Title: An Empirical Analysis of Short-Term Financing Options on Business Performance in Nigerian Manufacturing Sector
Authors: OBANUVWE, Isaac and EHIEDU, Victor C Ph.D
Volume: 9
Issue: 5
Pages: 402-411
Publication Date: 2025/05/28
Abstract:
This study presents an empirical analysis of the impact of short-term financing options on business performance in the Nigerian manufacturing sector. Specifically, it examined the impact of commercial bank loans, microfinance bank loans, and trade credit on Return on Assets (ROA). Using a time series approach and secondary data covering 20 years (2005-2024), the study employed the Augmented Dickey-Fuller unit root test, ARDL Bound test, Error Correction Model (ECM), Breusch-Pagan-Godfrey test, and Ramsey RESET test. The results revealed that microfinance bank loans and trade credit have a significant positive impact on ROA, while commercial bank loans do not. Based on the findings, it is recommended that Nigerian manufacturing firms prioritize microfinance bank loans and trade credit as viable financing options, and that policymakers create an enabling environment to support access to affordable financing. Additionally, commercial banks should revisit their lending policies to make their loans more accessible and affordable to manufacturing firms.