Foreign Currency Exchange Risk Management and Financial Performance of Nigeria Deposit Money Banks
Keywords:
Banks, Currency, Financial, Foreign Exchange, Performance
Abstract
This study examined foreign currency exchange risk management and financial performance of Nigeria deposit money banks. The cross sectional survey design was adopted. The population of the study covers the entire listed deposit money banks in Nigeria. The study employed a census sample study for a period of ten years, 2012-2021 financial years. The panel ordinary regression analysis was used. The study's findings revealed that foreign currency exchange risk has a negative impact on the financial performance of Nigerian deposit money banks. The study recommended that banks reduce their currency risk through proper risk management strategies.
References
1. Agbeja, O., Adelakun, O. J & Udi, E.E. (2016). Empirical analysis of counterparty risk and exchange rate risk management on the performance of deposit money banks in Nigeria. International Review of Economics and Management, 4 (2) , 1-15
2. Allayannis, G., Ihrig,J. & Weston, J. (2008). Exchange-rate hedging: financial vs. operational strategies, American Economic Review Papers and Proceedings, 91 (2), 391–395
3. Allen, S.L., (2014). Financial risk management: A practitioner’s guide to managing market and credit risk, Hoboken, New Jersey: Wiley.
4. Central Bank of Kenya. (2020). Bank supervision annual report. Online: https://www.centralbank.go.ke/uploads/banking_sector_annual_reports/1375903848_Bank%20Supervision%20Annual%20Report%202020.pdf
5. Chamberlain, S., J. S. Howe and H. Popper (2014). The Exchange Rate Exposure of U.S. and Japanese Banking Institutions, Wharton Financial Institutions Center, Working Paper Series, 96-55
6. Dam (2014). Do firms hedge in response to tax incentives? Journal of Finance, 57, 815-839.
7. Denga and Jain (2017) Denga, S., & Jain, A. (2017). Forex risk management for multinationals: internal and external hedging techniques. In София 280, (1), 51-61.
8. Eyanuku, J.P. (2022) . An analysis of foreign exchange risk management and profitability of deposit money bank in Lagos, Nigeria.. Online: ttps://www.researchgate.net/publication/358040948
9. Federal Aviation Administration (2009). Risk management book. Online: https://www.faa.gov/sites/faa.gov/files/2022-06/risk_management_handbook_2A.pdf
10. Giddy, I.H. (1977). Exchange Risk Whose view? Financial Management,8, 23-33.
11. Isaac, L. (2015). Assessing the impact of exchange rate risk on banks performance in Nigeria. Journal of Economics and Sustainable Development, 6(6), 1-14
12. Kanwal, S., & Nadeem, M (2013). The impact of macroeconomic variables on the profitability of listed commercial banks in Pakistan. European Journal of Business and Social Sciences 2 (9): 186–201.
13. Kiganda, E. O (2014). Effect of macroeconomic factors on commercial banks profitability in Kenya: Case of Equity Bank Limited, Journal of Economics and Sustainable Development 5(2)12-21
14. Limo, H (2014) . Effect of forex risk management techniques on the financial performance of commercial Banks in Kenya. Journal of management.6(4) , 49-64
15. Madura, J. (2010). International financial management, 10th Edition, South-Western College Publishing.
16. Madhuchandrika, N. (2019). Foreign exchange risk management in Indian commercial banks: Perspectives of Bankers and Customers. International Journal of Management, Technology, and Social Sciences (IJMTS), 4(1), 78-82.
17. Martin, P. & Mauer, I. (2014). An analysis on the causes of real exchange rate volatility and its effect on economic growth in Ghana. International Growth Center. 6(1), 144-167.
18. Mbabazize, P. M., Daniel, T. and Ekise, I. E. (2014). The role of foreign exchange risk management on performance management of exporting firms in developing countries: a case study of Uganda's exporting firm.. Research Journali's journal of Economics, 2 (3), 1-18.
19. Mutuku, C. (2016). The effect of risk management on the financial performance of commercial banks in Kenya. A research project submitted in partial fulfilment of the requirements for the award of the Degree of Masters in Business Administration, School of Business, University of Nairobi.
20. Ongore, V.O., & Kusa, K. (2013).Determinants of Financial Performance of Commercial Banks in Kenya. International Journal of Economics and Financial Issues, 3(1), 237-252
21. Papaioannou, M.G.(2008). Assessing market and credit risk of country funds: A value-at-risk analysis", Choi, J.J. and Powers, M.R. (Ed.) Global Risk Management: Financial, Operational, and Insurance Strategies. International Finance Review, 2(3),61-7
22. Rao,K,R,M.& Lakew,T,B.(2012). Determinants 0f Profitability of Commercial Banks in a Developing Country: Evidence from Ethiopia, International Journal of Accounting and Financial Management Research (IJAFMR), 2(3) 1-20.
23. Savani, M. J & Mistry, D.S. (2022). Foreign exchange risk and firm value: the case of India. A Global Journal Of Social Sciences 6(4)39-47
24. Singh, K. S. (2013). The relationship between foreign exchange trading and financial performance of commercial banks in Kenya. Unpublished Masters thesis, University of Nairobi.
