CHAPTER TWO

LITERATURE REVIEW

2.1 Conceptual Framework

2.1.1 Exchange Rate Fluctuation

Exchange rate is the rate at which a currency is exchanged for another currency. It is referred to

as the ratio at which a unit of currency of one country is expressed in terms of another currency.

The rate is normally determined in the foreign exchange market. The foreign exchange market is

a market where currencies of different countries are bought and sold. It is a market where the

values of local and foreign currencies are determined. As noted by Jhingan, the national

currencies of all countries are the stock-in-trade of the foreign exchange market, and as such, it is

the largest market to be found around the world which functions in every country. (Jhingan

2004).

Also, Bradley and Moles defined exchange rate as the price of a unit of foreign currency against

domestic currency. (Bradley and Moles 2002) Exchange rate is the value of the one unit of

foreign currency against local currency and Exchange rate serves as the basic link between the

local and the overseas market for various goods, services and financial assets (Reid and Joshua,

2004). This study considers exchange rate to mean the rate at which a unit of foreign currencies

are exchanged for Nigerian Naira. Omagwa posit that exchange rates like any other commodity

are explained by the law of demand and supply. (Omagwa,2005)

Supply of currency is explained by changes in fiscal policies whereas currency demand is

influenced by a wide range of factors such as inflation rates and interest rates. Murthy and Sree
argued that exchange rate enables comparison of prices of commodities quoted in diverse

currencies. (Murthy and Sree, 2003) . It was found that since the early 1970s, foreign rate

exchange system had been a floating one in most countries. The findings were that such nations

permitted exchange rates to change in the market place from day to day as per market forces.

(Thomas, 2006)

Before this eventuality central banks of nations intervened in determinations of the exchange

rate. This meant that international transactions were never subjected to exchange rate

fluctuations risk and as such international transactions were less dynamic. He further stated that

since the collapse of this exchange rate system it is markets forces that determine the exchange

rate of a nation’s currency. Thus such rates keep on fluctuating as per market forces and

therefore exposing international transactions to exchange fluctuation risks. The table below

illustrates the movement of the USD, Euro, GBP, JPY and CFAFr to the Nigerian naira exchange

rate from November, 2006 to April 2019.

(Table 1: Major foreign currencies mean exchange rates to the Naira, years 2006 to April 2019)
It was explained that exchange rate variation is significant in determining a country’s balance of

trade. (Adetayo, Dionco and Oladejo (2004). According to Omagwa, fluctuations in exchange

rates impacts on prices of imports directly thus inversely affecting a country’s external sector.

(Omagwa, 2005). Murthy and Sree postulated that country’s foreign debt is significantly affected

by the fluctuations in exchange rates. (Murthy and Sree, 2003). The central bank typically under

a fixed exchange rate system will set a par value between foreign and domestic currencies which

may be adjusted from time to time (Reid & Joshua, 2004).

2.1.2 Determinants of Exchange Rates

Numerous factors determine exchange rates, and all are related to the trading relationship

between two countries. Remember, exchange rates are relative, and are expressed as a

comparison of the currencies of two countries. According to Jason Van Bergen (2017), the below

are some of the principal determinants of the exchange rate between two countries.

i. Differentials in Inflation: Generally, a country with a consistently lower inflation rate

exhibit a rising currency value, as its purchasing power increases relative to other

currencies. During the last half of the 20th century, the countries with low inflation

included Japan, Germany and Switzerland, while the U.S. and Canada achieved low

inflation only later. Those countries with higher inflation typically see depreciation in

their currency in relation to the currencies of their trading partners. This is also usually

accompanied by higher interest rates.

ii. Differentials in Interest Rates: Interest rates, inflation and exchange rates are all highly

correlated. By manipulating interest rates, central banks exert influence over both

inflation and exchange rates, and changing interest rates impact inflation and currency
 values. Higher interest rates offer lenders in an economy a higher return relative to other

countries. Therefore, higher interest rates attract foreign capital and cause the exchange

rate to rise. The impact of higher interest rates is mitigated, however, if inflation in the

country is much higher than in others, or if additional factors serve to drive the currency

down. The opposite relationship exists for decreasing interest rates - that is, lower interest

rates tend to decrease exchange rates.

iii. Current-Account Deficits: The current account is the balance of trade between a country

and its trading partners, reflecting all payments between countries for goods, services,

interest and dividends. A deficit in the current account shows the country is spending

more on foreign trade than it is earning, and that it is borrowing capital from foreign

sources to make up the deficit. In other words, the country requires more foreign currency

than it receives through sales of exports, and it supplies more of its own currency than

foreigners demand for its products. The excess demand for foreign currency lowers the

country's exchange rate until domestic goods and services are cheap enough for

foreigners, and foreign assets are too expensive to generate sales for domestic interests.

