Effect of Macro Economic Factors on Financial Performance of Selected Quoted Manufacturing Companies in Nigeria

Abstract

The study examines the effect of macroeconomic factors, particularly gross domestic product and interest rates, on the financial performance of selected quoted manufacturing firms in Nigeria, using Tobin's Q as a proxy for firm performance. The study adopts ex-post factor research design and covered 43 quoted manufacturing firms in Nigeria.  Utilizing panel data from 2014 to 2023 which was extracted from published annual reports of Statistical Bulletin of the Central Bank of Nigeria, National Bureau of Statistics (NBS) and Nigerian Stock Exchange and applied regression analysis through the least squares method, the findings revealed that gross domestic product has a statistically positive and significant effect on financial performance (Tobin's Q) of selected quoted manufacturing firms in Nigeria 5% significant level. Conversely, interest rate has negative but statistically insignificant effect on financial performance (Tobin's Q) performance of selected quoted manufacturing firms in Nigeria 5% significant level. The study concludes that macroeconomic factors, particularly gross domestic product and interest rate influence financial performance (Tobin's Q) of selected quoted manufacturing firms in Nigeria. the study therefore, recommend that firms should seek to optimize their capital structure by exploring favorable financing options when interest rates are low, while also considering hedging strategies or fixed-rate loans to mitigate potential risks from future rate hikes. This can be achieved through prioritize focus on operational efficiency, cost management, and leveraging growth opportunities tied.