Corporate Governance and Challenges of Financial Leverage of Privatised Cement Industry in Nigeria

Abstract

The paper studies new corporate governance and the challenges of financial Leverage of privatised cement industry in Nigeria. The variables studied were leverage ratio as Performance proxy (dependent variables) and fourteen Corporate Governance proxies as independent variables. Data was collected from secondary sources, and the statistical tools employed in the Methodology were Trend Analysis and Pooled OLS regressions. Trend Analysis result suggests that;Devaluation, high cost of importation, insufficient power supply, bank strike, and deflation of global oil prices created capacity underutilization in cement industry and severe burden of financial leverage to sustain operational activities pre privatization. The result also, reveals that, the leverage ratio remarkably declined post privatization, however, the global financial crisis of 2009 inflicted high cost of production on the industry which necessitated increased leverage in order to cushion the effects on operational activities. Inferential Statistics Result suggests that corporate governance has positive and significant impact on the leverage ratio of the industry in general. The study concludes that, despite the challenges of unfavourable macroeconomic environment, the new corporate governance reduced the leverage ratio post privatisation and it has positive and significant impact on the financial leverage of the Cement Industry. The researcher recommends that Nigerian government should ensure favourable macroeconomic environment and improve private sector activities. Collectively, the new Corporate Governance of Cement Industry should strategize on how to; Increase Revenue, profitability, better management of inventory, and restructuring of debt to mitigate increased leverage.