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EFFECT OF INVESTING ACTIVITIES ON THE RETURN ON ASSETS OF 

OIL AND GAS FIRMS IN NIGERIA 

 

By 

 

Ojeh Augustine, Ph.D., FCA 

 

 

ABSTRACT 

Most entity are unwilling to borrow to finance its economic activities due to the terms 

and conditions attached the loans. Therefore the study empirically and statistically 

evaluate the implication of investing activities which is represented by equity to capital 

ratio (ECR) and debt to equity ratio (DER) and the performance which is represent by 

return on equity (ROE) of oil and gas sector firms listed on Nigeria exchange group, 

eight (8) firms was used for the study such as: 11 Plc Formally Mobil Oil Nigeria Plc, 

Anino International Plc, Coinoil Plc, Eterna Plc, Ardova Plc Formally Fortoil, Japaul 

Oil and Maritime Service Plc, Seplat plc and Total Nigeria Plc. With data ranging from 

2013 to 2020. The result showed that the companies experience a weak level of 

activities between the period of 2014 and 2015. ECR has a coefficient of -7.393806, 

and statistical value of 0.0405 while DER has a coefficient of -2.922808, and statistical 

value of 0.0247, the study also showed that Nigeria oil and gas sectors experienced a 

slow economic activities between 2015 and 2016 however the entities employed 

external sources of finance which was matched to the company’s investing activities 

and also with the help of relevant stakeholders, the entities where revitalized financially. 

Therefore we conclude that investing activities has statistical significant impact on 

performance. We therefore recommended that: creditors should not hesitate to give loan 

to firms and most especially the oil and gas companies because they play a great role in 

the economy; managers should source for external sources of financing to boost its 

activities before internal sources, the findings also revealed that the external sources has 

helped revitalized the sector; the government should create an enabling environment for 

firms in this sector to operate effectively and efficiently; government should also make 

soft loans available to entity during a financial challenging periods; and manager should 

match its investing activities properly to avoid over matching and mismatching of 

financial resources, if this is not done it may affect company going concern. The study 

also contributed to existing literature by revealing that external finance has contributed 

to revitalizing the oil and gas companies during the nosedived of the oil price, 

production and export between 2015 and 2016. However if an entity want to borrow 

they should consider the cost and benefits, terms and conditions associated with such 

sources of external finance. In summary the study revealed that investing activities has 

a significant impact on performance therefore stakeholders such  as creditors, 

government to mention but a few has crucial role to play in trying to revitalizing 



 

 

175 | P a g e  

 

 

companies during slow economics activities, this can done by creating an enabling 

environment, giving grants and soft loans to help revitalizedthem. 

Key words: Investing activities, Return on Assets, Performance, finance and activities 

 

INTRODUCTION 

Background of study 

Investing activities include purchases of physical assets, investments in securities, or 

the sale of securities or assets. However, negative cash flow from investing activities 

might be due to significant amounts of cash being invested in the long-term health of 

the company, such as research and development. Nigeria is an oil dependent nation, this 

due to the fact that large proportion of her revenue is generated from this sector. 

Therefore if proper financing decision is not taken by this sector it will automatically 

affect Nigeria economy. Scholars has not been able to come to consensus on the topic 

capital structure with respect to performance however investing activities is inevitable 

for operation and survival of every firm, hence for a company to operate as a going 

concern it must evaluate its current financial structure. Just like man cannot do without 

its skeletal structure in the same vein an entity cannot do without its investing activities 

because this is the foundation upon which an entity is beingbuilt. 

 

The combination of debt and equity is a very critical decision because any wrong 

combination will affect the performance and in the long run the going concern of the 

firm will be threaten i.e. it myth lead to bankruptcy. Before an entity should decide to 

employ debt to finance its operations those at the helm of affair should first consider 

the available sources, the risk attached to the available sources and the strategic 

approach put in place to manage this fund. If proper strategic is not design before this 

fund is sourced and gotten it may compel some firms to engage in improper matching 

of its fund, some myth even engage in an aggressive approach i.e. using current debt to 

finance non-current capital investment or assets. In the same vein,if the firm decides to 

employ equity it must consider how it will maximize the shareholders wealth and at the 

same time knowing when to distribute dividend to its shareholders or retain the fund 

for future investment however dividend should not be paid out of capital. If the firm 

decides to employ both equity and fund to finance its operation, it should be 

strategically spell out proportionately prior its incorporation because this will help 

guide against mismatching both debt and equity. Reason being that each of this element 

of capital structure has its own merits and demerits hence with a target capital structure 

already established the firm will go for the cheapest availablesources. 

 

Akpotohwo, Ayunku and Ogeibiri (2018) the size of a business is determine by its 

capital structure, the firms may have various sources and if proper matching is done it 

will result to a win-win for both shareholders and other stakeholders such as creditors 

this because while dividend or capital appreciation accrue to shareholders, the firm is 



 

 

176 | P a g e  

 

 

also able to meet her other financial obligation to its stakeholders, therefore the value 

of the firm is maximized and cost is minimize with proper matching. The capitalization 

of the firm is a determinant of its capital structure the firm may decides to employ equity 

shares, preference shares, non-current debt, return on equity to mention but a few 

however the onus is proper matching. Most reader’s term to mistake financial structure 

for capital structure of a firm, while the later deals with total liabilities of the firm’s i.e. 

non- current debt and current debt, the formal only deals with non-current debts. In the 

same vein proper clarification must be made between capitalization and capital 

structure, capital structure is the combination of equity shares, preference shares, 

debentures and retained earnings, hence prior operations or the accounting year of a 

firm, the combination of equity share and non-current debt of the firm is the capital base 

or capitalization, if proper emphasized is not made and stated it may result to a wrong 

capital structure formation and computation. 