2.1.3 Foreign Exchange Rate Policies

The foreign exchange rate of a country can either be any of the following:

 Fixed Or Pegged Exchange Rates: The fixed exchange rate is a phenomenon which

occurs when the rate of a currency against other currencies is fixed. Under the pegged

exchanged rates, all exchange transactions take place at an exchange rate that is

determined by the monetary authorities (Adetifa, 2005). This connotes that the exchange

rate of a currency to other currencies is stable. This allows for an increase in reserve of
 the country if there is a favourable balance of trade. International trade is encouraged

because prices of goods are more predictable and long term capital flows in an orderly

manner can be encouraged.

 Flexible Or Fluctuating Exchange Rates: This occurs when the currency of a country

against other currencies is not stable. The rates are determined by market forces. This

implies that the market is unpredictable, thus, leading to economic instability, high risk,

possibility of incurring loss on investment in foreign exchange. Under a regime of freely

fluctuating exchange rates, if there is an excess supply of a currency, the value of that

currency in foreign exchange market will fall (Ayodele, 2014). This will lead to

depreciation of the exchange rate.

2.1.4 The Concept of Financial Performance and Measurement

Murthy and Sree (2003) define financial performance as the ability to leverage operational and

investment decisions and strategies to achieve a business’ financial stability. According to

Adetayo, Dionco and Oladejo (2004), financial performance comprises of achievement

measurements of an organization. Financial performances measure an organizations benchmarks

and financial objectives. A wide range of measures are used in measuring firm’s financial

performance including; profitability measures, liquidity measures and debt measures (Reid and

Joshua, 2004). Financial performance, for the sake of the research is conceptualized and

described as Return on Capital Employed (ROCE), Return on Asset (ROA) and Return on

Equity (ROE). All organizations have the financial performance measures as part of their

performance management, although there is a debate as to the relative importance of financial

and non-financial indicators. Proponents of financial performance measures argue that they are
necessary because of the primary objectives of companies which is to maximize shareholders

wealth by making a profit and maintaining growth and development. One of the ways to analyze

financial performance is to calculate key financial ratios over the last three to five years. Ratios

can be compared year over year to measure progress and performance. Financial ratios are a

comparison of two or more elements of financial data. They are expressed as percentages (62 per

cent) or as ratios (4:1). Bradley and Moles (2002); and Iliemena and Amedu (2019) show that the

ultimate goal of any organization is profit maximization. therefore, profitability measures are

widely used as compared to other measures. Profitability measures comprises of return on capital

employed (ROCE), return on equity (ROE) and return on asset (ROA).

Mathematically, it is calculated as:

ROCE = Net Profit (PBIT) / Capital Employed x 100

ROCE is sometimes calculated using PBIT instead of net profit.

Capital Employed = total assets less current liabilities (net asset). This is also equal to total

equity plus long term debt.

Capital Employed maybe based on net book value (NBV), gross book value or replacement cost.

ROA is calculated as: Profit before interest and Tax(PBIT)/ Total Asset x100

ROE is calculated as: Profit before interest and Tax (PBIT)/ Shareholders’ equity x 100

2.1.5 Exchange Rates Fluctuations And Financial Performance Of Oil And Gas

Companies

Exchange rate fluctuations influence a country’s prices through import prices of consumption

and intermediate goods (Watkins, 2014). Currency fluctuations enter directly into the import

price, producer price and Consumer Price Index (CPI). Exchange rate fluctuations affect

domestic prices through three channels; first is through prices of imported consumption goods,
exchange rate fluctuation affects domestic prices directly, second is through prices of imported

intermediate goods, exchange rate fluctuation affects production cost of domestically produced

goods and third is through prices of domestic goods priced in foreign currency (Gatobu, 2013).

