The Effect of Overhead Costs and Material Costs on Profitability of Consumer Goods Firms in Nigeria

This study investigated the effect of material and overhead costs on the profitability of consumer goods firms in Nigeria over a ten-year period (2014–2023). The study analyzed secondary data from ten chosen organizations using a fixed-effect model and panel data regression, using return on assets (ROA) as a metric for profitability. The findings indicate that material and overhead costs have a substantial positive influence on the profitability of manufacturing companies in Nigeria. Specifically, a 67.3% rise in ROA is linked to a 1% increase in overhead cost, while a 5.3% gain in profitability seems to be associated with a 1% increase in material cost. The model’s R-squared value of 0.629 indicates that the firm size, material costs, and overhead costs account for almost 63% of the variation in ROA. The results highlight how crucial efficient cost control is to improving the sector’s financial performance. The positive correlation between costs and profitability may suggest that businesses can maximize earnings in spite of economic constraints by strategically controlling overhead and material expenses and using them efficiently. In light of these findings, the study recommends that managers implement stringent cost controls, particularly for material and overhead expenses, to maintain consistent earnings.