 

Every financial manager is faced with three most critical decisions which are; what 

investment should the firm proposed resources be invested in, this must be strategically 

stated before he/she can move to the next critical decision; where can this 

fund/resources be gotten putting in mind risk minimization and the available cheapest 

sources; and the manager must also put in place strategic procedure on how to manage 

this fund so that firm can meet up to its financial obligation to all stakeholders. Ross, 

Westerfield and Jordan (2008) capital structure is the combination of equity and debt 

owned by a particular entity, at particular stage of firm life cycle it will need funds and 

the size and the life span of the firm will help determine whether to borrow, divest or 

engaged in both process, this decision in long run may lead to capital restructuring i.e. 

this occurs when the entity change one of its capital structure without affecting its total 

assets structure, therefore if a firm capital structure decision is not careful planned the 

value of the firm will beaffected. 

 

Oil and gas sector 

As at the time of carrying out this research there where twelve (12) firms listed on the  

Nigeria exchange group (NEG) and most of them engaged in both upstream and 

downstream activities they are: 11 Plc; Anino International Plc; Capital Oil Plc; Conoil 

Plc; Eterna Plc; Forte Oil Plc; Japaul Oil & Maritime ServicesPlc; Mrs Oil Nigeria Plc; 

Oando Plc; Rak Unity Pet. Comp. Plc; Seplat Petroleum Development Company Plc 

And Total Nigeria Plc this companies are engaged either in one of these activities: Coal 

extraction; coal and  coal products distributors; crude oil and natural; gas extraction; 

petroleum refining; petroleum and petroleum products distributors; petroleum bulk 

stations and terminals; gasoline stations; energy equipment and services; field services; 

and integrated oil and gas services or the other. NSE (2020) the companies listed this 

sector are involved in operating, developing oil and gas field properties and, the mainly 

involved in discovering, recovering and production of liquid hydrocarbons from oil and 

http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGMOBIL00007
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGCAPOIL0007
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGCAPOIL0007
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGCONOIL0003
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGJAPAULOIL4
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGJAPAULOIL4
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGOANDO00002
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGSEPLAT0008


 

 

177 | P a g e  

 

 

gas fields. They are involved in exploration, production, refining, marketing and 

transportation of the oil and gas product to the needed users, the most capitalized and 

liquid companies as at the time of carry this research are: Conoil Plc; Ardova Plc; Mobil 

Plc; MRS Plc; Oando Plc; Total Plc; and Seplate with following capitalization 

N12,438,395,473.65; N16,992,583,868.74; N82,687,963,836.65; N4,459,949,671.47; 

N29,660,708,926.97;N31,924,397,613.44 and N204, 821,472,713.20, thus far Seplate 

Plc is most capitalized among the listed firms on the Nigeria exchange group as stated 

above. 

 

Scholars have not be able to come to a consensus on issue of capital structure Etale and 

Uzakah (2019) opined that capital structure has no significant effect on firm 

performance however Kpolode; Edoumiekumo and Alfred (2020), Etale, 

Edoumiekumo, Kpolode, and Nkak (2020) opined that capital structure has a significant 

impact on a firm performance. The firms under study play a great role in Nigeria 

economy, this is due to the fact that a large proportion of her revenue comes from this 

sector, and over time the oil price has been fluctuating. 

 

REVIEW OFLITERATURES 

Review of related literature 

Investing activities cannot to be analyzed on its own therefore the financial statements 

is an inevitable statement with respect to investing activities. Therefore the first and 

only the first step in assessing the investing activities and financial health of your 

business is through the financial statement of the entity, the process may also involve 

the comparison of different industry investing activities and performance with respect 

to other similar industry in other country and also with respect to industry standards 

over a period of time. 

 

Theoretical literature 

The study will employ the pecking order theory, trade-off theory and agency theory to 

mention but a few which will also serve as guide to the researchers. 

 

Pecking order theory 

Rose, Wester field and Jordan (2008) opined that pecking order theory is one among 

many underpinning theories behind the investing activities of an entity, the proponent 

of this school of thought believed that whenever a firm is faced with financial needs, 

it’s should first look inward hence internal fund should be used for any economic 

activities however if not enough the entities can then source outside (external sources), 

the ideology behind this school of thought is that is less expensive i.e. using internal 

sources to finance economic activities carry lower financial risk therefore this school of 

thought opined that economic activities should be financed in the following order 

internal sources, debts and equity financing respectively. This theory also opined that 



 

 

178 | P a g e  

 

 

employees of the entities know more about the entity (information asymmetric) hence 

influences the cost and risk of financing economic activities and also influences the 

investing activities of an entities. 

 

Trade-off theory 

This one of the underpinning theory behind the investing activities of an entity, the 

decision on what sources of finance to adopt in financing the economic activities of the 

firm involves a critical economic and financial trade-off, the proportion of internal 

financing, debt of equity employed by the firm will affect the investing activities and 

invariably affect the performance of the entity, hence if all the sources are available to 

the entity, the pros and cons must be consider before taking any critical economic and 

financial decision. Some scholar’s believed that it is better to finance an entity economic 

activities with debt rather than employ equity, the proponent and followers of this 

school of thought believed that debt financing give the entity tax shield unlike equity 

financing. 