The fluctuations in currency exchange rates could generate significant gains or losses and the

entry of these into the income statement could produce a distorted impression of what is

happening to financial institution concerned (Watkins, 2014). Jamal and Khalil (2011)

documented that the more a company is involved in international trade, the more its accounting

exposure and unless a company hedges this risk then it faces financial gains and/or losses from

transaction and translation of foreign activities. Unrealized foreign exchange gains/losses

according to Gatobu (2013) have an effect on the Net Income of multinational companies as

posted to either income statement or owners equity reserves. This is added to their unending

strive to meet up with operational and regulatory demands which could force them out of the

Stock Exchange Market, making their survival a hard one. Even in the midst of exchange

fluctuations, some conglomerates were among the delisted companies from Nigerian Stock

Exchange as reported in an earlier study by Iliemena & Goodluck (2019). Foreign exchange

fluctuations affect the companies’ imports, accounts payables, export sales and accounts

receivables; with net effect on the Net Income of multinational companies through the income

statement or the owners’ equity reserves. This outcome however seems exaggerated as

conglomerates continuously report more profit in Nigeria in the midst of exchange rate

fluctuations. Against this backdrop, this research paper seeks to examine the effects of exchange

rate fluctuations on financial performance of Nigerian companies

2.1.6 Financial Performance Metrics In The Oil And Gas Sector

companies in the oil and gas sector. These metrics provide insights into various aspects of the

financial performance, efficiency, profitability, and risk management strategies of companies

operating in this industry. Here are some key financial performance metrics commonly used in

the oil and gas sector:

 Return on Investment (ROI): ROI measures the profitability of investments by comparing

the net profit generated with the initial investment. In the oil and gas sector, it reflects the

efficiency of capital utilization in exploration, production, and other projects.

 Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA): EBITDA is

a measure of operating performance and profitability. It provides insight into a company's

ability to generate operational cash flows without accounting for interest, taxes, and non-

cash expenses.

 Net Debt-to-EBITDA Ratio: This ratio assesses a company's financial leverage by

comparing its net debt to EBITDA. It indicates the company's ability to manage its debt

obligations relative to its operational earnings.

 Reserves Replacement Ratio: This metric evaluates the ability of an oil and gas company

to replace depleted reserves with new discoveries and acquisitions. It's a critical indicator

of long-term sustainability.

 Production Growth Rate: Production growth rate measures the increase in oil and gas

production over a specific period. It reflects a company's ability to expand its operations

and meet growing demand.

 Operating Margin: Operating margin assesses the profitability of a company's core

operations by calculating the percentage of operating income relative to total revenue.

generating profits. It indicates how well the company is using its shareholders'

investments to generate returns.

 Free Cash Flow (FCF): FCF represents the cash generated by a company's operations

after deducting capital expenditures. It shows the company's ability to fund operations,

investments, and dividends.

 Asset Turnover Ratio: The asset turnover ratio measures the efficiency of a company's

utilization of its assets to generate revenue. In the oil and gas sector, it reflects the

efficiency of capital-intensive operations.

 Oil and Gas Reserves-to-Production (R/P) Ratio: The R/P ratio indicates the number of

years a company's proved reserves would last at the current production rate. It's a key

indicator of the company's reserve life and potential future revenue streams.

2.1.7 Key Factors Influencing Exchange Rate Fluctuations:

1. Oil Price Volatility: Nigeria's economy heavily depends on oil exports, making it

susceptible to shifts in global oil prices. When oil prices rise, Nigeria's export revenue

increases, boosting the supply of foreign exchange, which can lead to an appreciation of

the local currency (Naira). Conversely, falling oil prices can strain foreign exchange

reserves and lead to Naira depreciation.

2. Macroeconomic Indicators: Inflation, interest rates, and economic growth play a vital role

in shaping exchange rate movements. High inflation erodes purchasing power, leading to

currency depreciation. Interest rate differentials can attract or deter foreign investment,

impacting the demand for Naira.

demand and supply of foreign exchange. A trade deficit, where imports exceed exports,

can lead to pressure on the Naira's value due to increased demand for foreign currency.

4. Foreign Investment: The level of foreign direct investment (FDI) and portfolio

investment can influence exchange rates. High FDI inflows can strengthen the Naira,

while significant outflows can lead to depreciation.

5. Political and Economic Stability: Political uncertainty and economic instability can

negatively impact investor confidence, leading to capital flight and currency depreciation.

6. Monetary Policy: The Central Bank of Nigeria (CBN) plays a critical role in exchange

rate management. Interventions in the foreign exchange market and changes in monetary

policy rates can impact exchange rate movements.

