Inventory Management and Profitability: Evidence from Listed Industrial Goods Companies in Nigeria (2020 - 2024)

This study investigates the influence of inventory management on the profitability of listed Nigerian industrial goods companies from 2020 to 2024. The study was anchored on the Theory of Constraints as its framework. The ex post facto panel design was employed, relying on secondary data extracted from the audited reports and accounts of companies listed on the Nigerian Exchange Group (NXG). Of the thirteen (13) companies in the population, only seven (7) met the criteria of being listed before 2020 and with complete reports for the study period. Profitability was proxied by Return on Assets (ROA). At the same time, inventory management was measured using Inventory Conversion Period (ICP), Inventory Turnover Ratio (ITR), and Inventory to Sales Ratio (ISR), with firm size as a control variable. The study employed panel data regression, descriptive statistics, and the Hausman test to analyze the data. Results revealed that ICP had a positive but insignificant effect on profitability; ISR had a significant negative effect, indicating excessive inventory relative to sales reduces efficiency; and ITR had a negative but insignificant effect, suggesting high turnover alone does not guarantee better performance. As a result, inventory management significantly influenced profitability, highlighting the need for operational alignment. The study recommends adopting optimization models such as Economic Order Quantity (EOQ) and Just-In-Time (JIT), monitoring inventory-to-sales ratios, and enhancing manager training for improved asset utilization.