AN ANALYSIS OF CAPITAL RESTRUCTURING AS A SOLUTION TO CORPORATE FAILURES . A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The Nigeria Economic Crises, which has persisted up to this 1999, got to its peak in 1989. The effects then had seen that of gross underutilization of human and material resources, how level of operations and out right corporate failure.
Virtually every industry in the Nigeria economy has suffered one form of a problem or the other. The banking industry through it controls the greatest financial resources in the economy experienced and is still experiencing its own share of Decree of 2000 construction industry has enjoyed continuous negative growth trends, manufacturing industry amongst other was not spared.
Prior to the economic crises was the decade of economic Joom (1970 – 1980) which saw the dominance of the oil sector accounting for up to 80% of the total foreign exchange earning in 1985 and 90% in 1999. During this decade, Nigeria had the singular good fortune of benefiting from the skyrocketing. Oil prices being of member of organization of Petroleum Exporting Countries (OPEC). The failure of government planning machinery to channel these vast resources into other investment pool culminated into serious problem the economy is facing.
This lapse resulted into inflationaring pressures manifesting itself in escalating prices, shortage of basic goods and service low income per capital, high unemployment rate, with many industries shut and a host of them producing at far below installed capacity (Baffa S.S. 1999).
A period of Recession is this period when firm failures is high pronounced research “a recurring period of decline in the total output income, employment and trade, usually lasting six months to a year, and marked by widespread contraction in many sectors of the economy.
These negative economic trends continued until the introduction of Structural Adjustment Programme SAP in 1999. The economy had witnessed serious internal and external disequilibria and structural imbalances, such that all economic indicators like inflation rate, Gross Domestic Product (GDP), employment rate, idle capacity. In industries amongst other attested to this fact as there were obviously manifest.
It was against their background that Structural Adjustment Programme (SAP) was introduced with the intention of reforming the structural pattern and restructure the productive base of the economy, in order to ensure viability and sustained growth. These, however made it inevitable for restructuring of corporate bodies to ensure survival in business. To make these possible, most companies had rolled off liquidated, some were on the verge of rolling off. The surviving ones were those that restructured and adjusted extensively to accommodate the new precept of economic change. These were done with great economic cost and difficulties. Structural Adjustment Programme on its own has been a blessing in disguise in that it has brought with itself reliance. Viability, prosperity and sustained growth.
All these have lent credence to the fact that slow growth and subsequent failure of an enterprise often depends to a large extent, on its financing, structure and its implication for financial risk.
It is therefore hoped that this little efforts made in this project will contribute in no small measure to increase the knowledge of how to curb corporate failure while establishing a workable capital structure (Ama G.A. 1992).
Leave a Reply
You must be logged in to post a comment.