2.1.8 Implications of Exchange Rate Fluctuations

i. Inflation: Depreciation of the Naira can lead to imported inflation, as the cost of imported

goods rises. This can erode purchasing power and affect living standards.

ii. Imports and Exports: A weaker Naira can make imports more expensive, potentially

leading to a balance of payments issue. On the other hand, a stronger Naira can hurt

export competitiveness.

iii. Foreign Debt: Exchange rate fluctuations can affect the cost of servicing foreign-

denominated debt. A depreciation of the Naira can increase the debt burden.

iv. Investment: Unpredictable exchange rate movements can deter foreign investment due to

increased risk and uncertainty.

need to account for potential currency-related losses or gains.

2.1.9 Impact Of Exchange Rate on Revenue and Profits in the Oil and Gas Sector

Exchange rate fluctuations wield a substantial influence on the revenue and profits of companies

operating in the oil and gas sector. This impact is particularly pronounced in economies like

Nigeria, where the sector plays a vital role. Here's a closer look at how exchange rate movements

can affect revenue and profits in the oil and gas industry:

 Revenue Fluctuations:

i. Currency Denomination of Oil Prices: Oil is globally traded in US Dollars (USD). When

the local currency weakens against the USD, the selling price of oil in local currency

terms tends to rise. This can lead to an apparent increase in revenue for oil and gas

companies when translated into the local currency.

ii. Export Earnings: For oil-exporting countries, including Nigeria, a weaker local currency

can lead to higher export earnings in terms of the local currency. This can directly

contribute to increased revenue for oil and gas companies.

 2. Profit Margins:

i. Cost Structure: The oil and gas sector involves significant operational costs, including

exploration, production, and transportation. Many of these costs are denominated in

USD. A weaker local currency can lead to higher costs for companies as they need to

convert more local currency to USD for these expenses, potentially squeezing profit

margins.
 ii. Imported Equipment and Services: The sector often relies on imported equipment and

specialized services for operations. A weaker local currency can raise the cost of imports,

further impacting profit margins.

iii. Tax Implications: Taxation in the oil and gas sector is usually linked to revenue or

profits. A weaker local currency can lead to higher tax liabilities in terms of the local

currency, even if USD-denominated revenue remains stable.

 Investment Decisions:

i. Capital Expenditure: Exchange rate volatility adds uncertainty to investment decisions.

Companies may delay or modify capital-intensive projects if the exchange rate risk

becomes too high, impacting potential revenue and profits in the long run.

ii. Financing Costs: If companies have USD-denominated debt, a weakening local currency

can increase the cost of servicing the debt, affecting profitability.

iii. Hedging Strategies: Companies may implement hedging strategies to mitigate the impact

of exchange rate fluctuations. These strategies can help stabilize revenue and profit

streams, but they also come with costs and risks.

 Financial Reporting and Perception:

i. Accounting Impact: Exchange rate fluctuations can affect the translation of foreign

operations' financials into the parent company's reporting currency. This can impact the

overall financial performance and presentation of the company.

ii. Investor Confidence: Exchange rate volatility can influence investor perceptions of risk

and stability. Companies that are better equipped to manage or mitigate these risks might

be viewed more favorably by investors.

2.1.10 Relationship Between Exchange Rate And Investment In The Oil And Gas Sector
The relationship between exchange rates and investment in the oil and gas sector is significant

and intricate due to the global nature of the industry and its exposure to international markets.

Exchange rate fluctuations, which refer to the changes in the value of one currency compared to

another, can have a profound impact on various aspects of investment decisions, project

economics, and overall industry performance within the oil and gas sector. Here's a detailed

explanation of this relationship:

 Cost of Investment:

Exchange rate fluctuations affect the cost of investing in the oil and gas sector, particularly in

projects that require imported equipment, technology, and services. When the local currency

weakens against foreign currencies (such as the US Dollar), the cost of purchasing these imports

increases. As a result, companies might need to allocate more funds to acquire the necessary

resources for their projects.

 Project Economics:

Exchange rate movements influence the financial viability of oil and gas projects. Fluctuations

impact the revenue earned from oil and gas sales, as these commodities are typically priced in

US Dollars. When the local currency depreciates, the revenue in local currency terms may

increase even if the underlying commodity prices remain stable. Conversely, a stronger local

currency can lead to reduced revenue when converted to the local currency.

3. Investment Decision-Making:

Exchange rate volatility introduces uncertainty into investment decisions. Companies evaluating

potential projects must consider the potential impact of currency fluctuations on project costs,

revenues, and overall profitability. Investors and lenders also assess these risks when deciding
whether to finance or invest in projects. Exchange rate stability can enhance the predictability of

investment returns.

