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 E-views 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.