EXCHANGE RATE FLUCTUATIONS AND THE PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISES IN RIVERS STATE, NIGERIA

Authors

  • Dr. Henry Waleru Akani Department of Finance, Rivers State University Nkpolu - Port Harcourt, Rivers State, Nigeria

Keywords:

Exchange Rate Fluctuations, Small and Medium Scale Enterprises, Official Naira Exchange Rate, Cross Exchange Rate, Average Naira Exchange Rate and Return on Investment

Abstract

This study examined the effect of exchange rate fluctuation on the financial performance of quoted small and medium scale enterprises in Nigeria. The objective is to examine if exchange rate fluctuation have positive or negative impact on financial performance. Cross sectional panel data was sourced from financial statement of the quoted small and medium scale enterprises and Central Bank of Nigeria statistics. Multiple regressions were formulated to study the relationship between naira devaluation and performance of quoted small and medium scale enterprise. Return on investment and return on equity were used as dependent variable while official naira exchange rate, Average naira exchange rate, Average naira cross exchange rate and official naira exchange rate selling. Panel data methodology was employed while the fixed effects model was used as estimation technique at 5% level of significance. Fixed effects, random effects and pooled estimates were tested while the Hausman test was used to determine the best fit. The study found that 83.6 and 90.2 percent variation on financial performance of the quoted small and medium scale enterprises can be traced to variation in naira exchange rate depreciation over the periods over in this study and that official naira exchange rate selling, official naira exchange rate, average naira exchange rate have positive and significant relationship with financial performance of the quoted small and medium scale enterprise while average naira cross exchange rate have negative and significant relationship with return on investment of the quoted small and medium scale enterprises. The study recommends that Nigeria exchange rate per US dollar should be well structured and defined. Policies to leverage the depreciation naira exchange rate should be formulated and there is need to strengthen Nigeria bilateral, unilateral and multilateral trade and investment relationship for better naira exchange rate that will enhance performance of small and medium scale enterprises

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Published

2024-01-18

How to Cite

Akani, H. . . W. . . . (2024). EXCHANGE RATE FLUCTUATIONS AND THE PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISES IN RIVERS STATE, NIGERIA. British International Journal of Applied Economics, Finance and Accounting, 8(1), 1–25. Retrieved from https://aspjournals.org/Journals/index.php/bijaefa/article/view/432