Title: Liquidity Constraints And Performance Of Manufacturing Firms In Nigeria
Authors: OGANA, Michael; OKONKWO, Francis Ugo; OKOH, Greg; & ODITA, Anthony Ogomegbunam
Volume: 9
Issue: 12
Pages: 34-51
Publication Date: 2025/12/28
Abstract:
This study investigated the impact of liquidity constraints on the financial performance of manufacturing firms in Nigeria. Liquidity constraints proxied with Access to Credit and Loan Facilities (ACLF), and Cash Flow Volatility (CFV), on the performance measured with Return on Assets (ROA) of manufacturing firms in Nigeria. Adopting an ex-post facto research design, the study relies on secondary data extracted from the annual financial statements of 10 purposively selected manufacturing firms listed on the Nigerian Exchange Group (NGX) over a 10-year period (2015-2024). The data were analyzed using panel Ordinary Least Squares (OLS) regression in E-Views 9.0, and diagnostic tests including panel unit root, cointegration, and Hausman tests were conducted to ensure robustness. Findings revealed that the two proxies of liquidity constraints significantly affect ROA. Specifically, ACLF positively influenced ROA (? = 0.012129; p = 0.0425), reinforcing the necessity of improved access to credit. CFV was positively and significantly associated with ROA (? = 0.099578; p = 0.0269), indicating that firms with effective volatility management may turn liquidity risk into opportunity. The study concluded that liquidity constraints significantly influence the financial performance of manufacturing firms in Nigeria Policy recommendations include the need for strategic liquidity management, enhanced access to credit, robust interest rate risk strategies, and optimized inventory control. The study contributes to the extant literature by offering empirical evidence grounded in Pecking Order Theory, Trade-Off Theory, and Resource-Based View (RBV).