 

Agency theory 

This theory demonstrate the nexus between the principal (mainly the shareholders) and 

the agent (usually the Managers and caretakers of shareholder funds). Both parties have 

interest in the entity, the agent have a fiduciary responsibility of maximizing 

shareholders wealth, although this comes with some associated cost. Lawal, Edwin, 

Monica and Adisa (2014) in their study of effects of capital structure on firm’s 

performance opined that Berle and Means (1932) was the first proponent of this theory 

and found out that ownership and control of large corporation become more separated 

due to the ceaseless dilution of equity ownership. Hence because of the dispersed 

ownership managers are prone to likely pursue selfish interest instead of the interest of 

the owners, this moral hazard will lead to monitoring and bonding cost. Jensen and 

Meckling (1976) opined that in order to minimize the moral hazard (agency cost) an 

optimal debt level in capital structure should be maintained in order to avoid divergent 

interest of agents with principals and other stakeholders such as debt holders. 

 

Empirical literature 

Etale, Edoumiekumo, Kpolode, and Nkak (2020) investigated the nexus between capital 

structure and firm’s performance of quoted industrial goods listed on Nigeria stock 

exchange by employing five secondary data ranging from 2014 to 2019 (six year) using 

the multiple regression model in testing their hypotheses of their and found out that 

capital structure has a statistical significant relationship with performance however one 

of the component of their capital structure has a negative relationship with performance, 

therefore recommended that long term financing should be consider first when deciding 

the capital structure component of an entity and also proper matching should be carried 

out between debt and equity. 



 

 

179 | P a g e  

 

 

 

Kpolode; Edoumiekumo and Alfred (2020) employed a paired t-test to examined capital 

structure with respect to performance of 11 plc formally Mobil oil Nigeria plc prior the 

change of its name and post the change of its name using secondary data from 2013 to 

2019 and found out that, capital structure significantly and statistically influences the 

performance of the entity prior and post the change of its name therefore recommended 

that entities that intend to change its name should engage in more sensitization for a 

specific duration of time to keep stakeholders and the public at large abreast before it 

change its name. 

 

Uremadu and Onyekachi (2019) collated data from consumer goods firm sector of 

Nigeria economy and investigated the effect of capital structure on corporate 

performance by employing the multiple regression of ordinary least square analytical 

technique and found out that capital structure has a negative and insignificant effect on 

corporate performance of the consumer goods firm sector of Nigeria therefore opined 

that capital structure is not a major determinant of firm performance, hence 

recommended that managers and stakeholders should finance its economic activities 

via internal sources such as retained earnings and also managers need to 

becarefulwhenusingdebtasasourceoffinancingeconomicactivitiesanddebtshouldbecons

iderasalast option as this is negate the pecking order theory, therefore corporate firms 

should use more of equity than debt in financing their business activities. 

 

Ngwoke and Sergius (2019) investigated the impact of capital structure on financial 

performance of listed food and beverage companies in Nigeria with secondary data 

ranging from 2007 to 2016 by using the expost facto research design and multiple 

regression analysis was employed by using e-view statistical package and discovered 

that capital structure which was represented by current debt had a significant and 

positive effect on performance which was represented by return on equity however long 

term debt has no significant statistical relationship with performance therefore 

recommended that entities should consider equity first as a source of financing 

economic activities before any other sources. 

 

Ganiyu, Adelopo, Rodionova and Samuel (2019) employed secondary data to 

investigate the effect and relationship of capital structure on entities performance in 

Nigeria by employing dynamic panel model on panel data of 115 listed non-financial 

entities in generalized method of moments estimation method in a regression model and 

found out that there was a significant statistical nexus exist between capital structure 

and entities performance when moderate debt was employed however a non-monotonic 

relationship exist between capital structure and entities performance when excessive 

debt was employed, and also discovered that most entities in Nigeria finance its 



 

 

180 | P a g e  

 

 

economic activities through short term finances therefore concurred with the portability 

of the agency cost theory. 

 

Ezenwakwelu, Onyeama, Osanebi, Emengini and Abugu (2019) investigated the capital 

structure determinants and performance of startup firms in developing economies like 

Nigeria via conceptual review by employing secondary data and found out that levered 

firms has more tax sheltered than unlevered firms, the more a firm is levered, the higher 

the rate of return to the equity holders however when the net operating income is weak 

unlevered firms will perform better than the levered firms also if the net operating 

income of an firm is strong and is also very levered it will propelled the rate of return 

to increase, therefore opined that the level of debt and equity in an entity has implication 

on the capital structure and associated risk on performance hence recommended that 

entities should keep an optimal capital structure. 

 

Fredrick and Eboiyehi (2018) employed the panel corrected standard error (PCSE) 

technique to examined the impact of capital structure on corporate firms financial 

distress of manufacturing firms in Nigeria by employing variables such as corporate 

financial distress, capital structure, firm size, assets tangibility, revenue growth, 

profitability and age of firms and found out that capital structure, firm growth and firm 

size influences corporate financial distress negatively however variables such as age of 

firms, profitability and asset tangibility influences corporate financial distress 

positively, therefore recommended that the central bank of Nigeria should give 

preferential treatment to manufacturing sector by lower cost of borrowing, managers 

and stakeholders should be cautious when planning the entity capital structure, internal 

sources of fund should be used to finance economic activities rather than external 

source, and government should give preferential tax treatment to entity in the 

manufacturing sector. 

