EFFECT OF CONOIL PLC’S LIQUIDITY ON ITS PROFITABILITY: EVIDENCE FROM NIGERIA

Abstract

The economy of Nigeria has had periods of recession, thus exposing indigenous firms, specifically the oil sector and gas sector, to liquidity and profitability problems. The objective of this research is to analyze the impact of liquidity on the profitability of Conoil Plc, Nigeria. The research design adopted was causal-comparative and utilized secondary financial data for the period covering 2010-2024. The applicable analyses comprised descriptive and inferential statistics, for which Ordinary Least Squares (OLS) regression analysis was conducted via E-Views 9. The findings indicate that at 5% significance level, current ratio (beta 0.0749 & p-value 0.2314), cash ratio (beta 0.0798 & p-value 0.0513), and quick ratio (beta 0.0498 & p-value 0.5341) which are measures of liquidity have a positive but statistically insignificant effect on return on assets (ROA) which is a measure of profitability. This indicates that efforts at better management of liquidity can only serve to substantially enhance the company's overall financial performance. Furthermore, with F-statistic (value 2.8484 & p-value .0975) as the basis of conclusion, it is concluded that Conoil Plc's liquidity has no significant effect on its profitability. Therefore, based on the discussed findings, it is recommended that the company should look for other key drivers of ROA aside from the current ratio, hold cash in an effective way, without holding too much idle cash, focus on the quality of liquid assets and their utilization and lastly, consider broader factors for its optimal balance, not necessarily reliant on the individual ratios used in this study.