Exchange Rate Fluctuations and Financial Performance of Manufacturing Companies Listed in Nigeria
This study examined the effect of exchange rate fluctuations on the financial performance of manufacturing companies in Nigeria using a panel of 10 quoted manufacturing companies in Nigeria. Data for the study was obtained from the published financial statement of the quoted companies, the Organization for Economic Cooperation and Development (OECD), and the Central Bank of Nigeria (CBN). Data collected was analyzed using Random Effects (RE) and Fixed Effects (FE) techniques. Inferences were drawn at 5% significance level. Results from the empirical analysis showed that exchange rate fluctuation had a significant effect on ROA; an insignificant effect on ROE, and an insignificant effect on EPS. The study, therefore, concluded that there was a negative significant relationship between fluctuations in exchange rate and the financial performance of manufacturing firms in Nigeria when ROA is used as a proxy for financial performance. Therefore, the study recommends among others that there may be a need for a fixed exchange rate to limit the fluctuation that may negatively affect the financial performance of Nigerian manufacturing companies. Allowing the fluctuation in the exchange rate will significantly affect the profitability of manufacturing firms in Nigeria thus, negatively affecting their financial performance. Keywords: Earning per share; Exchange rate fluctuations; Return on assets; Return on equity JEL Codes: F31, L25