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Exchange Rate Volatility and Bank Performance in Nigeria

Author

Listed:
  • Owoeye Taiwo
  • Ogunmakin Adeduro Adesola

Abstract

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.

Suggested Citation

  • Owoeye Taiwo & Ogunmakin Adeduro Adesola, 2013. "Exchange Rate Volatility and Bank Performance in Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(2), pages 178-185.
    • Handle: RePEc:asi:aeafrj:v:3:y:2013:i:2:p:178-185:id:984
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    Citations

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    Cited by:

    1. Innocent U Duru & Millicent Adanne Eze & Abubakar Sadiq Saleh & Benedict I Uzoechina & Gabriel O Ebenyi & Ekechi Chukwuka, 2022. "Exchange Rate Volatility and Exports: The Nigerian Scenario," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 12(1), pages 11-28.
    2. Nawal Hussein Abbas Elhussein & Osama Eltayeb Elfaki Osman, 2019. "Exchange Rate fluctuations and Financial Performance of Banks: Evidence from Sudan," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(12), pages 1-15, December.
    3. Zafer Adali & Bilgin Bari, 2017. "Monetary Policy And Bank Lending Chanel in Turkey," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 6(2), pages 24-36, April.
    4. Michael Yeboah & Andras Takacs, 2019. "Does Exchange Rate Matter in Profitability of Listed Companies in South Africa? An Empirical Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 9(6), pages 171-178.
    5. Lis Sintha Oppusunggu & Ika Pratiwi Simbolon, 2024. "Analysis of Return on Asset for BUKU IV: Jakarta Interbank Spot Dollar Rate, Capital Adequacy Ratio and Loan To Deposit Ratio," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 166-182.
    6. Penu, Samuel Lucky & Nkanbia-Davies, Lilian Okorite, 2017. "Implications of Exchange Rate Fluctuation and Economic Performance: The Nigerian Experience," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 3(10), pages 206-217, 10-2017.
    7. Esra N. Kılcı & Burcu Kıran Baygın, 2019. "Analysis of the Relationship between Real Effective Exchange Rate, Common Equity Tier 1 Ratio and Return on Equity: Evidence from Turkey," Alphanumeric Journal, Bahadir Fatih Yildirim, vol. 7(2), pages 319-332, December.
    8. Nenubari John Ikue & Joseph Osaro Denwi & John Akin Sodipo & Linus B. Enegesi, 2022. "Bank-specific performance indicators, macroeconomic variables and capital adequacy of Nigerian banking industry," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(6), pages 288-299, September.
    9. Osaretin Kayode Omoregie & Sodik Adejonwo Olofin, 2020. "Corporate Performance in Nigeria: The Effect of Oil Price and Exchange Rate Fluctuations," International Journal of Economics and Financial Issues, Econjournals, vol. 10(1), pages 170-179.
    10. UFOEZE, Lawrence Olisaemeka, 2018. "Effect Of Foreign Exchange Rate Fluctuations On Nigerian Economy," Annals of Spiru Haret University, Economic Series, Universitatea Spiru Haret, vol. 9(1), pages 105-122.

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