- Title
- Improving financial risk management in the petroleum industry of Nigeria
- Creator
- Ogulu, Christiana
- Subject
- Financial risk management -- Nigeria
- Subject
- Risk management -- Nigeria Petroleum industry and trade -- Nigeria Nigeria -- Economic conditions -- 21st century
- Date Issued
- 2017
- Date
- 2017
- Type
- Thesis
- Type
- Doctoral
- Type
- DBA
- Identifier
- http://hdl.handle.net/10948/19806
- Identifier
- vital:28974
- Description
- Petroleum companies are critical to the Nigerian economy, as the petroleum sector is the biggest earner and spender of foreign exchange and the highest employer of labour. The industry is however faced with challenges of unprecedented fluctuation of commodity prices, exchange rates, a series of divestments, host communities’ demands, oil theft, project shelving, and destruction of infrastructure. Workforce cutting and consolidations are also the order of the day and current financial risk management (FRM) systems in companies appear not to be working. FRM systems in Nigerian petroleum companies have failed because risk managers did not have one generally accepted framework to manage financial risks such as fluctuations in commodity prices, exchange rates, interest rates, and in the demand and supply of crude oil and gas. There was a need for an integrated framework that is more descriptive and that does not rely only on mathematical models, separate management of each financial risk, and specific focus on the downside risk and derivatives. Mathematical models have presented weaknesses in the identification of issues, dissemination of information, policy formulation, planning, type and the institution of risk culture or delimitation of authority and in responsibility through the organisational structure. Mathematical models could not fully reduce the identification, communication, structure, and environmental scanning of FRM to mathematical models. The present study was the first attempt at an FRM framework that integrated all the financial risks strategically and took into consideration all the critical success factors that can solve the problems and challenges facing the Nigerian petroleum companies in the long term. The primary objective of the study was therefore to develop an FRM framework for the petroleum industry of Nigeria. The study collected data using a mixed methods approach to generate quantitative and qualitative data regarding financial risks facing the petroleum industry and possible methods of managing these risks effectively. The final sample consisted of 70 top-, middle- and lower-level managers, as well as five experts in the industry. Questionnaires were administered to practitioners in the south-eastern and south-western regions of Nigeria, and semi-structured interviews were conducted with financial risk management experts in the petroleum industry. Descriptive and inferential statistics were used in analysing the data. The study succeeded in developing a framework that: provides a thorough understanding and proper evaluation of the most important financial risks petroleum companies face; identifies the type and extent of top management support needed in a strategic FRM system; identifies and operationalises the financial risk culture that should be fostered to achieve FRM success; identifies the organisational structure that supports the successful achievement of FRM; identifies and operationalises the organisation communication flow that supports the successful achievement of FRM; identifies and operationalises oversight and control to support the successful achievement of FRM; and specifies the amount of training that supports the successful achievement of FRM. By implementing this framework, petroleum organisations in Nigeria will go a long way in successfully managing financial risks in that industry.
- Format
- xix, 281 leaves
- Format
- Publisher
- Nelson Mandela University
- Publisher
- Faculty of Business and Economic Sciences
- Language
- English
- Rights
- Nelson Mandela University
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