EFFECT OF FOREIGN EXCHANGE RATE VOLATILITY AND CORPORATE PERFORMANCE: EVIDENCE FROM NIGERIA’S MANUFACTURING SECTOR

Abstract

The forex volatility that greeted the 2023 general election in Nigeria and its exacerbation afterwards is a source of serious concern amongst manufacturers wherein unprecedented losses have been filed by major stock market participants among manufacturers in Nigeria. Consequent upon this, this study examines foreign exchange rate volatility's impact on the corporate performance of manufacturing firms in in Nigeria using a panel regression design over a 10-year period. The study investigated the forex volatility effect on financial performance as measured with return on asset, return on equity and Tobin’s Q. The findings revealed that forex volatility has no statistical significance on return on equity and return on asset. The study discovered that, forex volatility has statistically negative effect on Tobins’ Q but does not have a significant effect on ROE and ROA. This informs the conclusion that foreign exchange volatility embeds public information in its effect on performance as the significant effect noted was on the stock market-based performance of manufacturing firms. Among other things, the report recommends that prospective investors in the industrial firms should create plans that strike a balance between both foreign exchange and the profitability of their respective investee companies.