This study examines the impact of the government fuel subsidy removal on the financial performance of listed manufacturing firms in Nigeria. The study specifically analyzes the differences in Operating Cost Ratio (OCR), Return on Assets (ROA), and Profit Margin Ratio (PMR) before and after the policy implementation. Adopting an ex-post facto research design, secondary data were extracted from the annual financial reports of four purposively sampled listed manufacturing firms (Flour Mills of Nigeria, Nestle Nigeria Plc, Dangote Cement Plc, and Unilever Nigeria Plc) covering the period 2021–2024. The data were analyzed using descriptive statistics and independent t-tests. The findings reveal a statistically significant difference in financial performance indicators between the pre- and post-subsidy removal periods. Specifically, the Operating Cost Ratio increased significantly, indicating higher production expenses, while both Return on Assets and Profit Margin Ratios decreased significantly, reflecting reduced profitability and asset efficiency. The study concludes that the removal of fuel subsidies has had an immediate adverse effect on the manufacturing sector by escalating operational costs due to the sector's heavy reliance on fuel for power and logistics. It is recommended that the government provide palliative measures such as tax holidays and improved power infrastructure, while firms should explore alternative energy sources to ensure sustainability.
- Quote paper
- Abasiama James (Author), 2024, Government Fuel Subsidy Removal and the Financial Performance of Listed Manufacturing Firms in Nigeria, Munich, GRIN Verlag, https://www.grin.com/document/1681695