 

Odusanya, Yinusa and Bamidele (2018) employed secondary data from Nigeria stock 

exchange to investigated the factors behind a firm profitability for 114 firms ranging 

from 1998 to 2012 by employing the system generalized method of moments, and found 

out that short-term leverage, inflation rate, interest rate and financial risk have 

significant negative impact on firm profitability however lagged profitability has a 

significant positive impact on contemporaneous firm profitability therefore 

recommended that the cost of borrowing to the real sector of the economy should be 

reduced in order to minimize costs of production, enhance productivity and profitability 

and also necessary macroeconomic policies should be put in place by the government 

to curb the rising inflation rate in the economy. 

 

Ajibola, Wisdom and Qudus (2018) employed secondary data ranging from 2005 to 

2014 to investigated the impact of capital structure on financial performance of quoted 



 

 

181 | P a g e  

 

 

Nigeria manufacturing firms by employing the panel ordinary least square model and 

found out that there was a statistically significant nexus between non-current debt ratio 

which is an element of capital structure and the entity performance which was 

represented return on equity however a positive statistically insignificant nexus between 

performance and current debt ratio also a negative insignificant nexus between all other 

proxies of capital structure with respect to the other proxies of performance (return on 

asset) therefore opined that return on equity is the best performance measure with 

respect to that capital structure of an entity and entities should employ non-current debts 

in financing her economic activities hence recommended that all entities should make 

good capital structures decision to in order to improve its performance. 

 

Oladele, Omotosho and Adeniyi (2017) employed secondary data ranging from 2004 

to 2013 and examined the impact of capital structure on the performance of fifty eight 

Nigerian listed manufacturing firms by employing multiple regression model and found 

out that capital structure has no significant impact on performance which was 

represented by return on equity however a significant impact exist with respect to return 

on assets, earnings per share therefore recommended that Investors and stakeholders 

should consider the leverage level of an entity before committing their funds into an 

entity and management of Nigerian quoted manufacturing firms should work very hard 

to optimize the capital structure of their quoted firms in order to increase the returns on 

equity, assets and earnings per share. 

 

Birru (2016) examined commercial banks in Ethiopia with respect to capital structure 

and  financial firm performance by employing selected for a period of five years with 

secondary data ranging from 2011 to 2015 by employing multiple regression models 

his founding revealed that capital structure has a negative nexus with performance and 

statistically significant. 

 

Muchiri, Muturi and Ngumim (2016) examined the nexus between financial structure 

and financial performance of listed firms at the east Africa securities exchanges by 

employing secondary data ranging from 2006 to 2014 using the feasible generalized 

least squares approach based on Hausman specification test and discovered that when 

the variables are combined, financial structure had a significant positive and negative 

nexus with return on equity and return on assets respectively however in isolation short 

term debt, long term debt, retained earnings and external equity had insignificant 

negative relationship with financial performance which was represented by return on 

assets although an insignificant positive nexus with return on equity, therefore 

recommended that entities combine both debt and equity in their financial, governments 

should grow and maintain their upward gross domestic product flow because this 

influences financial structure and also firms’ stakeholders and managers should study 

their financial market to understand the economy and the trend of the market. 



 

 

182 | P a g e  

 

 

 

Javed, Younas and Imran (2014) collated secondary data of 63 companies listed on 

Karachi Stock Exchange and examined the effect of capital structure on firm with data 

ranging from 2007 to 2011 by employing fixed effects model which served as the 

pooled regression model and found out that there is significant relationship between 

capital structure and entities performance however is a mixed relationship, therefore 

opined that capital structure has impact on firm performance hence recommended that 

managers and stakeholder should be careful in making decisions that will determine the 

capital structure of an entity. 

 

Akinyomi and Olagunju (2013) obtained ten years secondary data and evaluated the 

factors behind of capital structure of selected manufacturing firms listed on Nigeria 

stock exchange using regression analysis and a descriptive research design via random 

sample with a culminating 240 firm-year observations and found out that capital 

structure has a negative relationship with firm size and tax on one hand and a positive 

relationship with tangibility of assets, profitability and growth on the other hand, 

however tangibility of assets and firm size has a significant relationship. 

 

Chandrasekharan (2012) investigated the factor behind the capital structure of listed 

Nigerian firms employing secondary data employed from panel reviewed ranging from 

2007 to 2011 (ten years) using multiple regression and found out that size, age, growth, 

profitability and tangibility are strong factors behind Nigerian firms leverage, therefore 

opined in order to have an optimum financing mix during debt financing decisions 

stakeholders most especially Nigeria listed entity should installed and accurately 

evaluate the age, size, growth, profitability and tangibility of the firms. 

 

Salawu (2009) employed secondary data from 50 non-financial quoted companies and 

Nigeria stock exchange fact books ranging from 1990 to 2004 to examine the impact of 

the capital structure on the entities profitability using ordinary least squares model, 

fixed effect model and random effect model statistical analysis approach and found out 

that profitability which is a measure of performance has a positive relationship with 

current debt and equity which served as an element of capital structure however inverse 

relationship exist with non-current therefore opined that Nigeria entities rely so much 

on external financing, therefore recommended that entities should implement an 

efficient and effective credit policy that will improve the performance and growth of 

this entities and managers of the entities should also be keen about the capital structure 

of the entity because it influences the performance. 