 Foreign Investment:

The attractiveness of the oil and gas sector to foreign investors is influenced by exchange rate

stability. Foreign Direct Investment (FDI) and portfolio investment are more likely to flow into

countries with stable exchange rates, as currency risk can affect the potential returns on

investment. Exchange rate volatility might deter foreign investors from committing to long-term

projects.

 Financing and Capital Availability:

Exchange rate stability affects a company's access to financing. A stable local currency can make

it easier to secure both domestic and international financing, as lenders and investors are more

confident when currency risk is minimized. A weaker local currency can increase the cost of

borrowing for companies with USD-denominated debt.

 Hedging Strategies:

Companies often use financial derivatives like currency forwards and options to hedge against

exchange rate risk. By employing these instruments, companies can lock in favorable exchange

rates for future transactions, ensuring that currency fluctuations do not adversely affect their

project economics or financial stability.

 Government Policies:

Government policies, such as exchange rate controls or interventions by the central bank, can

influence the stability of the local currency. Clear and consistent policies can provide a

conducive environment for investment by reducing uncertainty related to exchange rate

movements.
8. International Competitiveness:

A stable local currency can enhance the international competitiveness of the oil and gas sector.

When the currency is stable, companies can better predict their costs and plan for long-term

projects, making them more attractive to investors and suppliers.

2.2 Theoretical Framework

The Purchasing Power Parity Theory (Ppp) – Menon And Viswanathan (2005)

Purchasing Power Parity theory posits that the value of homogenous goods is similar in different

countries based on the currency of each country. By, implication, when purchasing power is

similar in different countries then the exchange rates between the country’s currencies will be at

equilibrium. This is similar to the earlier postulation of Reid and Joshua (2004) that ratio of

commodities price levels should be equal the country’s currency. By PPP, the prices of same

commodity is different in different countries, it could be high in country A and low in B, and

vice versa. This can be said to have direct implication on cost of sales. According Ross (2008), a

country’s currency may be incorrectly valued whereby money has no purchasing power against

the country’s commodities level. The main challenge of this belief is in measuring Purchasing

Power Parity constructed from price indexes given that different countries use different goods to

determine their price level (Reid, 2004). This theory is relevant for this study as it explains a

country’s currency value over another country’s currency. This theory argues that in the

equilibrium exchange rate is one that ensures that the value exchanged can purchase the same

basket of goods and services from either of the countries involved.

2.3 Empirical Review

performance in the oil and gas sector in Nigeria, Aloku (2009) analyzed the effect of interest

rate, exchange rate on the Nigerian economic growth using the annual data between 1975 and

2008. Using Ordinary Least Square technique, the result revealed that interest rate and exchange

rate exerted negative impact on economic growth in Nigeria. Akpan (2009) studied the

relationship between exchange rate and economic growth in an emerging petroleum based

economy using the annual data for the period of 1970 to 2007. Using Ordinary Least Square

(OLS) technique, the result revealed that there is a positive relationship between exchange rate

and economic growth in Nigeria. Opaluwa, Umeh and Ameh (2010) examined the effect of

exchange rate fluctuations on the Nigerian manufacturing sector during a twenty (20) year period

(1986 - 2005). The argument was that fluctuations in exchange rate adversely affected output of

the manufacturing sector. This was because Nigerian manufacturing was highly dependent on

import of inputs and capital goods paid for in foreign exchange whose rate of exchange was

unstable. The methodology adopted for the study was empirical. The econometric tool of

regression was used for the analysis. In the model that was used, manufacturing output

employment rate and foreign private investment were used as the explanatory variables. The

result of the regression analysis shows that coefficients of the variables carried both positive and

negative signs. The study shows adverse effect and is all statistically significant in the final

analysis.

Shehu (2012) examined the relationship between exchange rate volatility, trade flows and

economic growth in Nigeria using the annual data for period of 1970 to 2009. Using a Vector
Auto-regression (VAR) technique, the result revealed that exchange rate volatility has positive

effects on the economic growth in Nigeria.

Adeniran (2012) studied the impact of exchange rate fluctuation on the Nigerian economic

growth using annual data for the period of 1980 to 2010. Using ordinary least square (OLS)

technique, the study revealed that exchange rate has positive impact on economic growth in

Nigeria.

