CHAPTER ONE

INTRODUCTION

BACKGROUND TO THE STUDY

In initiating and setting up any business concern, the first and the most important issue that quickly comes to mind is finance (money). This is because the availability of adequate fund will enable the investor to employ the necessary input labour, equipment and machinery power, utilities, suppliers and even management. However, it is the pre-occupation of this project to trace the grass0root of what is finance in a bid to excavate its meaning as it concerns the scope of this work. Therefore, without negating the points already stated above, finance can be viewed as those basic human functions of production and marketing that involves financial decision-making.

In this study therefore, it is partiment to discuss briefly the issue of industrial finance in the past in an attempt to identify the origin of Nigeria’s present structural problem therefore, subsequent sections of this paper will shift to the pattern of financing medium scale and large scale companies excluding those engaged in banking finance or investment

1.2  STATEMENT OF PROBLEM

Pre-independence Nigerian entrepreneurs did no have much financing problems because, at that time, labour intensive agricultural activities dominated the economy. The unfortunate situation however, directed Nigerian economy into activities that offered little or no opportunity for economy enlargement So with independence and the realization that the perpetuation of such economic relationship would hardly sustain political independence in the context of modern power relationship, the manufacturing industries were recognized as a crucial factor.

In this direction, the manufacturing as well as the agricultural sub sectors become formidable industries in the private sector based on this an d the government apparent belief that medium scale enterprises are essential ingredients of a competitive economy, the need for some modification become evidence. Ever government’s efforts and policies are being directed towards creating favorable investment environment. As a result indigenisation was introduced to enable Nigerians control the commodity heights of the economy. This was beloved would accord the preferred sector the required attention. But perhaps, the realization that industrialization is a predicate factors in economic emancipation directed so much attention to the sector that is generated unprecedented responses from potential enterprises that the problem. A inadequate capital formation become gloringly obvious within Nigerian economy. For the for-going, circumstance and knowledge have shown that financing practices of industries in Nigeria are limited. However, in carrying on their business, Nigerian companies are continually involved in financial market. They build up liquid assets drown on bank loans, they give credit from suppliers and from time to time they enter the capital market to raise new equity a long-term loan capital. But in choosing among financial instrument, they access to the capital market seems restricted.

1.3  AIM OF STUDY

The aim of this research work are as follows:

(1) To examine the means by which companies are financed in Nigeria

(2) To discuss the limitation when companies face while making use of the capital market

(3) To evaluate the efforts of those limitations in the capital market on the capital structure of a company.

This research will be based mainly on a particular source of data, namely the published accounts of Aluminum manufacturing company of Nigeria limited for a three years track period 1980-1982 though the study may seem out a data, it is the writer view that it will be of considerable historical interest.
Moreover, though the writer readily concedes that certain part of the work relates specifically to the period 1980-1982, many other parts are likely to be valid for some year to come.

1.4  SIGNIFICANCE OF STUDY

The research will be useful in following important

(1) Official of the society as a standard of internal evaluation and control performance in co-operative societies.

(2) In further development, in order to redress the daily explanation which people suffer at hard of profit earning middlemen during the capital list system.

(3) The research scholars who may wish to carry out further the matter on the related topic.

(4) To student and scholars studying co-operative in higher institution system

1.5  SCOPE AND LIMITATION OF STUDY

The project paper has been under taken within the framework of the following significance:

TIME: It would have been interesting for this study to have been extended to cover many companies, but because of the great significance of time, it was not possible for the researcher to cover more than one company.
The study therefore, is concentrated on Alumaco Company.

Resources: More than anything else, finance played the greatest contract on the research. A data to be included in the work (considering the cost of transportation to their various source or offices to and fro) is dictated by the amount of funds available for the project.

Period of analysis: The writer has due to some circumstances already enumerated above limited the analysis of the study to the period 1980-1982. At least this can only provides a rough approximation at the present situation of this specific company to data.

1.6 Definition of Term

A thorough research on this aspect of this study will indicate that much has been written on company finance such that the historical review could not be exhausted on the subject matter, but for purpose of this research study, efforts have been made to collect as much as could be possible to enable the researcher examine his case analytically in its entirely on the sources of fund.

Consequent upon this, types of financing sources are the various means through which enterprises raise the capital needed for business activities.
The financial manager, therefore, has the responsibility of considering each of these finance sources on its merits in respect of ownership or control of business income flows and inherent risk.