Assessment of Inventory Management for Profitability in the Energy Sector: A Case Study of Nigerian Power Distribution Asset Companies

Introduction: There are many different energy distribution companies (DisCos) in Nigeria's power sector. The distribution of power to millions of customers nationwide is the responsibility of these companies. These companies frequently encounter major inventory management challenges despite the enormous demand for power. Such inefficiencies have a detrimental effect on these companies' overall profitability since they can lead to both monetary losses and operational disruptions. Objective: This study investigates the impact of inventory management on operational costs, revenue generation, and overall financial sustainability. Method: The dataset consists of three DisCos that were chosen to represent the energy sector in Nigeria. Among the businesses are Abuja Electricity Distribution Company, Ibadan Electricity Distribution Company, and Eko Electricity Distribution Company. Key factors required for evaluating inventory management procedures and their effect on profitability in the Nigerian oil sector are included in the dataset. The variables employed are location, revenue, cash flow, capital cost, year, city, and operational cost. Using a variety of quantitative methods, the examination of inventory management and its effect on profitability in the Nigerian energy sector was carried out. Regression analysis, sensitivity analysis, break-even analysis, and data envelope analysis (DEA) are some of these techniques. Results: According to the break-even analysis, some Nigerian power companies would find it difficult to turn a profit if revenue growth is not matched by rising capital and operating expenses. According to the DEA ratings, several businesses were performing well regarding revenue creation, capital use, and operational cost control. In contrast, some companies were discovered to be inefficient. Conclusion: These findings suggest that as power DisCos experience revenue growth, they are often required to increase their investment in infrastructure, equipment, and other capital expenses.