Dada and Oyeranti (2012) examined the effect of exchange rate volatility on economic growth

in Nigeria using the annual data for the period of 1970 to 2009. Using Vector Auto-regression

(VAR) technique, the studied revealed that economic growth is negatively related to exchange

rate in the long run while in the short run, a positive relationship exist between the two variables

in Nigeria. Asher (2012) examined the impact exchange rate fluctuation on the Nigerian

economic growth using annual data for the period of 1980 to 2010. Using Ordinary Least Square

(OLS) technique, the study revealed that exchange rate has a positive effect on the GDP.

Obansa (2012) investigated the relationship between exchange rate, interest rate and economic

growth in Nigeria using annual data for the period of 1970 to 2010. Using Vector Auto-

regression (VRR) technique, the study revealed that exchange rate has a significant impact on

economic growth in Nigeria.

Fapetu (2013) investigated the relationship between foreign exchange and the Nigerian economic

growth using the annual data for the period of 1960 to 2012. Using Ordinary Least Square (OLS)

technique, the result revealed that exchange rate explained and accounted for about 99%

variation in economic growth. Owoeye, and Ogunmakin (2013) examined exchange rate

volatility and bank performance in Nigeria. This study investigated the impact of unstable
exchange rate on bank performance in Nigeria using two proxies for bank performance, namely

loan loss to total advances ratio and capital deposit ratio. Government expenditure, interest rate,

real gross domestic product were added to exchange rate as independent variables. The two

models specified show that the impact of exchange rate on bank performance is sensitive to the

type of proxy used for bank performance. Loan loss to total advance ratio shows that fluctuating

exchange rate may affect the ability of lenders to manage loans resulting into high level of bad

loans while capital deposit ratio does not have significant relationship with exchange rate. A core

recommendation of this study is that a stable exchange rate is needed to improve the ability of

the banking sector to channel credit to the economy.

Adetayo (2013) examined management of foreign exchange risks in a selected commercial

bank, in Nigeria. The study sought to determine how the risk involved in foreign exchange can

be effectively managed, by determining the following specific objectives: to determine the

various exchange risks which the treasurer of the selected bank is exposed to in its foreign

exchange transaction; to investigate how these risks can be effectively managed and to identify

risk and exposure management techniques required for treasury management. The selected firm

used for this study was a Commercial Bank of International Standard, located in Lagos, the

business center of Nigeria. The study exploited both the primary and secondary sources of

information. The primary source comprised of a structured questionnaires, to elicit pertinent

responses from the respondents. A non-parametric measure based on chi-square statistics was

employed to test the hypothesis and determine if there is any association between foreign

exchange trading and risk management issues. Spot transaction technique was founded to be

effective in minimizing foreign exchange risk. Ayodele (2014) evaluated empirically the impact
of exchange rate on the Nigerian economy. The study investigated how economic induces such

as exchange rate and inflation rate affects changes in Gross Domestic Product (GDP) in Nigeria.

The study used Secondary data collected from Annual Reports of Central Bank of Nigeria

(CBN), Nigerian Stock Exchange (NSE), and Nigeria Securities and Exchange Commission

(SEC) which were analyzed through the multiple regression analysis using the Ordinary Least

Squares (OLS) method. The result showed that the two factors –exchange rate and inflation rate-

impact significantly on the Gross Domestic Product and economic growth of Nigeria. Exchange

rate has a negative impact on the GDP because as it increases, the economic growth is negatively

affected, while inflation rate exerts a positive impact on GDP, indicating that firms are more

willing to produce when inflation rate is high and vice versa. The outcome of the research was

that the government should make Nigerian economic climate investment friendly by restoring

security of lives and property, infrastructural development and improvement of local production

in order to reduce the pressure on the dollar and that this would go a long way to boost the

exchange rate in favour of the naira and hence improve the Gross Domestic Product.

Uduakobong and Enobong (2015) conducted an empirical analysis on the relationship between

exchange rate movements and economic growth in Nigeria using annual data spanning 1970-

2011. Specifically, the study sought to: examine the relationship between exchange rate and

economic growth; and also to determine the nature and the direction of causality between

exchange rate and economic growth in Nigeria. Employing the Ordinary Least Square (OLS)

technique and the Granger Causality Test, the study revealed the existence of a positive and

insignificant relationship between exchange rate and economic growth in Nigeria. The results

also indicate that there is no causality between exchange rate and economic growth in Nigeria.
Goodluck and Iliemena (2019) investigated the effect of financial crises which include exchange

rate fluctuation on corporate survival using a sample of 69staff of selected manufacturing firms

in Nigeria. The methodology adopted was Pearson product moment correlation. Analyses reveal

financial crises have a significant negative effect on corporate survival.