SALES PROMOTION IN BEVERAGES INDUSTRIES (CASE STUDY OF NIGERIA BREWERIES PLC)

INTRODUCTION 1.1 Background to the Study Capital structure decision for any business organization in private and public sectors as well as economy played a prominent role. It is regularly complex for business firms to make out the right combination of debt and equity. (Burca & Batrinca, 2014). Modern-day corporate finance managers of insurance firms in Nigeria continue to face the dual challenge of poor financial performance of their firms and finding optimum business financing options. These managers also have to tackle with the triple demands of creating wealth for investors, sustaining business operations and contributing to the growth of an economy. According to (Kripa & Ajasllari, 2016) However, it is important to note that, in Nigeria, various legislation have been put in place to ensure that the industry runs smoothly but these legislations have ended up constraining the insurance firms in issues relating to capital, for example a minimum paid up capital is required for the insurance firms before register a company. Then also constrain in share capital to be deposited with the central bank. These issues are very specific to insurance firms only, and they have an influence on the capital structure of the firms thus having an impact on the overall performance of these firms. This study is likely to give a practical contribution were the finding will be used by the insurance firms policy-makers in Nigeria to identify the appropriate financing mix that can go well with and overcome the constrains by examining how the capital structure affect the financial performance of insurance firms. Theoretically, the finding is also expected to contribute to validate the theories under consideration in this study. Abu-Rub (2012) contends that financing decision vary according to the rate of risk related to each financing options as well as the relationship between risk and return. Capital structure is very important in insurance business because there must be proper combination of all the funds accruing to the company so as to avoid excessive debt in the company. Insurance is one of the major risks mitigating mechanism in modern economy. The existence and survival of financially strong Insurance Companies is therefore inevitable. According to kari (2018) insurance sector has been described as the weakest link in the Nigerian economy because of the low capital base of operators. He noted that the sector that ought to insure critical sectors such as aviation, should not be seen to have capital base, which is even less than that of microfinance banks. Currently capital base of life insurance firms in Nigeria is N2 billion, that of non -life is N3 billion, composite firms have N5 billion capital while reinsurers have N10 billion capital base. Kari, expressed disappointment that whereas the Central Bank of Nigeria recently announced plans to increase minimum capital of micro finance banks to N5 billion and mortgage banks N6 billion, recent move by the National Insurance Commission (NAICOM) to do same was rejected by operators. The insurance sector which ought to provide risk cover for other sectors seemed to be losing its ground as parties that should secure or breaking new grounds leaving it behind. The sector as the weakest link in the Nigerian economy and now to be less capitalized than mortgage guarantee banks with N6 billion and less capitalized than microfinance banks with N5 billion and this is grievously affecting their profitability. “How can an insurance company that insures the aviation sector have capital less than that of microfinance banks? Some insurance operators argue that capital is not important. If capital has no function, how come banks bought over insurance companies that used to be owned by insurance companies? “Insurance anywhere in the world is the mobilizer of funds and provider of security. You cannot provide security if you don’t have capital. The sector is daily confronted with the challenges of low level of financial literacy, poverty, lack of trust (failure of insurance companies to settle claims), adding that the combination of all of these have continued to negatively affect profitability of listed insurance firm and their level of penetration, (Kari 2018). Several studies have been conducted on capital structure both in developed and developing countries using capital structure as the independent variable. For instance, (Degryse, Goeij, & Kappert, 2010; Ebaid, 2009; Osuji & Odita, 2012; Akinlo 2011 Bhaird & Lucey, 2010; Onaolapo et al., 2015Abdullah et al., 2011; Ibrahim & Masron, 2011)). However, few studies were conducted on using capital structure variable in determine profitability of listed insurance firms. For example, Chechet and Olayimuwola, (2014) examined capital structure and profitability of the Nigerian listed firms. Muritala (2012) carried out a similar research but the focus was on the manufacturing sector of the Nigerian economy. Muritala (2012) was in support of more of equity financing as against debt financing. Oladeji & Olokoyo (2015 ) examined effect of Capital Structure on Performance of Firms in the Petroleum Industry in Nigeria. Moreover, very few studies have been conducted in the financial sector, for instance, (Musah, 2018) , Pinto and Joseph (2018), examined effect of Capital Structure on Profitability of commercial banks in Ghana using debt to total assets ratio and debt to equity ratios as independent variables and return on capital employed (ROCE) as a proxy of financial performance. Though, the banking and insurance firms are both financial institutions, but the findings of the banks cannot be extrapolated to the insurance firms because of industry regulations, policies and other sectorial environmental changes. Moreover, the operations of the banks and insurance firms are based on different models that lead to some notable contrasts between them (Thangavelu 2015). Their conclusions suggest that there were some common attributes in the capital structures of firms in different countries but they advocated the necessity of further research to be carried out on capital structure and profitability in particular institutional settings or countries.   1.2 Statement of Problem Capital structure, according to various researchers has been a study of significance in the corporate finance field for a number of decades. Financial managers have complexity in determining the optimal or favourable capital structure. The Nigerian insurance firms have