Working Capital Management and Profitability of Agro-Allied Companies in Ogun State

This study investigates the relationship between working capital management and profitability among agro-allied companies in Ogun State, South West Nigeria. Agriculture remains a significant contributor to Nigeria's non-oil GDP, and agro-allied businesses play a central role in value-chain development. However, poor working capital management has been identified as a key factor limiting the growth and profitability of agro-allied firms in the Southwest. This study adopts a longitudinal research design, using financial data extracted from the annual reports of 12 agro-allied companies operating in Ogun State over a five-year period from 2019 to 2023. Key working capital variables analyzed include the cash conversion cycle, accounts receivable period, inventory holding period, and accounts payable period. Profitability is measured using return on assets and net profit margin. Panel data regression analysis is employed to examine the relationships. Findings reveal that shorter cash conversion cycles are significantly associated with higher profitability, indicating that efficient management of receivables and inventory improves financial performance. The accounts payable period showed a positive but weaker relationship with profitability. The study concludes that agro-allied firms in Ogun State that optimize their working capital cycles tend to generate superior returns. It recommends that management teams prioritize receivables monitoring and adopt just-in-time inventory strategies to reduce holding costs and improve liquidity in the agricultural supply chain.

Keywords: working capital management, agro-allied firms, profitability, Ogun State, cash conversion cycle.