EFFECT OF ASSET STRUCTURE ON PROFITABILITY OF MANUFACTURING FIRMS IN NIGERIA

This study investigates how asset structure influences the profitability of quoted manufacturing firms
in Nigeria over the period 2014–2024. Given persistent macroeconomic pressures—including inflation,
exchange rate volatility, and infrastructure deficits—internal financial decisions have become
increasingly critical to firm survival and performance. The study focuses on three key asset composition
indicators: Current Assets to Total Assets ratio (CATA), Non-Current Assets to Total Assets ratio
(NCATA), and Inventory to Total Assets ratio (ITA), while profitability is measured using Return on
Equity (ROE). Anchored on the Resource-Based View and working capital management theory, the
research adopts an ex-post facto design and applies Panel Least Squares regression to data obtained
from five listed manufacturing firms across eleven years. Descriptive statistics reveal balanced asset
allocation patterns and relatively stable profitability levels. Regression results indicate that NCATA
exerts a positive and statistically significant effect on ROE, implying that investment in long-term
productive assets enhances shareholder returns. Conversely, CATA demonstrates a positive but
insignificant relationship with profitability, suggesting that liquidity alone does not guarantee
improved financial performance. ITA shows a negative and insignificant association with ROE,
indicating that excessive inventory holdings may constrain returns without producing measurable
gains. Although the model exhibits high explanatory power, diagnostic tests initially revealed
multicollinearity concerns, which were corrected through appropriate adjustments. Overall, the
findings emphasize that strategic allocation toward productive non-current assets, supported by
efficient liquidity and inventory management, is essential for strengthening profitability in Nigeria’s
manufacturing sector.