EXCHANGE RATE VOLATILITY AND FINANCIAL PERFORMANCE OF MANUFACTURING FIRMS IN NIGERIA

Abstract

This study examined the effect of exchange rate volatility on the financial performance of manufacturing firms in Nigeria, using return on assets, return on equity and return on 
capital employed as the dependent variable and exchange rate, balance of payment and inflation rate as independent variable. The study used ex-post facto research design with data collected from five manufacturing firms that involved in export-oriented activities in Nigeria. A Analysis of panel data from 2004 to 2023 revealed that exchange rate volatility had significant effect on ROA with F-stats p-value of 0.000. Conversely, exchange rate volatility had an insignificant effect on ROE with F-stats p-value of 0.09. Exchange rate volatility had an insignificant effect on ROCE with F-stats p-value of 0.08. The study emphasized the importance of strategic, efficient public expenditure allocation to foster sustainable economic development. The study recommended that government should 
implement policies to stabilize exchange rates, reducing cost pressures and improving profitability for manufacturing firms in Nigeria. 
Keywords: Balance of payment, Exchange rate, Inflation rate, Return on assets, Return on capital employed; Return on equity