EFFECT OF WORKING CAPITAL MANAGEMENT ON FINACIAL PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA

Abstract The financial performance of Nigerian manufacturing firms remains challenged by inefficient working capital management, including issues in inventory control, receivables, payables, and cash conversion cycles. These inefficiencies have constrained profitability and operational sustainability. In response, this study investigates the determinants of financial performance among listed manufacturing firms in Nigeria, focusing on the impact of working capital management components. The specific objectives were to: (i) assess the effect of inventory management on financial performance; (ii) evaluate the influence of accounts receivable management; (iii) examine the impact of accounts payable management; and (iv) investigate the relationship between the cash conversion cycle and firm performance. The study adopted an ex-post facto research design, utilizing secondary data from 13 listed manufacturing firms on the Nigerian Exchange Group (2020–2024). Multiple regression analysis was employed to analyze the data. At a 5% significance level, results revealed that inventory management (β = 0.162, t = 2.14, p = 0.034 < 0.05) and the cash conversion cycle (β = 0.205, t = 2.29, p = 0.023 < 0.05) had significant positive effects on performance, while accounts receivable management (β = -0.188, t = -2.07, p = 0.039 < 0.05) had a significant negative effect. Accounts payable management was not statistically significant (β = 0.071, t = 1.01, p = 0.312 > 0.05). The study concludes that optimizing inventory and cash cycles while controlling receivables is crucial for profitability. Firms are advised to implement robust working capital strategies for sustained financial performance. Keywords: Working Capital Management, Inventory, Receivables, Payables, Cash Conversion Cycle, Financial Performance.