 

 

 

 



 

 

183 | P a g e  

 

 

Conceptual literature 

The operationalizing variables for this study are examined below: 

 

Return on equity ratio: This is a proxy for measuring company’s performance for the 

study, Ajibola, Wisdom and Qudus (2018) opined that the best measure to be used in 

evaluating a company performance is the return on equity, which is adopted for the 

study. Etale (2020) opined that the best way to measure or evaluate shareholder wealth 

maximization is by using return on equity. This can be mathematical expressed as the 

profit after tax for the respective companies divided by the equity share fund of the 

various entities, prospective investors will always prefer entities that pay or give more 

return entities. 

 

Equity to capital employed ratio: This is an element of investing activities for the 

study, which is derived as equity fund for the various entities divided by capital 

employed by the various entities for the study, this also indicate the value of funds 

employed by the various entities to finance its economic activities with respect to her 

equity fund, the more the equity employed the better the chance of the entities to get 

more bargaining power and more incentives such as discount. 

 

Debt to equity ratio: This is an element of investing activities for the study, this can 

be derived by non- current debt of the entities divided by equity fund of the various 

entities, this also show the financial commitment of the entities to the external 

stakeholders such creditors, a higher debt to equity ratio indicates more available fund 

for the entities to carryout it economic activities however the higher risk and financial 

obligation associated with that entity. 

 

METHODOLOGY 

Research Methodology 

In this chapter (three), the we (researchers) will be discussing the research design, the 

population of the study, sample and sampling techniques, method of data collection, 

ratio analysis, method of data analysis techniques, reasons for using regression analysis 

and model specification. 

 

Research Design 

This refers to structure, plan and strategy that we intend to use in order to obtain the 

reliable information and answers to the research questions stated in chapter one of the 

research above. The design of this research work involves the use of secondary data 

(descriptive analysis) also known as the ex post facto (after- the- fact) research design, 

with this approach the researcher does not possess the power in any way to influence or 

massage the study variables that will be used to determine the implication of investing 

activities on performance of oil and gas sector firms listed on Nigeria stock exchange 



 

 

184 | P a g e  

 

 

Population 

As at the time of carrying out this research the feasible population of this study consists 

of twelve (12) firms listed on the Nigeria exchange group (NEG) oil and gas sector 

which are: 11 Plc; Anino International Plc; Capital Oil Plc; Conoil Plc; Eterna Plc; Forte 

Oil Plc; Japaul Oil & Maritime Services Plc; Mrs. Oil Nigeria Plc; Oando Plc; Rak 

Unity Pet. Comp. Plc; Seplat Petroleum Development Company Plc And Total Nigeria 

Plc, on the average they engage both downstream and upstream activities. 

 

Sampling and Sample Techniques 

The sample for this study was selected base on the availability of data on Nigeria 

exchange group and companies website, this is the due to the fact that our research 

design is based on ex post facto therefore, eight (8) firms which are: 11 Plc Formally 

Mobil Oil Nigeria Plc, Anino International Plc, Coinoil Plc, Eterna Plc, Ardova Plc 

Formally Fortoil, Japaul Oil and Maritime Service Plc, Seplat Petroleum Development 

Company Plc and Total Nigeria Plc. The selected firms are equivalent 67% of the 

population for the study, therefore financial statement of the listed companies with data 

ranging from 2013 to 2020 we reanalyzed. 

 

Method of Data Collection 
The data were collected from the following source: 

Secondary Source:- 

The secondary source of data collection for this study includes; published data on the 

Nigerian Stock Exchange and the various companies web-site. i.e., using the financial 

statement of the various companies to analyzed the impact of investing activities on 

their performance from 2013 to 2020 (eight years period). 

 

Data Analysis Techniques 

The researcher choose to represent the data collected in tables of frequency, using 

simple percentage (ratios) method of analysis, thus the statistical method used for 

testing the hypotheses will be the regression analysis, which was also used by Etale, 

Edoumiekumo, Kpolode, and Nkak, (2020) Etale and Uzakah (2019) to mention but 

afew. 

 

Reasons for using regression analysis 

Regression analysis is a set of statistical model processes for estimating the 

relationships between an output, also known as the dependent and independent 

variablesin order to achieve an outcome which will be used in making crucial decisions 

(Rawlings, Pantula & Dickey,1989). 

 

 

 

http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGMOBIL00007
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGCAPOIL0007
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGCONOIL0003
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGJAPAULOIL4
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGOANDO00002
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGSEPLAT0008
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGSEPLAT0008
http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGSEPLAT0008
https://en.wikipedia.org/wiki/Independent_variable
https://en.wikipedia.org/wiki/Independent_variable


 

 

185 | P a g e  

 

 

Model Specification 

The above variables will tested using regression analysis with the help e-view 9.0 the 

model is stated as 

follows: 

ROE = f (ECR,DER) 

This can be expressed into an equation as follows: 

ROE = β0+ β1 ECR+ β2DER +μ 

Where: 

ROE = Return on equity served as a measure of firms performance (the dependent 

variable). 

ECR= Equity to capital employed ratio, serve as an independent variables and also a 

component of investing activities in the study. 

DER = Debt to equity ratio, served as an independent variables and also a component of 

investing activities in the study. 

β0= server as intercept or constant termβ1, β2, β3= served as the parameters or 

coefficients of the independent variables to be estimated through the regression. 

μ = is the error term of the regression equation (stochastic variable) 

 

RESULTS AND DISCUSSION OFFINDINGS 

In this chapter we will be presenting and analyzing the data of the study, and the 

chapter also tests the hypotheses, and presents the study’s findings. 

