MACROECONOMIC FACTORS AND FINANCIAL PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA

Abstract

The Nigerian manufacturing sector has experienced persistent macroeconomic instability characterized by exchange rate volatility, inflationary pressures, and fluctuating interest rates, which have adversely affected frim profitability and operational efficiency. This study examines how macroeconomic variables affect Nigerian manufacturing companies' performance. The study used a longitudinal panel research design which the population comprised 71 manufacturing firms listed on the Nigerian Exchange Group (NGX) as of December 2023. Using purposive sampling, 27 firms with complete financial records for a 14-year period (2010–2023) were selected. The World Bank databases, the Central Bank of Nigeria Statistical Bulletin, and the annual financial statements of the sampled companies were the sources of secondary data. The System-GMM estimator was used because the model contains lagged dependent variables and potential endogeneity. Also to deal with endogeneity, dynamics, and unobserved heterogeneity. Furthermore, the study used descriptive statistics, correlation, panel unit root tests (Levin-Lin-Chu; Im- Pesaran-Shin), as well as tests for cross-sectional dependence for robustness purposes. The empirical findings suggest that exchange rate, interest rate and inflation had negative and significant impacts on both ROA and ROE, signifying that macroeconomic instability in Nigeria through its effects on profitability cum shareholders’ value. In addition it revealed average ROA and ROE of 6.06% and 4.82% respectively, while exchange rate averaged ₦213.05/$ and inflation averaged 11,97% . The study concluded and recommended that there is a strong and positive correlation between government revenue and business performance, suggesting that higher fiscal capacity generally boosts financial outcomes and industrial performance. The paper ends by advocating for macroeconomic stability and prudent monetary policy in conjunction with a more strengthened fiscal policy management as necessary ingredients for sustainable growth in the industrial sector.