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Saturday 23 September 2017

AMNESTY CORPORATE SOCIAL RESPONSIBILITY AND FINANCIAL PERFORMANCE OF LISTED DOWNSTREAM OIL COMPANIES IN NIGERIA

Abstract 
In 2009, the federal government of Nigeria launched its amnesty programme for Niger Delta region of the country to address the concerns of the communities that host the oil and gas companies operating in the country. One of the matters arising since the launching is whether the programme has helped in the restoration of peace and security in the region to enable the companies operate optimally, realise their full potentials and increase their productivity and consequently their financial performance. Another question relates to the extent to which the programme motivates the companies to make more effort to satisfy the communities through increased corporate social responsibility (CSR) activities. This study examined the effect of amnesty and CSR on the financial performance of listed downstream oil companies in Nigeria. The study formulated three hypotheses with the third hypothesis focusing on the moderating effect of firm size on the extent to which amnesty and CSR affect the financial performance of the companies over the period of 10 years from 2004 to 2013. The robust regression result based on the annual data collected from five (5) companies revealed that both amnesty and CSR have significant effect on the financial performance of the companies. The result also revealed a high level of interacting effect of size on amnesty and CSR. Based on the findings, the study recommended among other things that the federal government should continue with the implementation of the amnesty programme and initiate even other similar interventions as means of maintaining or restoring peace within the Niger Delta and other regions of the country where such interventions are needed. The study also recommended that the management of oil companies should continue to execute more CSR programmes in order to guarantee safety and security of personnel and equipment that are used to generate higher profits.

CHAPTER ONE
INTRODUCTION
1.1 Background to the study
The Niger Delta region of Nigeria, which is richly endowed with crude oil, and also known for its gas, wealth of hydrocarbon and water resources had suffered the effect of oil exploration with its attendant environmental degradation for years due to the activities of multinational oil companies in the region. It is argued that the companies have over the years exploited the widespread ignorance of the people of the region about the obligation for them to be socially responsible. Consequently, until the late 2000s, the rich natural endowment was not seen to have translated into concrete development in the region. However, as the Niger Delta Environmental Survey of 1992 indicated, while the exploitation was going on, the people in the region were becoming increasingly enlightened about their rights as citizens, in the same vein that they were increasingly aware of how much is derived from their communities as oil revenues both for the government and the multinational oil corporations (Niger Delta Survey, 1992). Thus, as their business activities continue to expand and their sizes increase, the companies were confronted with issues related to sustainable development in the region through Corporate Social Responsibility (CSR). The call for CSR was premised on the fact that corporations that align business interests with community interests in terms of CSR objectives can minimize the risks and liabilities associated with operating in culturally different regions from their homes countries (Bertels & Vredenburg, 2004; Grossman, 2005; Lipineux, 2005; Thompson, 2005; Porter & Kramer, 2006). Corporate social responsibility connotes the commitment of companies towards encouraging community growth and development and voluntarily eliminating practices that are not in accordance with public interest. It is thus the deliberate inclusion of public interest into corporate decision making and the honoring of a triple bottom line: People, Planet and profit (Solihin, 2009). It is believed that if corporations or businesses establish an understanding with host community where such businesses are located, an understanding anchored on the protection of the people from the adverse effects or impacts of its activities, this will further enhance the operation of such companies in the organization. However, oil companies in the Niger Delta have been found to be practicing CSR in the form of donations and charitable concerns to less privileged, contributions, sponsorship and charitable gifts devoid of consideration of their different sizes and scope of activities instead of long lasting CSR programmes.
The host communities on their part perceived those donations as not sufficient but deceptive and destructive to the environment compared to the damage being caused by the companies especially those with expanded scope of activities. According to the host communities, the region has over the years been deprived of its resources that were expected to bring about good life to its inhabitants (Inokoba and Imbua, 2008:647). Prior to the discovery and exploration of oil and gas resources in the region, the primary occupation of the people was fishing and farming. It was however noted that oil activities have destroyed the subsistence economy of the people and the environment suffers degradation occasioned by oil spillages has made life extremely difficult for the local people. (Fedelis & Kimiebi, 2011). This consequently affected the livelihood support system of the inhabitants; the people continue to live in poverty and famine. As a response, some of their youth formed militant groups that embarked on disruption of crude oil and gas installations, production obstruction and kidnapping of foreign oil company personnel. The actions of the militia led to violent conflict in the region and posed threats to the oil sales, and in turn reduced drastically the oil revenue to the government.
Various strategies were devised by the companies and the federal government to enthrone peace in the region. The companies began to spend large amount of money according to their size and scope of operations in order to hire security operatives to safeguard their facilities and personnel from attacks by the Niger Delta militia, while government expends huge amount of money in peace maintenance in the region. Despite the huge expenditure, peace could not be restored in the region and oil revenue continues to decline.
In order to resolve the conflicts, President Umaru Musa Yar‟Ádua introduced Amnesty programme in 2009. The program was designed in four phases starting with pardoning the militants for them to willingly renounce violence, followed by disarmament, rehabilitation and reintegration (DRR) of the militias. The essence of the programme was to change the mindset of the militants and facilitate their adjustment to normal civil life. The hitherto militants were therefore equipped in different areas of skills and entrepreneurship in the orientation and rehabilitation camp in Obura in Cross River state. The quantity of crude oil production for example jumped from 0.80 million barrels in 2008 to over 1.6 million barrels from second quarter of 2010 (Ambily, 2012). Thus the programme created a conducive atmosphere and peaceful environment that present an opportunity for oil companies to enhance their production, increase their profitability and consequently carry out more CSR activities for the betterment of the region. Furthermore, as the various oil companies are of varying sizes, the extent of their damage to the host communities varies as well, hence the need for the Amnesty policy benefits to be commensurate to damages caused as well as the need for the companies to increase their CSR activities. In view of the mixed feelings with which the host communities received the amnesty policy from the time it was launched (Fidelis & Kimiebi, 2011), a study on the effect of the intervention on the CSR activities and consequently performance of the oil company is considered imperative.

Many empirical studies have been conducted on CSR and its impact on the performance of firms largely in developed countries and relatively in developing countries. The studies have however yielded mixed results (Friedman, 1970; Bragdon and Marlin, 1972; Klassen and McLaughlin, 1996; Cordeiiro and Sarkis, 1997; Wright and Ferris, 1997; Orlitzky et al., 1997; Bird et al., 2007; Arago´ n-Correa et al., 2008; Nicolau, 2008). This could be attributed to methodological issues such as model specifications and choice of variables, or domain; or due to CSRs measurement challenge as captured in the findings of literature review of CSR and financial performances. According to the literature, measuring CSR has always been a difficult undertaking as there is no consensus about which measurement tool is the best to apply. In addition, the studies seem to focus more on the manufacturing sector, perhaps in view of the nature of its multi-scale activities and the effect of the activities on the society. The mixed results documented in the literature have created a motivation for further research.

AMNESTY CORPORATE SOCIAL RESPONSIBILITY AND FINANCIAL PERFORMANCE OF LISTED DOWNSTREAM OIL COMPANIES IN NIGERIA

Format: MS Word
Chapters: 1 - 5, Preliminary Pages, Abstract, References, Appendices.
Delivery: Email
No. of Pages: 89

Price: 3,000 NGN
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