Capital Allowance and Operation Efficiency of Listed Consumer Goods Firms in Nigeria

Abstract

This study looked into the impact of capital allowance on the operational effectiveness of firms producing consumer goods in Nigeria. The proxies of capital allowances are: initial allowance, annual allowance and balancing charge while operation efficiency was measured with asset turnover ratio. Population of the study was all the 21 consumer products companies listed on the Nigeria Exchange Group between 2014 and 2021. 12 companies were selected as the sample size using purposeful sampling. Through the use of the firm's publicly available financial filings, data was acquired from secondary source. The research design was expo-facto, both descriptive and inferential statistics such as correlation analysis, variance inflation factor, serial correlation, heteroskedasticity and multiple regression were employed in analyzing the data. Redundant fixed and hausman tests were also carried out in order to know the most appropriate statistical estimator. The results of the analysis showed that capital allowance improved efficiency. According to the study's findings, there was positive and significant relationship between the variables of capital allowance and proxy of operation efficiency, this implies that consumer items firms operate more efficiently when their capital allowances are advanced. Based on the outcome of the findings, It was advised that the Nigerian government reevaluate the capital allowances now enjoyed by firms in order to improve operational effectiveness and financial performance of consumer products enterprises. Additionally, greater capital allowances ought to be granted to more consumer products companies.