 

Data presentation 

The data collected from Nigeria exchange group and the companies’ web-site were 

presented and analyzed in this chapter. Therefore the analysis is based on secondary 

data of the following companies: : 11 Plc Formally Mobil Oil Nigeria Plc, Anino 

International Plc, Coinoil Plc, Eterna Plc, Ardova Plc Formally Fortoil, Japaul Oil and 

Maritime Service Plc, Seplat Petroleum Development Company Plc and Total Nigeria. 

 

Table4.1.1: Operationalizing values (Tableone) 

YEAR PROFIT 

AFTERTAX 

(N'000) 

NON-

CURRENTDE

BT 

(N'000) 

CAPITALEM

PLOYED 

(N'000) 

EQUITY 

(N'000) 

2020 72,333,815 368,591,27

5 

1,016,586,2

60 

647,994,

985 

2019 43,287,945 154,474,34

8 

340,062,94

6 

185,588,

598 

2018 31,942,001 183,092,04

6 

457,821,95

4 

274,729,

908 

2017 13,491,928 436,620,86 899,496,97 462,876,

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5 3 108 

2016 -35,522,432 326,481,49

8 

656,614,63

5 

330,133,

137 

2015 -122,954,507 383,871,06

3 

704,832,67

2 

320,961,

609 

2014 28,018,128 123,433,63

3 

502,591,60

5 

379,157,

972 

2013 9,855,640 143,718,81

0 

415,381,52

8 

271,662,

718 

Source: author’s computations, from companies’ financialstatements. 

 

Table one above showed the combined computed profit after tax for the respective eight 

firms listed on the oil and gas sector of Nigeria exchange group from 2019 to 2012 

which are: 72,333,815, 43,287,945, 31,942,001,13,491,928,-35,522,432,-

122,954,507,28,018,128and9,855,640allvaluesareinthousandsof 

naira respectively. From the reported profit calculated above, we can deduce that the 

firms reported its highest profit after tax in 2019 and lowest profit (negative figure) in 

2014. The firms reported a negative profit between the periods of 2015 to 2014, this 

was due the nosedived of oil of price, output and export between the periods, this was 

also seconded by the graphical presentation in the statement of the problem of the study 

in chapter one. 

 

Table one above showed the combined computed non-current debt for the respective 

eight firms listed on the oil and gas sector of Nigeria exchange group from 2020 to 2013 

which are: 368,591,275, 154,474,348, 183,092,046, 436,620,865, 326,481,498, 

383,871,063, 123,433,633 and 143,718,810 all values are in thousands 

of naira respectively. The values presented depicted that the firms highest non-current 

debt was reported in 2017 (N436,620,865,000) while its lowest values was reported in 

2014 (N123,433,633,000). 

 

Table one above showed the combined computed capital employed for the respective 

eight firms listed on the oil and gas sector of Nigeria exchange group from 2020 to 2013 

which are: 1,016,586,260, 340,062,946, 457,821,954, 899,496,973, 656,614,635, 

704,832,672, 502,591,605 and 415,381,528 all values are in thousands of naira 

respectively. From the reported profit calculated above, we can deduce that the firms 

reported its  highest capital employed in 2020 (1,016,586,260,000) while its lowest 

values was reported in 2019 (340,062,946,000). 

Table one above showed the combined computed equity for the respective eight firms 

listed on the oil and gas sector of Nigeria exchange group from 2020 to 2013 which are: 

N647,994,985, N185,588,598, N274,729,908, N462,876,108, N330,133,137, 

N320,961,609, N379,157,972 and N271,662,718 all values are in  thousands of naira 



 

 

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respectively. From the reported profit calculated above, we can deduce that the firms 

reported its highest capital employed in 2020 (647,994,985,000) while its lowest values 

was reported in 2019 (185,588,598,000). 

 

Operationalizing ratios (Tabletwo) 

YEAR ROE ECR DER 

2020 0.1116 0.6374 0.5688 

2019 0.2332 0.5457 0.8323 

2018 0.1163 0.6001 0.6664 

2017 0.0291 0.5146 0.9433 

2016 -0.1076 0.5028 0.9889 

2015 -0.3831 0.4554 1.1960 

2014 0.0739 0.7544 0.3255 

2013 0.0363 0.6540 0.5290 

 

Source: author’s computations, from companies’ financialstatements. 

 

Table two above showed the computed return on equity ratio (ROE) for the respective 

eight firms listed on the oil and gas sector of Nigeria exchange group from 2020 to 2013 

which are: 0.1116, 0.2332, 0.1163, 0.0291, -0.1076, -0.3831, 0.0739 and 0.0363 

respectively, the presented also depicted that the return on equity has a negative ratios 

in 2015 and 2014, this was as a result of the negative profit (-35,522,432,000 and - 

122,954,507,000) reported in the two periods respectively, which is also as the result of 

the nosedived of the oil price, production and export. From the above (table two) we 

can deduce that the firms has its highest returns on equity in 2019 (0.2332) while its 

lowest return on equity ratio was in 2015(-0.3831). 

 

Table two above showed the computed equity to capital employed ratio (ECR) for the 

respective eight firms listed on the oil and gas sector of Nigeria exchange group from 

2019 to 2012 which are: 0.6374, 0.5457, 0.6001, 0.5146, 0.5028, 0.4554, 0.7544 and 

0.6540 respectively, from the calculated ECR above (table two) showed that the firms 

has its highest ratio in 2014 (0.7544) which is the prior the nosedived of oil price, 

production and export of oil, while its lowest ECR was in 2015 (0.4554) which in the 

period oil price, oil production and exportnosedived. 

