ENTREPRENEURIAL FINANCING: ANALYSIS OF INFLATION AND CAPITAL BUDGETING

This research examines the effect of inflation on capital budgeting performance in Nigerian enterprises. The impact of inflation on an economy is diverse which could concurrently be negative or positive. Inflation can grind down the definite expected return that is received on an asset. Hence, the study sets to determine how enterprises behave when faced with inflationary pressure. Survey research method was employed for the study. Questionnaires were administered to 100 respondents. The questions were administered purposively to finance managers and officials in finance department in selected enterprises in Lagos State which is the hub of commerce and the State with the largest number of registered entrepreneurs. Random sampling technique was employed in selecting the enterprises because it offers an opportunity to select an unbiased sample from the population. The hypotheses were tested using T-test and Chi-square. Findings from the study shows that the impact of capital budgeting could be impractical if the impact of inflation is not appropriately built into the test. It was observed that the inefficiency of enterprises in Nigeria in the management of their resources is as a result of difficulty in application rather than flaws in their budgets. As a result of the negative effects of inflation that were discovered in this research work it was recommended that the government should try to ensure stability in the economy so that the cost and time of preparing the budget will be reduced. The government should also develop interventions to reduce the negative effects of inflation on enterprises in Nigeria.