An Assessment of Capital Budgeting Practices Among Manufacturing Firms in Lagos State

Capital budgeting decisions rank among the most consequential financial choices that manufacturing firms must navigate, as they involve the allocation of substantial resources toward long-term productive assets. This study assesses capital budgeting practices among selected manufacturing firms in Lagos State, which serves as Nigeria's foremost industrial hub within the South West geopolitical zone. Using a survey research design, primary data were gathered from 150 finance officers and investment managers employed across 30 quoted and unquoted manufacturing companies in the Lagos Industrial Layout and Ikeja Free Trade Zone. A structured questionnaire was administered, and the results were analysed using frequency tables, percentages, and chi-square tests. The research evaluates the prevalence of techniques including net present value, internal rate of return, payback period, and profitability index, while also examining the barriers that limit adoption of sophisticated appraisal methods. The study is situated within the context of post-pandemic capital recovery and the increasing cost of imported capital equipment. Findings from reviewed literature indicate that many Nigerian manufacturers continue to rely on payback period due to its simplicity, despite its limitations in capturing long-term value. This study aims to identify industry-specific factors that influence methodology preferences and to recommend practices that improve investment efficiency. The outcomes are relevant to manufacturing associations, financial regulators, and business school curricula in the South West. Keywords: capital budgeting, manufacturing firms, net present value, investment appraisal, Lagos State