set back to the research.
Un-cooperating attitude of some respondents as they were busy to attend to the researcher.
In accessibility of adequate information from research respondent due to illiteracy among them, some find it difficult to understand some question they were asked.
Finance was also a limiting factor in the course of the research.

1.6 Definition of Terms

Inflation: Inflation is the decline of purchasing power of a given currency over time. The rise in the general level of prices, often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods.

Property: According toCollins dictionary a property is a building and the land belonging to it.

Property Development: (The Collins English Dictionary, 2014) This can be define as an improvements in land.

Value: This a monetary worth of an asset, business entity, goods sold, service rendered, or liability.

Rental Value: Oxford Advance Learner’s Dictionary (6th edition) define is the fair market value of a property.

Property Value: Property value refers to the worth of a piece of real estate based on the price that a buyer and seller agree upon. According to economic theory, the value of a property converges at the point where the forces of supply meet the forces of demand.

1.7 Historical Background Of The Study

Nasarawa local government area of Nasarawa state was established in 1976 during the military regime under the leadership of General Muhammed administration.

The local government are covers an estimated area of 154 square kilometers.

It has thirteen (13) wards and consists of six departments which is responsible for carrying out the activities of personnel, social, primary health care, agriculture and natural resource. The state derives it name from the local government of Nasarawa. The local government head quarter is between latitude 8.8 degrees east of Karu. They also share boundary with Toto local government area, Federal Capital Territory and Benue.

The local government has a population of 60,210 by the 2006 census through other contest in the law court. It has multiethnic like Afo, Agatu, Gwan-dara etc.

TOPOGRAPHY

From an elevation of about 1,500 to 1,000 meters, the Nasarawa descends in a series of step to the wide Benue through the northern part of the low lands forms a continuous plain about 50 kilometers wide which gradually slopes from the foot of the Nasarawa towards river Benue.

The western part of the northern low land is an area of transaction, only part of it can be regarded as belonging to the Benue plains.

CLIMATE

Nasarawa has two seasons, which includes:

A dry season without or with little rain from November to March.
1. Wet season from April to October

The main annual rainfall is 1-300km

THE PEOPLE AND THEIR OCCUPATION

The major ethnics groups are Hausa, Afo, Gwari, and Gwandara. The earliest inhabitants were predominantly farmers and some of them are fishermen they use river for their routine fishing.

Besides, they were also engaged in rearing of cattle, black dying and weaving. Meanwhile, trading is one of their major occupation as a result of the establishment of the Federal Polytechnic.

Pages

Friday, 31 December 2021

THE EFFECT OF EXCHANGE RATE FLUCTUATION ON THE NIGERIA ECONOMY

THE IMPACT OF ECONOMIC RECESSION ON GOVERNMENT EXPENDITURE IN NIGERIA

ASSESSMENT OF THE IMPACT OF VACANCY AND OCCUPANCY RATE ON RESIDENTIAL PROPERTY INVESTMENT MARKET

EDUCATION AS A TOOL FOR WOMEN EMPOWERMENT AND COMMUNITY DEVELOPMENT IN BWARI AREA COUNCIL OF ABUJA

AN APPRAISAL OF THE ADMINISTRATION OF PERSONAL INCOME TAXATION

FINANCIAL LEVERAGE AND FINANCIAL PERFORMANCE OF THE ENERGY AND PETROLEUM SECTOR COMPANIES

CAPITAL STRUCTURE AND FINANCIAL PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA

THE IMPACT OF INFLATION ON PROPERTY VALUE IN NIGERIA