25. Udoezika, D., & Orjinta, H. I. (2021). Credit risks indicators and performance of deposit money banks in Nigeria and Botswana: A Comparative Analysis. International Digital Organization for Scientific Research (IDOSR), 6,(7) 8-27
2. Allayannis, G., Ihrig,J. & Weston, J. (2008). Exchange-rate hedging: financial vs. operational strategies, American Economic Review Papers and Proceedings, 91 (2), 391–395
3. Allen, S.L., (2014). Financial risk management: A practitioner’s guide to managing market and credit risk, Hoboken, New Jersey: Wiley.
4. Central Bank of Kenya. (2020). Bank supervision annual report. Online: https://www.centralbank.go.ke/uploads/banking_sector_annual_reports/1375903848_Bank%20Supervision%20Annual%20Report%202020.pdf
5. Chamberlain, S., J. S. Howe and H. Popper (2014). The Exchange Rate Exposure of U.S. and Japanese Banking Institutions, Wharton Financial Institutions Center, Working Paper Series, 96-55
6. Dam (2014). Do firms hedge in response to tax incentives? Journal of Finance, 57, 815-839.
7. Denga and Jain (2017) Denga, S., & Jain, A. (2017). Forex risk management for multinationals: internal and external hedging techniques. In София 280, (1), 51-61.
8. Eyanuku, J.P. (2022) . An analysis of foreign exchange risk management and profitability of deposit money bank in Lagos, Nigeria.. Online: ttps://www.researchgate.net/publication/358040948
9. Federal Aviation Administration (2009). Risk management book. Online: https://www.faa.gov/sites/faa.gov/files/2022-06/risk_management_handbook_2A.pdf
10. Giddy, I.H. (1977). Exchange Risk Whose view? Financial Management,8, 23-33.
11. Isaac, L. (2015). Assessing the impact of exchange rate risk on banks performance in Nigeria. Journal of Economics and Sustainable Development, 6(6), 1-14
12. Kanwal, S., & Nadeem, M (2013). The impact of macroeconomic variables on the profitability of listed commercial banks in Pakistan. European Journal of Business and Social Sciences 2 (9): 186–201.
13. Kiganda, E. O (2014). Effect of macroeconomic factors on commercial banks profitability in Kenya: Case of Equity Bank Limited, Journal of Economics and Sustainable Development 5(2)12-21
14. Limo, H (2014) . Effect of forex risk management techniques on the financial performance of commercial Banks in Kenya. Journal of management.6(4) , 49-64
15. Madura, J. (2010). International financial management, 10th Edition, South-Western College Publishing.
16. Madhuchandrika, N. (2019). Foreign exchange risk management in Indian commercial banks: Perspectives of Bankers and Customers. International Journal of Management, Technology, and Social Sciences (IJMTS), 4(1), 78-82.
17. Martin, P. & Mauer, I. (2014). An analysis on the causes of real exchange rate volatility and its effect on economic growth in Ghana. International Growth Center. 6(1), 144-167.
18. Mbabazize, P. M., Daniel, T. and Ekise, I. E. (2014). The role of foreign exchange risk management on performance management of exporting firms in developing countries: a case study of Uganda's exporting firm.. Research Journali's journal of Economics, 2 (3), 1-18.
19. Mutuku, C. (2016). The effect of risk management on the financial performance of commercial banks in Kenya. A research project submitted in partial fulfilment of the requirements for the award of the Degree of Masters in Business Administration, School of Business, University of Nairobi.
20. Ongore, V.O., & Kusa, K. (2013).Determinants of Financial Performance of Commercial Banks in Kenya. International Journal of Economics and Financial Issues, 3(1), 237-252
21. Papaioannou, M.G.(2008). Assessing market and credit risk of country funds: A value-at-risk analysis", Choi, J.J. and Powers, M.R. (Ed.) Global Risk Management: Financial, Operational, and Insurance Strategies. International Finance Review, 2(3),61-7
22. Rao,K,R,M.& Lakew,T,B.(2012). Determinants 0f Profitability of Commercial Banks in a Developing Country: Evidence from Ethiopia, International Journal of Accounting and Financial Management Research (IJAFMR), 2(3) 1-20.
23. Savani, M. J & Mistry, D.S. (2022). Foreign exchange risk and firm value: the case of India. A Global Journal Of Social Sciences 6(4)39-47
24. Singh, K. S. (2013). The relationship between foreign exchange trading and financial performance of commercial banks in Kenya. Unpublished Masters thesis, University of Nairobi.
25. Udoezika, D., & Orjinta, H. I. (2021). Credit risks indicators and performance of deposit money banks in Nigeria and Botswana: A Comparative Analysis. International Digital Organization for Scientific Research (IDOSR), 6,(7) 8-27
Published
2023-09-29
How to Cite
Osemwegie-Ero , J. O., Jackson-Akhigbe , B. E., & Adoghe, F. (2023). Foreign Currency Exchange Risk Management and Financial Performance of Nigeria Deposit Money Banks. Central Asian Journal of Innovations on Tourism Management and Finance, 4(9), 167-174. https://doi.org/10.51699/cajitmf.v4i9.610
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