EFFECT OF FINANCIAL LEVERAGE ON THE PROFITABILITY OF LISTED CONSUMER GOODS FIRMS IN NIGERIA

This study investigates the effect of financial leverage on the profitability of listed consumer goods firms in Nigeria over a ten-year period (2014–2023). Given the persistent macroeconomic instability in Nigeria including rising inflation, interest rates, and exchange rate volatility consumer goods firms increasingly rely on debt financing to sustain operations. The study disaggregates financial leverage into short-term debt, long-term debt, and total debt-to-asset ratio, while profitability is measured by return on assets (ROA). Using secondary data from 16 purposively selected firms and employing pooled Ordinary Least Squares (OLS) regression analysis, the research finds that both short-term and long-term debts exert significant negative effects on profitability, implying that higher reliance on either form of debt reduces firm earnings. Conversely, total debt-to-asset ratio is found to have a significant positive effect, indicating that overall debt, when optimally structured, can enhance profitability. The study concludes that while debt remains a critical financing tool, its composition and maturity structure are vital determinants of financial performance. It recommends that firms adopt balanced and context-sensitive capital structure strategies to mitigate the risks of over-leveraging, and that policymakers foster more accessible and cost-effective long-term financing options to support sustainable growth in Nigeria’s consumer goods sector. (Word Count: 199)