CHAPTER ONE
1.1 INTRODUCTION:
Capital budgeting decision in the most
government parastatals is statutory instrument used to take decision in most
organization like NNPC i.e.
Nigerian National Petroleum Industry.
This government parastatals helps in exploration of crude oil and
natural gas and refining or processing of crude oil and natural gas to produce
petroleum and produces and others denatures both for domestic consumption and
for export. The expect of the
corporations activities include transportation and distribution petroleum
products throughout Nigeria
and production of petrol-chemical to provide the needed raw material for rapid
agricultural and industrial development of the country. They are also responsible for the supervision
of the country activities of oil companies.
Since
the year 1996, most of the oil companies has grown considerably. This is evident in its size and area of operation,
which spanned through one length and breath of the country.
The
other subsidiaries of government department engaged in activities of capital
budgeting are; (1) Engineering Company of Nigeria (ENCON).
This
is a joint venture enterprise between NNPC and Bethel, An American based multi national
engineering and consulting company.
B. Nigerian
Petroleum Development Company (NPDC):
This is petroleum producing company of a group. It is wholly owned by Ngos. It is involved in exploration and production
of crude oil and gas.
The
mission of NNPC is to profitable operate and optimum size petroleum exploration
and production.
Nigeria has development company limited NGDC it
is also under the NNPC, its mission is to efficiently gather treat, transmit
and market Nigeria Natural Gas and its bye-products to major industries and
utility gas distribution companies in Nigeria. The other includes Integrated Data Service Company Limited (IDSC).
1.2 STATEMENT
OF THE STUDY:
This
study which is an appraisal of capital budgeting in government parastatals, is
to find out how the various appraistatals appraise as capital budgeting
decisions. For every organization, the
usefulness of financial statement enhance decision making. Information provided should be current and
meaningful.
The
continuing inflation of recent year has led to an increasing awareness of some
of the disadvantage of historical cost accounting. The following problems associated against the
capital budgeting decision in government parastatals.
i. The inability to provide current
information for decision making.
ii. Limitation of capital evaluation models and
appraising investment.
iii. Lack of infrastructure facilities militate
the production and service of organization.
iv. Finally the monitoring/post auditing of all
capital budgeting decision is important.
However this is costly and after ignored in practical.
Management
should under take this activities as it can contribute favourably to the firms
over all returns risk and value.
1.3 OBJECTIVES
OF THE STUDY:
The
primary objective of the study is to determine how capital budgeting decisions
are undertake by the Nigerian Government Parastatals like NNPC. Its aims is to find out how investment
decision are made, how accurate are the information presented to management
useful in making investment decisions.
It
also tend to find out the particular capital budgeting technique the management
of government parastatals use to evaluate the investments they want to used.
1.4 SIGNIFICANCE
OF THE STUDY:
The
importance of this research in its usefulness.
This study will be of immense interest to those responsible for
apprasing capital budgeting decision in firms.
The study will also be of immense help to accounting on banking student
interested in this area.
It is
hoped that the research findings will be primary importance to the management
of the government parastatals.
1.5 THE
SCOPE AND LIMITATION:
This
study to find out how government parastatals engage in capital budgeting
decisions.
i) How government organization should engage
in making effective decision.
ii) How money will be realized to finance the
firms and investment made.
The
researcher is limited to the above decision for capital budgeting in government
organization and also the researcher that studying individual subsidiary
companies or organization will generate information for that particular
subsidiary company or organization of government parastatals.
1.6 OPERATIONAL
DEFINITION OF TERMS:
Capital
Investment: This is an investment that
yield returns during future periods that are relatively for removed from the
time of the investment.
Capital
Budgeting: This is the process of
decreasing resources is project whose cost and benefits are spread out several
time periods.
Capital
project: These are real asset and the
productive fixed assets of a company.
Accounting information: This takes the form of financial reports
which are used not only to appraise the past performance of individuals and
groups but also to design and make decision affecting the future.
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