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Research Article | Volume 3 Issue 3 (May-Jun, 2021)
Effect of Inflation on Earnings of Listed Basic Materials Manufacturing Firms in Nigeria
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Open Access
Abstract

This study examined the effect of inflation on the earnings of quoted basic materials manufacturing companies in Nigeria for the period 2010 to 2019. The study adopted inflation (CPI) and interest rate (INR) as the independent variables, and earnings of companies represented by earnings per share (EPS) as the dependent variable. Secondary data for the selected study variables were obtained through analyses of the annual reports of eleven basic materials manufacturing companies quoted on the NSE with additional information from the CBN Statistical Bulletin for the relevant years. The study used descriptive statistics and multiple regression analysis technique based on OLS computed the E-views 10 software as the techniques for data analysis. The results revealed that inflation (CPI) had a negative relationship with earnings while interest rate (INR) had a positive relationship with earnings. However, the independent variables had no significant effect on earnings. The regression results also showed that the coefficient of determination (R Squared) value of approximately 0.422407 indicated that 42% of changes in the dependent variable were accounted for by the combined effect of changes in the independent variables. Based on the findings, the study recommended among others that listed basic materials manufacturing companies should put in place, proper inflation targeting, forecasting and managing measures so as to reduce the negative effect of inflation on their earnings.

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