 

Table two above showed the computed debt to equity ratio (DER) for the respective 

eight firms listed on the oil and gas sector of Nigeria exchange group from 2020 to 2013 

which are: 0.5688, 0.8323, 0.6664, 0.9433, 0.9889, 1.1960, 0.3255 and 0.5290 

respectively, from the calculated DER above (table two) showed that the firms has its 

highest ratio in 2015 (1.1960) this may likely be as a result of the nosedived of oil price, 



 

 

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production and export, therefore more debt was obtained by them to keep the firm afloat 

and to meet up with other financial obligations, while its lowest DER was in 2014 

(0.3255) prior the nosedived of oil price, production and export ofoil. 

 

Descriptive statistics (Tablethree) 

 ROE ECR DER 

Mean 0.013712 0.583050 0.756275 

Median 0.055100 0.572900 0.749350 

Maximum 0.233200 0.754400 1.196000 

Minimum -0.383100 0.455400 0.325500 

Std.Dev. 0.187017 0.097434 0.285025 

Skewness -1.201105 0.426632 0.036945 

Kurtosis 3.676599 2.222903 1.978437 

Jarque-Bera 2.076131 0.443979 0.349684 

Probability 0.354139 0.800924 0.839590 

Sum 0.109700 4.664400 6.050200 

Sum Sq.Dev. 0.244827 0.066454 0.568676 

Observations 8 8 8 

Source: author’s computations, e-view9.0. 

 

Table three above showed the summary of the descriptive statistics of the study 

variables. The table showed that ROE (dependent variable), ECR (independent 

variable) and DER (independent variable) has the mean of: 0.013712, 0.583050 and 

0.756275 respectively, DER has the highest value while ROE has the lowest value. The 

maximum values of ROE, ECR and DER as shown in table three above are: 0.233200, 

0.754400 and 1.196000 respectively, DER has the highest value while ROE has the 

lowest value. The minimum values of ROE, ECR and DER as shown in table three 

above are: -0.383100, 0.455400 and 0.325500 respectively. Table three above also 

showed the standard deviation of ROE, ECR and DER are: 0.187017, 0.097434 and 

0.285025, from the listed values DER is most dispersed while ECR is the least 

dispersed. Furthermore the Jarque-Bera statistics and the associated probability values 

showed that ROE, ECR and DER has a probability values of: 0.354139, 0.800924 and 

0.839590respectively, from the above (table three) depicted that the variables are 

normally distributed, since the values are greater than the 5% significant level. 

 

4.4 Correlati

on 

 analysis 

(Tablefour) 

  

  ROE ECR DER 

 ROE 1.0000   

 ECR 0.5497 1.0000  



 

 

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 DER -0.6480 -0.9882 1.0000 

Source: author’s computations, e-view9.0. 

Table four above show the relationship between the operationalizing variables in the 

study. The above (table four) depicted that ROE has positive relationship with ECR 

(0.5497) however the relation between ROE and DER is negative relationship (-

0.6480). ECR has negative nexus with DER(-0.9882). 

 

Multiple regression output (Tablefive) 

Dependent 

Variable:ROE 

    

Method: LeastSquares     

Date: 11/11/21   

Time:20:28 

    

Sample: 20132020     

Included observations:8     

Variable Coefficie

nt 

Std.Error t-Statistic Prob. 

C 6.535118 2.260659 2.890802 0.0342 

ECR -

7.393806 

2.692624 -

2.745948 

0.0405 

DER -

2.922808 

0.920460 -

3.175377 

0.0247 

R-squared 0.768688 Mean 

dependentvar 

 0.013712 

AdjustedR-squared 0.676164 S.D. 

dependentvar 

 0.187017 

S.E. ofregression 0.106425 Akaike 

infocriterion 

 -1.362756 

Sum squaredresid 0.056631 Schwarzcriterion  -1.332965 

Loglikelihood 8.451023 Hannan-

Quinncriter. 

 -1.563681 

F-statistic 8.307926 Durbin-

Watsonstat 

 2.680018 

Prob(F-statistic) 0.025733    

Source: author’s computations, e-view9.0. 

 

Discussion of findings 

The regression output above (table five) showed that the coefficient of determination 

(R-squared) value of 0.77 approximately which indicates that 77% of changes in the 

dependent variable are accounted for by the combined effect of fluctuation in the 



 

 

190 | P a g e  

 

 

independent variables. In the same vein the adjusted R- squared value of 0.68% 

approximately, indicates that the model used is appropriate and good fit to be used in 

testing our hypotheses for the study. This also indicate that there is high confidence 

level for acceptance of the goodness of fit for the model under study. Probability value 

of the F-statistic 0.025733 above showed that our model is statistically significant at 

5% level with a Durbin- Watson statistics(2.68). 

 

In summary, the regression output used in investigating the implication of investing 

activities (ECR and DER) on performance (ROE) of oil and gas sector firms listed on 

Nigeria exchange group indicated strong significant nexus between the explanatory 

variables and response variable, therefore the null hypotheses for the study are rejected. 

We can therefore confidently say base on the regression output that investing activities 

does significantly impact firm performance. 

 

Hypothesis testing 

In this section, our null hypotheses for the study is been tested against the alternative 

hypotheses. 

 

Hypothesis one 

H01 There is no significant implication of equity to capital ratios (ECR) on the 

performances of oil and gas sector firms listed on the Nigeria exchange group. 

