Corporate Performance in Nigeria: The Effect of Oil Price and Exchange Rate Fluctuations

International Journal of Economics and Financial Issues, 2020, 10(1), 170-179

10 Pages Posted: 30 Jan 2020

See all articles by Osaretin Kayode Omoregie

Osaretin Kayode Omoregie

Lagos Business School

Sodik Olofin

Pan-Atlantic University - Lagos Business School

Date Written: 2020

Abstract

Discussions on the separate effect of oil price and exchange rate fluctuations on economic activity and corporate performance in Nigeria are inconclusive. This study investigates the simultaneous influence of oil price and exchange rate and the impact of the different exchange rate regimes adopted in Nigeria on corporate performance, using the structural vector autoregressive/historical decomposition framework. The literature in these areas is sparse. Result from this study suggests that oil price shocks have negative influence on corporate performance with a very short-term positive influence. Exchange rate shocks have positive impact on corporate performance with an instantaneous negative effect. Also, fixed exchange regimes are associated with a downturn in corporate performance, while flexible regimes are associated with improved corporate performance. This result support diversification and flexible exchange rate policies, while corporate managers should adopt risk-hedging strategies to cushion the adverse combined effect of oil price and exchange rate shocks.

Keywords: Corporate Performance, Oil Price, Exchange Rate, Structural Vector Autoregressive, Historical Decomposition, Nigeria

JEL Classification: F38, G3, Q43

Suggested Citation

Omoregie, Osaretin Kayode and Olofin, Sodik, Corporate Performance in Nigeria: The Effect of Oil Price and Exchange Rate Fluctuations (2020). International Journal of Economics and Financial Issues, 2020, 10(1), 170-179. Available at SSRN: https://ssrn.com/abstract=3515099

Osaretin Kayode Omoregie (Contact Author)

Lagos Business School ( email )

Km 22 Lekki Epe Expressway
Ajah
Lagos
Nigeria
105102 (Fax)

Sodik Olofin

Pan-Atlantic University - Lagos Business School ( email )

Km 22 Lekki Epe Expressway
Ajah
Lagos
Nigeria

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