4.0 Introduction 48
4.1 Procedure for the processing and analyzing of
collected Data 48
4.2 Analysis of Data 59
CHAPTER
FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
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5.1
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Summary
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63
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5.2
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Conclusion
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64
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5.3
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Recommendation
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65
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References
Appendix 89 -
91
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CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND TO THE STUDY
Raising and utilizing funds efficiently and effectively has been a major source of
concern to all financial managers both in the corporate world and Public Sector
all over the world. The prime
purpose of establishing a firm is to ensure that returns will not only be
sufficient to meet the cost of funds but also enough to satisfy the wealth of
maximization objective of the
firm, thus, raising finance for corporate bodies has become important.
Financial management can thus be described as the managerial
planning and controlling of financial resources of a business to achieve the
objectives of the business. It
has long been considered as a branch .of economics but in the early 20th century it emerged as a separate discipline. It can also be
defined as the identification of the possible strategies capable of maximizing
an organizations net present value, the
allocation of scarce resources among the competing opportunities, and the
implementation and monitoring of the chosen strategy so as to achieve stated
objectives.
Financial management as a subject is of growing interest to both
academics and financial managers. On its emergence, it dealt with only the
instruments, institutions and procedures in the capital market. It later dealt
with keeping records and reports, establishing funds (external financing)
monitoring cash position and paying bills. It also deals with the concepts,
assumptions, principle and techniques underlying the major financial decisions
of the enterprises. Financial management connotes responsibility for obtaining
and effectively utilizing the funds necessary for the efficient operation of an
enterprise. The finance function centre around the management of funds, raising
and using them effectively. It therefore covers all functions concerned in
attempting to ensure that financial resources are obtained and used in the most
effective way to secure attainment of the objectives of the organization.
It provides the background for thorough understanding of the
nature, theories and critical issues relating to modern financial management.
It thus serves as a necessary background to a more advanced treatment of the
investment financial decision.
Financial management today now includes a rigorous analysis of
Investment of organization's funds in assessing and obtaining the best mix of
financial and dividend in relation to overall market valuation of a firm.
The field is still changing with ideas and techniques. The
historical background of the company under review is thus:
NIGERIA NATIONAL PETROLEUM COMPANY (N. N. P. C) was established on
April 1977 under the statutory instrument decree No. 33 of the same year by a
merger of the Nigeria National Oil Corporation operational functions and the
ministry of mines and power with its regulating responsibility, this decree
established NNPC, a public organization that would on behalf of government
adequately manage all government interest in the Nigeria oil industry.
In addition to its exploration activities, the corporation was given
powers and operational interest in refining petrochemicals and products
transportation as well as marketing. Between 1978-1989, NNPC constructed
refineries in Warri, Kaduan and Port Harcourt and took over 35,000 barrel shell
refinery established in Port Harcourt in 1965.
In 1988, the NNPC was commercialized into 12 strategic business
units covering the entire
spectrum of oil industry operations: exploration and production gas development, refining, distribution,
petrochemical engineering and commercial investment. The subsidiary companies
include:
i)
National Petroleum
Investment Management Services
(NAPISMS)
ii) Nigeria Petroleum Development Company (NPDC)
iii) The Nigerian Gas Company (NGC)
iv) The Products and Pipelines Marketing Company (PPMC)
v) Integrated Data Services
Limited (IDSL)
vi) Nigeria LNG Limited (NLNGN)
vii) National
Engineering and Technical Company Limited
(NETCO)
viii) Hydrocarbon
Services Nigeria Limited (HYSON)
Ix) Warri Refinery and Petrochemical Co. Limited
(WRPC)
x) Kaduna Refinery and Petrochemical Co.
Limited (KRPC)
xi) Port-Harcourt Refining Co. Limited (PHRC)
xii) Eleme
Petrochemicals Co. Limited (EPCC)
In addition to these subsidiaries, the industry is also regulated
by the department of petroleum resources (DPR) a department within the ministry
of Petroleum resources. The DPR ensures compliance with industry regulations
processes applications for licenses, leases and permits establishes and
enforces environmental regulations. The DPR and NAPIMS playa very crucial role
in the day to day activities throughout the industry.