The decision is based on 5% significant level, which means the null hypothesis should 

be accepted if the calculated p-value is greater than 5%, otherwise reject. From table 

five above ECR (element of investing activities) has a coefficient of -7.393806, and 

statistical value of 0.0405 which is within the 5% significant level. Therefore we can 

conclude that investing activities has statistical significant impact on performance, 

therefore we reject our null hypothesis for our study. 

 

Hypothesis two 

Ho2 There is no significant implication of debt-to-equity ratios (DER) on the 

performances of oil and gas sector firms listed on the Nigeria exchange group. 

The decision is based on 5% significant level, which means the null hypothesis should 

be accepted if the calculated p-value is greater than 5%, otherwise reject. From table 

five above DER (element of investing activities) has a coefficient of -2.922808, and 

statistical value of 0.0247which is within the 5% significant level. Therefore, we can 

conclude that investing activities has statistically significant impact on performance, 

therefore we reject our null hypothesis for our study. 

 

CONCLUSION ANDRECOMMENDATIONS 

In this chapter we will be summarizing the finding of this study, drawing conclusion 

and making recommendations. 



 

 

191 | P a g e  

 

 

Summary of finding 
We analyzed the implication of investing activities (ECR and DER) on performance 

(ROE) of oil and gas sector firms listed on Nigeria exchange group with secondary data 

extracted from eight (8) companies’ website and Nigeria exchange group with data 

ranging from 2020 to 2013 applied using regression with the help of e- view. The 

researchers were propelled to carry out the study due the different scholars view on 

investing activities with respect to performance such as Etale and Uzakah (2019) who 

opined that investing activities has no significant impact on performance however 

Kpolode, Edoumiekumo and Alfred (2020) Etale, Edoumiekumo, Kpolode, and Nkak 

(2020) opined that investing activities has a significant impact on a firm performance. 

 

Another driven force behind the study is also due to the fact that Nigeria get a large 

proportion of her revenue from this sector, furthermore the fluctuation rate associated 

with this sector output has drawn the researcher’s interest also to look into the impact 

of investing activities on the performance of the firms. Investing activities play a critical 

role in every entity and if proper matching is not made by an entity it can drastically 

affect the going concern principle and in turn affect Nigeria economic growth. 

 

Therefore this study will be of significant values to key stakeholders such as internal 

(stakeholders and employees) and the same time it will also be of significant values to 

the external stakeholders such: the government, creditors, and prospective investors to 

mention but a few. 

 

In view of the above the researchers hypothesized a significant nexus between investing 

activities of oil and gas sector firms listed on Nigeria exchange group using two 

variables such as equity to capital employed ratio (ECR) and debt to equity ratio (DER) 

to represent investing activities and performance is represent by return on equity. The 

study hypotheses were analyzed using the simple regression with the help of e-view 

statistical package. 

 

Our findings revealed that: 

Equity to capital employed ratio (ECR) which is an element of investing activities has 

a coefficient of - 7.393806, and statistical value of 0.0405 which is within the 5% 

significant level. Therefore we can conclude that investing activities has statistical 

significant impact on performance, therefore we reject our null hypothesis for our study; 

and 

Debt to equity ratio (DER) which is an element of investing activities has a coefficient 

of -2.922808, and statistical value of 0.0247which is within the 5% significant level. 

Therefore we can conclude that investing activities has statistical significant impact on 

performance, therefore we reject our nullhy pothesis for our study. 

 



 

 

192 | P a g e  

 

 

Conclusion 

In view of the research findings, we concluded that: 

The statistical and empirical evidence from the study thus far on the implication of 

investing activities (ECR and DER) and performance (ROE) of oil and gas sector firms 

listed on Nigeria exchange group showed that investing activities has a significant 

impact on performance. Eight (8) firms was used for the study such as: 11 Plc Formally 

Mobil Oil Nigeria Plc, Anino International Plc, Coinoil Plc, Eterna Plc, Ardova Plc 

Formally Fortoil, Japaul Oil and Maritime Service Plc, Seplat Petroleum Development 

Company Plc and Total Nigeria Plc. With data from 2020 to 2013, the result show that 

the companies experience a weak level of activities between the period of 2016 and 

2015 however the company recovered in 2017 and recorded its highest return on equity 

in 2019(0.2332). 

 

In a nutshell the findings also revealed that a negative profit doesn’t opined an 

extinction of an entity however if leverage is sorted and properly matched it can lead to 

an entity recovery, which was depicted in the study in table one and two above i.e. when 

the firms experienced financial downturn the resorted to borrowing more which helped 

them recovered in the short run. 

 

Recommendations 

Based on the research findings regarding the implication of investing activities (ECR 

and DER) and performance (ROE) of oil and gas sector firms listed on Nigeria 

exchange group showed that investing activities has a significant impact on 

performance, we therefore recommended that: 

i. The creditors should not hesitate to give loan to firms and most especially the oil 

and gas companies because they play a great role in the economy; 

ii. Managers should source for external sources of financing to boost its activities 

before internal sources, the findings above revealed that the external sources has 

helped revitalized the sector; 

iii. The government should create an enabling environment for firms in this sector to 

operate effectively and efficiently; 

iv. The government should also make soft loans available to entity during a financial 

challenging periods just like what happened in 2016 and 2015 of the study; and 

v. Manager should match its investing activities properly to avoid over matching 

and mismatching of financial resources, if this is not done it may affect company 

going concern negatively in the long run, which will result to employees lay off, 

shortfall of Nigeria revenue flows from this sectors. 

 

 

 

 

http://www.nse.com.ng/issuers/listed-securities/company-details?isin=NGSEPLAT0008
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