Cost Control and Profitability: Evidence from Listed Industrial Goods Companies in Nigeria

Abstract

High increase in costs associated with running a business in Nigeria have become a major concern, as this has resulted to business closures, and relocation of industrial goods firms to neighboring countries, where operational costs are comparatively lower than that of Nigeria. Therefore, implementing cost control measures in industrial goods companies is essential to monitor and reduce expenditures to levels that support profitability. This study therefore, examined the influence of cost control on profitability of listed industrial goods companies in Nigeria. The study uses an ex post facto research design and data was collected from audited annual reports and account of the Ten (10) selected industrial goods companies within the time frame of 2015 to 2024 covering a ten-year period. The collected data were examined through descriptive statistical methods and multiple regression analysis. The findings revealed that changes in distribution cost (β = -4.184, p-value = 0.3598 > 0.05) and finance cost (β = -3.3448, p-value = 0.4496 > 0.05) both have negative and insignificant effect on net profit margin, while changes in labour cost (β = 0.7692, p-value = 0.0.8297 > 0.05) showed positive but insignificant effect on net profit margin of listed industrial goods companies in Nigeria. The study concluded that since the findings revealed that distribution cost, labour cost, and finance cost individually show insignificant effects on the profitability of listed industrial goods companies in Nigeria, this implies that their effect is not strong enough to meaningfully determine company’s profitability when considered independently. The study recommended that management of industrial goods companies should consider reducing reliance on expensive short-term borrowing and instead utilize long-term financing options or equity funding.