The NNPC is by law a joint venture between the Nigerian Federal
Government and a Number of foreign multinational corporations, which includes
Royal Dutch Shell, Exxon-Mobil, Agip, Total fina Elf, Chevron and Texaco
(though now merged with chevron). Through collaboration with these companies,
the Nigerian government conducts petroleum exploration and development.
According to the Nigerian constitution, all minerals, Gas and oil
the country possesses are legally the property of the Nigeria Federal
Government.
1.1 STATEMENT OF THE PROBLEM
Public finance is closely connected to issues of income
distribution. Resources generation, resources allocation, expenditure
management are the essential component of the public financial management
system.
Most of the time, resources collected from the economy are
inefficiently and ineffectively utilized which constitute poor financial
management.
Financial information relating to the operations of the joint
ventures are not in the public domain, most public enterprises have no audited
account and not been audited in several years.
Public enterprise are poorly managed, and highly unreported with
their financial information either unavailable unreliable where such financial
information are available, or questionable at best. They are broken and has
become liabilities the their nations. They have a huge debt profile, hidden
financial records and obviously unable to meet their financial obligations.
To achieve transparent government, this question must be
answered,; How can financial poor financial management be eliminated in public
enterprises?
1.2 OBJECTIVE OF THE STUDY
1. To
identify how financial management play a major role in the public sector.
2. To
examine how public enterprises has minimized share holders wealth
1.3 RESEARCH QUESTIONS
1. Does financial management play a major role
in the public sector?
2. To what extent has public enterprises
minimized shareholders wealth?
1.4 STATEMENT
OF HYPOTHESIS
The hypothesis designed to solve problems identified in public
enterprises (a case study of NNPC)
Hypothesis to be tested
1.
Ho:-
Financial management does not play major role
in a Public Sector.
Hi: Financial management play a
major impact in a Public Sector.
2.
Ho: Public enterprises does not maximize stakeholders wealth.
Hi: Public enterprises maximize
stakeholders wealth
1.5 SIGNIFICANCE OF THE
STUDY
The purpose of this study is aimed at studying the relevance of
financial management and its contributions in an enterprises. This would be
appreciated when it is remembered that in a business concern organized to
produce a profitable return to those who have invested in it (stakeholders),
the objectives of management is to maximize such returns, and financial
management is a technique that can be of assistance in attaining such maximization.
The significance of this study will be appreciated in the
following area which includes:
a)
Merit of having a suitable
financial management in a public enterprise.
b)
To show the effectiveness of
financial management in the public enterprise.
c)
To show that financial
management helps in the coordination of other sectors in an enterprise.
d)
It could also serve as a
reference point to those who might want to carry out research in similar areas
of study.
1.6 SCOPE OR DELIMITATION
OF THE STUDY
The scope of the project is limited to a public enterprise. For
the purpose of this study, the scope will cover the role of financial
management and its relevance in a public enterprise. All investigation and
researches of this write up shall be limited to Nigeria National Petroleum
Corporation (NNPC). Where facts on the role played by financial management
would be highlighted. This project will be limited by time constraint and
financial constraint and also non-cooperation on the part of the workers.
1.7 DEFINITION OF TERMS
Financial Management:- the managerial planning and control of
financial resources of a business to achieve the objectives of the business
Financial Managers:- this is a
key manager who is responsible for the day to day financial services and record
keeping of the organization.
Investment Decision: - this
involves the identification of viable projects using various techniques to
determine those that are viable. Financing Decision: this involves the
identification of the appropriate sources of finance that would be used to
finance the projects. Dividend Decisions: this is the determination of the appropriate amount to be paid as
dividend and the profit that would be ploughed back to finance expansion in the
company.
Stakeholders: this is a coalition of
a group of people that has a stake in what the company does. It comprises of
equity shareholders, preference shareholders, lenders, employees, suppliers and
customers.
Public Enterprise: these are
governmental organizations which are "Un in the interest of the society as
a whole and they might be a gap between the benefits they provide to society
and the cost of their operation.
Finance: this is the management
of money (i.e. the management of the flows of money through an organization and
claims against money)
Objectives: this states precisely
what is to be achieved and when the results are to be accomplished.
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