The determinants of firms' performance: Empirical evidence from Nigeria's manufacturing sector

Abstract

Given the importance of manufacturing growth to the economy's development, policy-makers in Nigeria have introduced several reforms, policies, and programmes to improve the sector's performance. Despite these measures, the sector's performance has not improved over the years. The data on indicators of manufacturing sector performance, such as the manufacturing value-added growth rate and the contribution of manufacturing value-added to gross domestic product (GDP), show downward trends. This has constrained the achievement of most development objectives. Against this background, this study examines the determinants of performance among 55 quoted manufacturing firms in Nigeria from 1999 to 2023. The study employed the System Generalized Method of Moments (GMM) estimation technique. The findings show that capital intensity, vertical integration, management efficiency, gross domestic product growth rate, and oil price are positively related to firm performance. In contrast, firm size and the inflation rate are negatively related to firm performance. The study recommends that manufacturing firms should plough back their profits to encourage the expansion of their asset. Also, manufacturing firms should encourage on-the-job training programmes for managers and workers to improve their competency and capabilities. Finally, the government should keep inflation within manageable bounds through its monetary and fiscal policies to encourage investment without compromising efficiency and productivity among manufacturing firms.