ECONOMIC ENVIRONMENT AND PERFORMANCE OF LISTED CONSUMER GOODS COMPANIES IN NIGERIA: THE MODERATING EFFECT OF BOARD INDEPENDENCE

Abstract

This study empirically examined the effect of economic environment on the performance of 
listed consumer goods companies in Nigeria. The panel data set for 15 listed consumer goods 
companies spanning from 2014 to 2023 were sourced from Nigerian Exchange Group (NGX), 
and Central Bank of Nigeria (CBN). Methodologically, descriptive statistical techniques, 
correlation analysis technique, as well as fixed and random effect models were used to examine 
the degree of association among the variables to investigate the effect of interest rate, exchange 
rate and inflation (as proxies for economic environment) on the performance of listed consumer 
goods companies (proxied by firm value based on Tobin’s Q) in Nigeria. On the whole, the 
results showed that interest rate, inflation and board independence have positive and 
statistically significant impact on organizational performance on consumer goods companies 
in Nigeria; while exchange rate has negative but insignificant effect on organizational 
performance on consumer goods companies. Furthermore, the results of moderating effect 
showed that board independence significantly moderated the effect of interest rate, inflation 
and exchange rate on organizational performance on consumer goods companies over the 
period of the study. Finally, the study recommends for management of the companies use 
periods of lower interest rates to lock in long-term financial agreements related to fixed-rate 
debt and capital expenditures; adopt backward integration and local sourcing of raw materials 
in order to reduce high reliance on imported inflation; domesticate their supply chain in order 
to reduce excessive demand for foreign currency; and constitute a “macroeconomic risk 
assessment” sub-committee to be chaired by an independent director for effective monitoring 
of changes in macroeconomic business environment.