Capital Adequacy and Profitability of Manufacturing Firms Listed in Nigeria

Manufacturing firms in Nigeria continue to face fluctuating profitability levels despite efforts aimed at improving capital adequacy and operational efficiency. This situation raises concerns regarding the extent to which capital structure and financial management variables influence firm performance. The main objective of this study was to examine the effect of capital adequacy indicators on the profitability of listed manufacturing firms in Nigeria. The study adopted a panel research design using secondary data sourced from the annual reports of selected firms. The findings revealed that EQA had a positive significant effect on profitability with a coefficient of 0.2034 and a probability value of 0.0041, suggesting that stronger equity positions enhance financial performance. CIR also exhibited a positive significant influence on profitability, with a coefficient of 1.6317 and a probability value of 0.0308, indicating that efficient cost management contributes to improved returns. Conversely, CAR (–0.2645; p = 0.3684) and DER (–0.0358; p = 0.2720) showed negative but statistically insignificant effects on profitability, implying that leverage and capital adequacy alone do not meaningfully drive firm performance. It is recommended that firms optimize their capital structures by improving equity positions, adopting cost-effective operational strategies, and reducing reliance on debt financing to boost profitability.