EFFECT OF LIQUIDITY ON THE PROFITABILITY OF MANUFACTURING COMPANIES IN NIGERIA
Abstract
The study examined the effect of liquidity on the profitability of manufacturing companies in Nigeria. The result of this study provided valuable insights for manufacturers, financial analysts, policymakers, and other stakeholders in the Nigerian economy. The objectives of the study was to examine the relationship between liquidity and the profitability of manufacturing firms in Nigeria and to identify the effect of liquidity on the profitability of manufacturing firms in Nigeria. The population in this study is all listed manufacturing companies in Nigeria. Data was sourced from the Nigerian Stock Exchange fact books, annual reports of firms for a period of 5 years, spanning from 2020 – 2024. The study focused on three quoted manufacturing firms, the selected firms are: Dangote Cement Plc, Nestle plc and Nigeria Breweries Plc. Data collated were analyzed using pooled Ordinary least square estimation, fixed effect estimation, random effect estimation Panel Unit Root, Panel Co-Integration Test, and Granger Causality. It was revealed from the study that there is a significant relationship between liquidity and profitability of manufacturing firms in Nigeria. Therefore, there is a significant relationship between liquidity and profitability ratio of a manufacturing firms in Nigeria. It was also revealed from the study that there is no significant relationship between current ratio and the profitability ratio of manufacturing firms in Nigeria. It is recommended that the management of manufacturing should objectively try to reduce their bill receivable, so as to guide against waiting longer to collect from customers, for the purpose of increasing their profitability.
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