EFFECT OF MONETARY POLICY ON THE FINANCIAL PERFORMANCE OF QUOTED CONSUMER GOODS MANUFACTURING FIRMS IN NIGERIA
Keywords:
Effect, Monetary Policy, Financial Performance, Consumer Goods Manufacturing FirmsAbstract
Consumer goods manufacturing companies constitute a large part of the real sector of the Nigerian economy. Most of their inputs are subjected to volatile foreign exchange markets and ever-rising inflation, both of which are determined by monetary policy manipulation. This study examined the effect of monetary policy on the financial performance of quoted consumer goods manufacturing firms in Nigeria. Focusing on the monetary policy variables such as Money Supply (MSP), Interest Rate (INTR), Exchange Rate (EXCR), and Inflation Rate (IFR), while the financial performance aspect was proxied by Return on Assets (ROA). The study used an ex-post facto research design and obtained secondary time series and cross-sectional (TSCS) panel data of the twenty-one (21) quoted consumer goods manufacturing firms in Nigeria for the years 2014 to 2024. With the aid of E-Views 12.0, the data were subjected to multiple regression analysis using the Cross-section random Panel Least Squares (PLS) technique. The study revealed that Interest rate and Exchange Rate (EXCR) have a significant effect on the financial performance of quoted consumer goods manufacturing firms in Nigeria while money supply and inflation rate have insignificant effects. Also, while money supply and inflation rate have a positive effect on the financial performance of quoted consumer goods manufacturing firms in Nigeria, interest rate and exchange rate have negative effects. Based on these findings, the study concluded that interest rates (INTR) and Exchange Rate (EXCR) emerge as significant and influential factors affecting the financial performance of these firms. The strong negative relationship between interest rates and Return on Assets (ROA) underscores the sensitivity of these companies to changes in borrowing costs and consumer spending patterns influenced by interest rate fluctuations. Based on the conclusions it was recommended that firms should explore financial instruments such as interest rate swaps or forward rate agreements to hedge against interest rate fluctuations if return on assets is anything to come by.
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