Return on Capital Employed of Listed Manufacturing Companies and Government Spending on Infrastructures in Nigeria (1990 -2015)

Abstract

Government spending on infrastructures in various subsectors of the economy such as power, roads, education for human capital development and security is often directed towards increase in the production of goods and services and creating environment that will enhance the welfare of the citizens. However poor state of infrastructure in Nigeria, have been noted to be affecting the financial performance of manufacturing companies in the country. Our focus in this study was to link government spending on Power, Roads, Security and Human Capital Development with the micro variables of firm performance in the area of Return On Capital Employed (ROCE).The study adopted ex-post facto research design. The population of the study was 83 listed manufacturing companies in Nigeria as at December 31, 2016, from which a sample size of 20 was purposively selected based on availability of data covering the period from 1990 to 2015. Secondary data were obtained from published financial statements of listed manufacturing companies in Nigeria, publications of government and the World Bank. Validity and Reliability of the data were based on the reports of external auditors and other regulatory agencies. The data were analyzed using descriptive and inferential statistical methods. The study found that government spending on Power, Roads, security and human capital development have no joint significant effect on ROCE (F(4, 21 ) = 0.523, the P-value associated with the F-value as is 0.720, this is greater than 0.05 indicating that there was no significant relationship between the independent and the dependent variables. adj R2 = -0.083. Coefficients of the independent variables show that Government spending on Power had positive but insignificant effect on ROCE (t=0.524, p>0.05). Roads had negative, insignificant effect on ROCE(t=-0.498, p>0.05) Security had negative but insignificant effect on ROCE (t(26) = -1.221, p>0.05), HCD had positive but insignificant effect on ROCE (t(26) = 0.823, p>0.05). The study concluded that government spending on infrastructural development in the areas of power, road, security and education did not impact on the Return On Capital Employed of manufacturing companies in Nigeria within the period of study. Sustainable industrial development requires adequate funding of infrastructures in Nigeria to reduce cost of operations and increase profitability level of manufacturing companies.