The Relationship Between Capital Structure and Financial Performance of Listed Cement Companies in Nigeria

This study examines the relationship between capital structure decisions and financial performance among listed cement companies in Nigeria. The cement industry is one of Nigeria's most capital-intensive manufacturing sectors and plays a strategic role in supporting the country's infrastructure development ambitions. Capital structure choices, specifically the mix of debt and equity financing, directly affect the cost of capital, financial risk, and ultimately firm profitability. This study uses an ex-post facto design and draws on financial data from the annual reports of five cement companies listed on the Nigerian Exchange Group for the period 2019 to 2023. Capital structure is measured by the debt-to-equity ratio and long-term debt ratio, while financial performance is proxied by return on equity and return on assets. Panel data regression with fixed effects estimation is applied. Findings reveal that higher leverage ratios are negatively associated with return on assets, suggesting that excessive debt impairs financial performance in the Nigerian cement industry. Return on equity showed a more complex relationship, with moderate leverage levels associated with improved equity returns. The study concludes that optimal capital structure management is critical to sustaining profitability in capital-intensive industries. It recommends that cement company boards regularly review their debt financing strategies to maintain leverage within ranges that support both growth objectives and financial sustainability.

Keywords: capital structure, financial performance, cement companies, leverage, Nigerian Exchange Group.