EFFECT OF WORKING CAPITAL MANAGEMENT ON THE PROFITABILITY OF MANUFACTURING COMPANIES IN NIGERIA

ABSTRACT This study examined the effect of working capital management on the profitability of manufacturing companies in Nigeria, focusing on Nasco Group Nigeria Limited and Grand Cereals Limited over the period 2020 to 2025. Anchored on the Cash Conversion Cycle Theory, Trade Off Theory, and Pecking Order Theory, the study adopted a mixed-methods design combining primary data from 352 purposively selected respondents with secondary data drawn from audited annual financial statements. Return on assets served as the dependent variable, while inventory turnover ratio, average collection period, payable deferral period, and cash conversion cycle constituted the independent variables. Multiple regression analysis revealed that the four working capital management variables jointly explained 78.1% of the variance in return on assets (R² = .781, Adjusted R² = .656, F(4, 7) = 6.241, p < .001). Inventory management exerted the strongest positive effect on profitability (B = 0.914, β = .413, p = .022), while accounts receivable management exerted a significant negative influence (B = −0.174, β = −.391, p = .035). Accounts payable management contributed positively to profitability (B = 0.138, β = .282, p = .049), and cash conversion cycle exerted a significant negative effect (B = −0.093, β = −.361, p = .029). All four null hypotheses were rejected at the 0.05 significance level. The study concluded that working capital management is a significant determinant of manufacturing profitability in Nigeria and recommended investments in inventory control systems, stricter receivable recovery mechanisms, structured payable frameworks, and expanded concessionary working capital financing from regulatory institutions.