Authors : Obadina A. Babatunde

Volume/Issue : Volume 11 - 2026, Issue 8 - August

Google Scholar : https://tinyurl.com/5x3w6633

DOI : https://doi.org/10.38124/ijisrt/26aug893

Note : A published paper may take 4-5 working days from the publication date to appear in PlumX Metrics, Semantic Scholar, and ResearchGate.

Abstract : Chemical and allied raw material distributors in Nigeria operate at the difficult intersection of two persistent pressures: the working capital demands of a business built on holding large stocks of imported inputs and extending credit to downstream manufacturers, and the escalating cost and complexity of financing those imports through a banking system now charging historically high interest rates. Nigeria's Monetary Policy Rate rose from 11.5 percent in 2021 to 27.25 percent by the end of 2024, while the Cash Reserve Ratio climbed to 45 percent over the same period, sharply raising the cost of the trade loans, overdrafts, and letters of credit that distributors rely on to bridge the gap between paying foreign suppliers and collecting from local customers. At the same time, foreign exchange scarcity between 2023 and 2024 slowed the issuance of letters of credit and eroded supplier confidence in Nigerian trade instruments, even though value of letters of credit issued nationally later rebounded by 33.3 percent between the January-August 2024 and January-August 2025 periods as liquidity improved. The problem this study addresses is how distributors reconcile the working capital cycle inherent in chemical distribution, long inventory holding periods and extended customer credit, with an import financing environment that has become simultaneously more expensive and, at times, less reliable. The objective of the study is to examine the relationship between working capital management practices and import financing challenges among chemical and allied raw material distributors in Nigeria. The study adopts a quantitative research design based on secondary time-series data compiled for 2018 to 2026 from the Central Bank of Nigeria's monetary policy records, trade finance statistics, and the aggregated financial results of listed Nigerian commodity chemicals companies. Descriptive statistics, trend analysis, and Pearson correlation were used to examine the relationship between the cost of finance and industry profitability. The findings reveal a strong positive statistical association between the Monetary Policy Rate and the net profit margin of listed chemical distributors, driven primarily by aggressive cost pass-through rather than improved working capital efficiency, alongside evidence that import financing activity, while recovering in value, remains constrained by documentation delays and foreign exchange uncertainty. The study concludes that working capital management in this sub-sector has become reactive rather than strategic, and recommends that distributors adopt structured inventory optimisation, diversify financing instruments beyond bank overdrafts, and that regulators simplify and speed up trade documentation processes for critical raw material imports.

Keywords : Working Capital Management; Import Financing; Cash Conversion Cycle; Monetary Policy Rate; Letters of Credit; Chemical and Allied Raw Material Distributors; Nigeria.

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