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EVALUATION OF THE RELATIONSHIPS BETWEEN FINANCIAL RATIOS AND SHARE PRICE MOVEMENTS IN NIGERIA OIL AND GAS (2002 – 2014)

Oliver Ike Inyiama, Ph.D, FCA and Ugah Helen, BSc, MBA


The aim of this study is to examine the relationships between financial ratios and share price movements in Nigeria oil and gas sector. A sample of four oil and gas companies listed in the Nigeria Stock Exchange from 2002 to 2014 was used. These companies comprise of Oando Plc, Mobil Oil Nigeria Plc, MRS Nigeria Oil and Conoil Plc. Cross-sectional correlation analysis was used to establish the relationship. Share price is the dependent variable while the financial ratios such as Earnings per share (EPS), Dividend per share (DPS), Net asset value per share (NAVPS) and Dividend cover (DCO) were the independent variables. The findings showed that there was a weak and insignificant relationship between financial ratios and share movements of the selected oil and gas sector quoted at the Nigerian Stock Exchange (NSE). The study equally revealed that Net Asset value per share has strong and positive significant relationship with Share Price Movements in Nigeria Oil and Gas sector; not minding that the other ratios claimed otherwise. The result is not in line with a priori expectation because of the peculiar nature of the Nigeria Oil and Gas sector. Price is not determined by the forces of demand and supply which is contrary to a crucial economic principle. The heavy government presence in the sector makes it impossible for Oil firms to determine the price of the product based on considerations of production cost and margin of safety. The removal of these bottlenecks is crucial by complete deregulation and removal of subsidy as this will usher in an era of competitive pricing, local refining and very reduced government presence in the all important oil sector.