Effect of Foreign Currency Translation on Performance of Selected Manuafacturing Firms in Nigeria
Keywords:
Foreign currency; currency translation; Profit after taxAbstract
The study evaluated the effect of foreign currency translation on the performance of selected manufacturing firms in Nigeria. Specifically, the study evaluated effect of exchange rate, transaction rate and interest rate on profit after tax of selected manufacturing firms in Nigeria. In a bid to accomplish this, panel regression analysis of fixed and random effect on ten (10) selected manufacturing firms in Nigeria were incorporated. The study employed secondary data; the data for the study covered the period 2013 to 2022. The Hausman test carried out showed that fixed effect model is more realistic and produced a better result which was therefore employed in drawing inferences in the study. From the result, exchange rate exhibited significant negative relationship; Interest rate has insignificant positive relationship, while the translation rate indicated insignificant negative relationship with selected manufacturing firms, performance in Nieria. Hence, the study concluded that unfavourable movement and adjustment in foreign currency translation rate affect the performance of selected manufacturing firms in Nigeria, especially, when measured performance in term of profit after tax (PAT). It was recommended that manufacturing firms should develop a mechanism to hedge against foreign exchange rate exposure caused by unanticipated movement in the exchange rate. More so, this should be supported by sound risk management strategies that can withstand macroeconomic instability especially inflation rate in the host economy.
References
Adetayo, J. O. (2013). Management of Foreign Exchange Risks in a Selected Commercial Bank,
in Nigeria, Journal of Social Science, 8(3), 207-213.
Ayodele, T. D. (2014). An Empirical Evaluation of the Impact of Exchange Rate on the Nigeria
Economy. Journal of Economics and Sustainable Development, 5(8), 23-37
Bradley, K. & Moles, P. (2002) Managing Strategic Exchange Risk Exposure- Evidence from
UK Firms, Managerial Finance, 5(28), 29-39.
Danish, M. (2012). Price discovery in Indian commodity futures market: an empirical exercise.
Journal of trade and global markets, 5 (1) 23-29.
Ebaidalla, E. M, (2014). Real exchange rate misalignment and economic performance in Sudan,
African Review of Economics and Finance, 6(2), 12-24
European Central Bank, (2010). Beyond Return on Equity – How to Measure Bank Performance:
Appendix to the Report on EU Banking Structures. Retrieved from https://www.ecb.europa.eu/pub/pdf/other/beyondroehowtomeasurebankperformance201009en.pdf?186ec63 2b33cc504fbd295de0b425d5b on 28th January, 2016.
Opaluwa, D., Umeh, J. C., &Ameh, A. A. (2012).The effect of exchange rate fluctuations on the
Nigerian manufacturing sector. African Journal of Business Management, 4(14), 2994 2998.
Okika, C, Udeh, F, Okoye, G. (2018). Effect of Exchange Rate Fluctuation on the profitability of
conglomerate Companies in Nigeria. International Journal of Academic Research In Business & Social Sciences, 4(2), 12-24
Owolabi, A. U. & Adegbite, T. A. (2017). The effect of foreign exchange regimes on industrial
growth in Nigeria. Global Advanced Research Journal of Economic, Accounting and Finance,1(1), 1 – 8.
Williams, H. T., (2018). An empirical investigation of the impact of exchange rate fluctuations
on firm’s performance in Nigeria. Journal of Business Management and Economic Research, 2(3), 1-10.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Cement Olatunji Olaoye, Adebusoye Olaniyi
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.