INTEREST RATE CHANGES AND FINANCIAL PERFORMANCES OF OIL FIRMS IN THE AFRICAN STOCK MARKET.

Abstract

Prices of oil and gas are generally known to be highly volatile and the recent price changes
have caused several concerns for consumers, corporations and countries alike as they
experience high dependency on oil and gas for transportation, electricity generation and
industrial production. The specific objective of the study was to investigate interest rate
change effect on financial performance of the oil and gas sector. The study also evaluated
Firm size and firm age as a control variable. In so doing, data was sourced from active oil
and gas firms quoted in the African Stock market. Panel data regression using Hausman’s
fixed effect and random effect models was adopted. However, the study also conducted other
diagnostic tests like multicollinearity test using Variance inflation factor, Heteroscedasticity
test, correlation analysis. Findings showed that Interest rate changes has positive and no
significant effect on the performance of oil and gas firms listed on African stock market.
Firm size does not have significant effect on interest rate and financial performance of oil
and gas firms on the African stock market.
And recommend that, Oil and gas companies increase the price of their commodity in order
to overcome the rise in interest rate, as such increase their profit. However, management
can ignore interest rate fluctuations since it’s not significant in determining the profitability
of their firms. And that Government should find a way of stabilizing interest rate using its
monetary policies to cub the fluctuations in oil price