THE ACCOUNTING FOR HUMAN RESOURCES IN THE OIL AND GAS INDUSTRY IN NIGERIA (A Case Study of Shell Petroleum Development Company of Nigeria).
The study was conducted on the Accounting for Human Resources in the oil and gas industry in Nigeria (A Case Study of Shell Petroleum Development Company of Nigeria).
Different set of people in the company were interviewed and questioned for the purpose of the study.
The data were gathered through the administration of questionnaire to respondents from different department status in the organization.
The results were analysed based on a simple percentage and interpreted under discussion of results. Finding of analysis were used to give recommendation to problems identified in the study. While the hypothesis were tested using chi-square method statistical tools for hypothesis testing.
The major findings conclusions at the study among others are:
- Loss of revenue to the company will occur if the department continues in their current practice of not informing the human resource department about when their contract staff is on leave so that they would not be paid during such period.
- Loss of revenue to the government will occur, results of 5% withholding tax payment by the contract staff which is not properly computed by the company.
TABLE OF CONTENTS
Title Page i
Table of contents vi
Chapter One: Introduction
1.1 Background of the Study 1
1.2 Statement of the Problem 4
1.3 Objective of the Study 4
1.4 Research Questions 5
1.5 Research Hypothesis 6
1.6 Significance of the Study 7
1.7 Definition of Terms 8
Chapter Two: Literature Review
2.1 Introduction 9
2.2 Development of Human Resources Management 11
2.3. Employee Remuneration 17
2.4. Positions in Nigeria 23
2.5. The Current System 24
2.6. The Accounting Aspect 25
2.7. Relevance of this Study 25
2.8. Impact of Taxation 26
2.9 Internal Control and Policies 28
2.10. The People in the Operating Environment 30
2.11 History of the Company 31
Chapter Three: Research Methodology
3.1. Introduction 37
3.2 The Area of the Study 37
3.3 Sample Size 37
3.4. Sampling Method 38
3.5. Instrument 38
3.6. Validity of the Instrument 38
3.7. Method of Data Collection 39
3.8. Method of Data Analysis 40
Chapter Four: Data Presentation, Analysis and Interpretation
4.1. Introduction 42
4.2. Data Analysis 42
4.3. Hypothesis Testing 59
Chapter Five: Summary, Conclusion and Recommendation
5.1. Introduction 69
5.2. Summary 69
5.3. Conclusion 70
5.4. Recommendation 71
1.1 BACKGROUND OF THE STUDY
It is well know fact that the Nigeria major sources of revenue is from oil gas sector of the economy. This account for over 80% of the total revenue generated by the government in the recent past. the Nigeria foreign resources has increased tremendously due to the high price of petroleum product all over the world. This has brought some level of confidence to the foreign investors to invest in the Nigeria economy and stability in the exchange rate of the Nigeria currency.
As the importance of this sector cannot be over emphasized, it is pertinent to see that those companies that are engaged in exploration of the crude oil carry out their activities in an effective and efficient manner.
My focus of this research will be based on accounting for human resources in the oil and gas industry, a case study of shell petroleum Development Company of Nigeria limited.
The topic was chosen because of my concern as to determine the treatment being meted out to personnel in the industry.
This research projects is based on the human resources accounting of shell petroleum Development Company of Nigeria limited. It focuses at the points highlighted in the proposal. Before I proceed, would like to present the followings
Structure of the Oil Industry
Most of the oil in Nigeria comes form the Niger Delta and six major companies of which SPDC is the largest. The others are EXXON, Mobil, Chevron Texaco, Agip, Total Fina ELF, and Texaco. All these operations are joint ventures with the government holding a majority share of between 55.60 percent, through the NNPC (Nigeria National Petroleum Corporation).
National Oil Companies
NNPC and its subsidiaries are senior partners in all the major upstream ventures. They have extensive domestic operations, especially downstream. They own large reserve of oil and gas and enjoy a monopoly of refining and petrol chemicals. NNPC depends on the government for fondling and has limited access to international capital markets.
Major Oil Companies
Shell, Exxon, Mobil, Chevron, Agip, Total Fina ELF, Texaco, ESSO, Canoco.
These companies operate internationally and have a strong financial hue. They have considerable technological know how and extensive information networks. They are commercially and markets driven with strong links to head offices and sister companies world wide. Their activities in Nigeria usually relate to upstream operations.
Independent Oil Companies
Addax, Amni, Atlas, Brass, Cavendish, Consolidated, Continental, Dobril, Express, Famfa, Montorief, Penk, Sommit and others. These are mostly indigenous companies, but often operating with foreign technical partners. They compliment the role of the major players and national oil companies.
Service and Supply companies
Sdilom Berger, Halliborton, western Alas, Baroid Cameron, Bj Hoghes MI. Drilling Fluids and others.
These companies provide services to the oil industry. They are mainly multinationals with a strong R & D base and skilled manpower. Nigeria companies are now making inroads in this sector ,e.g. lonstar Drilling Savsco well services and others.
