DEBT FINANCING AND FINANCIAL PERFORMANCE OF BREWERY FIRMS IN NIGERIA
Keywords:
Debt financing, net profit margin, short-term debt, long-term debt, total debt,, brewery firmsAbstract
This study examined debt financing and the financial performance of brewery firms in Nigeria over a ten-year period spanning 2016 to 2025. Specifically, the study examined how short-term debt, long-term debt and total debt affect net profit margin as a proxy for financial performance. The study adopted an ex-post facto research design and employed a judgmental sampling technique to select three brewery firms listed on the Nigerian Exchange Group, namely Nigerian Breweries Plc, Guinness Nigeria Plc and International Breweries Plc. Secondary data were obtained from the audited annual reports of the selected firms and were analysed using descriptive statistics and panel least squares regression. The regression results revealed that short-term debt, with a coefficient of 544,845.8 and a probability value of 0.0442, has a positive and statistically significant effect on net profit margin, indicating that the effective utilisation of short-term borrowing improves working capital management and profitability among brewery firms. Long-term debt, with a coefficient of 76,247,021 and a probability value of 0.1163, showed a positive but statistically insignificant effect, suggesting that although long-term financing supports capital investment and expansion, its direct influence on profitability is limited. Total debt, with a coefficient of −15,040.59 and a probability value of 0.8931, exhibited a negative and insignificant relationship with net profit margin, implying that excessive borrowing may increase financial risk and depress profitability. The model returned an adjusted R-squared of 0.627251, indicating that approximately 63 per cent of the variation in net profit margin is explained by the debt financing variables. The study concludes that the optimal management of debt financing, and of short-term debt in particular, is essential to enhancing the financial performance of brewery firms in Nigeria, and it recommends that financial managers adopt debt management policies capable of sustaining an optimal capital structure.
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