INVENTORY MANAGEMENT AND PROFITABILITY OF LISTEDPHARMACEUTICAL COMPANIES IN NIGERIA

Abstract

This study examined the effect of inventory management on profitability of listed
pharmaceutical companies in Nigeria. However, the specific objectives were to examine the
effect of inventory turnover on gross profit margin of listed pharmaceutical companies in
Nigeria, to access the effect of inventory holding cost on gross profit margin of listed
pharmaceutical companies in Nigeria and to determine the effect of economic order quantity
on gross profit margin of listed pharmaceutical companies in Nigeria. The study adopted an
ex-post facto research design and utilized a panel data of seventy (70) pooled observations
gathered from seven (7) listed pharmaceutical firms in Nigeria over ten (10)-year period
(2014-2023) and employed a panel multiple regression technique to analyze the data via Eviews 10.0 statistical package. The study findings revealed that inventory turnover has a
significant positive relationship (Coeff. = 0.414078 {0.0005}) with gross profit margin of listed
pharmaceutical firms in Nigeria while inventory holding cost has a significant negative
relationship (Coeff. = -3.100747 {0.0298}) with gross profit margin of listed pharmaceutical
firms in Nigeria. It also revealed that economic order quantity has a non-significant negative
relationship (Coeff. = -0.000525 {0.4067}) with gross profit margin of listed pharmaceutical
firms in Nigeria. The study provided conclusive evidence on the importance of effective
inventory management in driving profitability in the pharmaceutical industry. The
recommendations made included that listed pharmaceutical firms in Nigeria should implement
cost-saving measures to reduce their inventory holding costs. This can be achieved by
renegotiating storage contracts, implementing just-in-time inventory systems, and reducing
inventory obsolescence