1.2 STATEMENT OF THE PROBLEM
(a) Current system list not the names of the contract staff and amounts to be paid to each and sends same to the cash office where each of the contract staff his or hers this way, there is no comparison of cumulated payment at the end of each contract with the agreed contract fee for the period. Through this may be discovered during audit, the attendant problem of locating the contract staff if he is no longer in employment is obvious. This study will find a solution to this problem also.
(b) How are they remunerated? The retired staff among them are paid gratitude; transportation, etc whereas others are not what effects has this on their motivation?
(c) How efficient is the rapport (relationship) between the company and his people in its operating environment? Is there adequate compensation for the use of the people’s land? Do these compensation actually the reaching the right people?
1.3 OBJECTIVE OF THE STUDY
Main objective of the study is to address the shortcoming above, by findings a lasting solution to them.
This study is therefore to look at the different accounting methods of payment to any category staff and compare same with the method in place in the human resources of shell Nigeria for direct contract staff payments.
It is also meant to determine obedience to accounting laws, rules and regulations by assessing the internal control measures in place and how the current method can be audited.
This study is also meant to recognize the importance of appropriate taxation by comparing the current method with normal taxation that should apply and how the proceeds are being remitted to appropriate authorities.
Significance of fraud, ghost worker(s) or any source of revenue leakage would be highlighted for possible remedy, in order to avoid occurrence of same. The compensation methods adopted by the company in setting the people when their lands are acquired? Is the right channel the one being used? Are these monies adequate?
At the conclusion of the study, its recommendations will be able to improve the current methods where necessary and applicable.
1.4 SIGNIFICANCE OF THE STUDY
With about 80% of shell’s total strength of 25,000 employed as direct or indirect contract staff and only 20% as staff, the relevance of this study can be easily seen, as a good percentage of the company’s total salary payment goes into this area each month. As this is also the case in many other companies in the oil industry, it is significant that documentation of its true position, based on scientific method, be made. An “employee information” collection of the shell petroleum development company of Nigeria Limited Explained the above assertion that 80% of the company total staff strength of 25000 are employed as contract staff while the remaining 20% are permanent staff.
As a scientific study of a scientific system, its relevance is more on its contribution to human knowledge and development. This study will help to improve the system already to existence in shell Nigeria and subsequently lead to efficiency and perhaps effectiveness.
It will also block any loophole(s) that might lead to fraud, ghost worker(s) presence and any source of revenue leakage to the company. With all these and more in mind, the relevance and significance of the study is not in doubt.
1.5 SCOPE AND LIMITATION OF THE STUDY
This study only tries to point out the benefits of accounting for human resources, but as already stated this study is not going to review the accounting of human resources in the Oil and Gas Industry in general, the study will not concern itself with procedure programmes and the general Accounting.
The study was limited to Shell Petroleum Development Company of Nigeria within Lagos metropolis and could be generalized to all the Shell Petroleum Development Company of Nigeria all over the country.
1.6 RESEARCH QUESTIONS
The research questions would be based mainly on the objective of the study and the short-coming highlighted above.
(a) Does improper human resources accounting lead to a loss of revenue to the company
(b) Improper human resources accounting lead to de-motivation of staff.
(c) There is improper accounting loss of revenue to the government
(d) Does crisis in the operating environment lead to loss of revenue to all.
1.7 RESEARCH HYPOTHESIS
The research is based on the following hypotheses.
(e) Ho: That improper human resources accounting would not lead to a boss of revenue to the company
Hi: That improper human resources accounting would lead to a loss of revenue to the company
(f) Ho: That improper human resources accounting would not lead to de-motivation of staff involved
Hi: That improper human resources accounting would lead to demotivation of staff involved
(g) Ho: That improper human resources accounting would not lead to lead to loss of revenue to the government
Hi: That improper human resources accounting would lead to loss of revenue to the government
(h)Ho: Crisis in the operating environment would not lead to loss of revenue to all.
Hi: Crisis in the operating environment would lead to loss of revenue to all.
1.8 DEFINITION OF TERMS
Petrochemical: Any chemical substance obtained from petroleum oil or national gas.
Refinery: A factory where a substance such oil is refined (i.e. made pose)
This study will analyze the data obtained from the questionnaire administration and interpretation of results thereof. It will be examined that improper human resources accounting would lead to a loss of revenue to the company.
Byars l.l & Rue L.W “Human Resources Management MC Graw, Hill Companies Inc. New York.
Eddy O. Omolehinwa (1991) “Coping with Cost Accounting” Punmark Nigeria limited, December, page 94.
Fashoyin Tayo (2004) “Collective Bargaining in the Public Sector in Nigeria” Mac Mill an Nigeria. 1987.
Frank wood & J.O OMUYA (2003) “Business Accounting” Long man limited.
J.A Ariwoda (1993) “Personal Taxation in Nigeria including Capital Gain Tax and Capital Transfer Tax’ JAA Nigeria limited,
Shell Dairy (2005): “The History of Shell Nigeria” page 7 1996 Calendar of Nigeria LNG Limited
Shell Nigeria. Com (2005): The Official Website of the Shell Petroleum Development of Nigeria Limited.
Tayo Fashoyin, (1992) “Industry