Foreign Exchange Rate Exposure Mitigation and Connection to Economic Growth The Nigerian Experience (2019 - 2023)

Main Article Content

Onwuliri, Okechukwu Cajetan (PhD)
Oshiole, Samuel (PhD)
Nwankwo, Uchenna Chiwendu
Nwakeze, Emmanuel Obiora
Okorie, Ijeoma Chineme


The increasing interest in the subject of management of foreign exchange exposure in Nigeria has been the sequel to the rising transactional, translational and economic risks experienced in the country. Thus, concerns for the incessant devaluation of the naira (increasing foreign exchange rate) continued to mount, explaining the main objective of this study - in attempting to evaluate the most suitable and effective measures and techniques for the management of foreign exchange rate exposures, while attempting to demonstrate the relationship between foreign exchange rate exposures and the economic growth of a developing country like Nigeria. Expo-facto design was deployed for this study. Regression analysis, descriptive statistics, residual statistics, Collinearity Diagnostics and Durbin-Watson were the techniques used to analyze data and examine the relationship between the two major variables of the study. The yearly highest foreign exchange rates (Nigerian Naira to a US dollar) – as at the official market; and the yearly average of the quarterly GDP of Nigeria, constituted the datasets, for the period 2019 – 2023 respectively. The study found that a statistical and significant relationship exists between foreign exchange exposure and economic growth. The study concludes that better exposure mitigation could be achieved with efficient use of hedging measures (currency forwards, currency option currency futures, cross-currency swaps, or even ‘natural’ hedging).

Keywords: Foreign Exchange Rate, Exposure Mitigation, Economic Growth, Gross Domestic Products (GDP), Hedging

Article Details

Foreign Exchange Rate Exposure Mitigation and Connection to Economic Growth: The Nigerian Experience (2019 - 2023). (2024). African Journal of Management and Business Research, 15(1), 261-272.

Copyright (c) 2024 Onwuliri, Okechukwu Cajetan (PhD), Oshiole, Samuel (PhD), Nwankwo, Uchenna Chiwendu, Nwakeze, Emmanuel Obiora, Okorie, Ijeoma Chineme (Author)

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Onwuliri, Okechukwu Cajetan (PhD), National Board for Technical Education (NBTE), Kaduna, Nigeria.

Polytechnic Programmes Department,

National Board for Technical Education (NBTE), Kaduna, Nigeria.

Oshiole, Samuel (PhD), Auchi Polytechnic, Auchi, Nigeria.

Accountancy Department,

School of Management Sciences,

Auchi Polytechnic, Auchi, Nigeria.

Nwankwo, Uchenna Chiwendu, Grundtvig Polytechnic, Oba, Nigeria.

Accountancy Department,

School of Management Sciences,

Grundtvig Polytechnic, Oba, Nigeria.

Nwakeze, Emmanuel Obiora, Grundtvig Polytechnic, Oba, Nigeria.

Accountancy Department,

School of Management Sciences,

Grundtvig Polytechnic, Oba, Nigeria.

Okorie, Ijeoma Chineme, Nigerian Defense Academy, Kaduna, Nigeria. 

Department of Mathematical Sciences,

Nigerian Defense Academy, Kaduna, Nigeria. 

Adam, A. M., & Ofori, D. (2017). Validity of International Fisher Effect in the West African Monetary Zone. Journal of Economic Cooperation & Development, 38(3), 121-143.

Ahmad, S. (2010). The long‐run Fisher effect in developing economies. Studies in Economics and Finance, 27(4), 268-275.

Allayannis, G., & Ofek, E. (2001). Exchange rate exposure, hedging, and the use of foreign currency derivatives. Journal of international money and finance, 20(2), 273-296.

Allayannis, G., J., & Weston, J. (2001). "Exchange-Rate Hedging: Financial vs. Operational Strategies," American Economic Review Papers and Proceedings, 91 (2), pp. 391-395.

Allen, S. L. (2003). Financial Risk Management: A Practitioner's Guide to Managing Market and Credit Risk, (Hoboken, New Jersey: Wiley).

Brown, G. W. (2001). Managing foreign exchange risk with derivatives. Journal of Financial Economics, 60(2-3), 401-448.

CBN (2024). Circular on Foreign Currency Exposure of Banks.

Cheng, R. Y. S., Chu, E. Y., Song, S. I., & Lai, T. S. (2017). Impacts of Foreign Currency Exposure on Malaysia's Firm Value: Firm Value, Hedging and Corporate Governance Perspectives. Global Business & Management Research, 9, p.206. Retrieved online from: [accessed April 21, 2024].

Chow, E. H., & Chen, H. L. (1998). The Determinants of Foreign Exchange Rate Exposure: Evidence on Japanese Firms. Pacific-Basin Finance Journal, 6(1-2), 153-174.

Exchange Rate Org UK (2023). US Dollar (USD) to Nigerian Naira (NGN) Exchange Rate History. Retrieved online from: [accessed April 14, 2024].

Ekpo, G. M. (2023). The Impact of Exchange Rate Volatility on Economic Growth in Nigeria. Social Sciences and Management International Journal 4(1), 208-221

El Khawaga, A., Esam, M., & Hammam, R. (2013). Exchange rates and interest rates: An empirical investigation of international fisher effect theory-The case of Egypt (2003-2012). International Research Journal of Finance and Economics, 117(2013), 139-160.

Ezeogidi, C. (2020). The Wasted Years of Oil Boom: A Critical Analysis of Military Economic Policies in Nigeria (1970-1979).

Froot, K. and R. Thaler, 1990, "Anomalies: Foreign Exchange," Journal of Economic Perspectives, Vol. 4 (3), pp. 179-192.

Hakala, J., & Wystup, U. (2002). Foreign Exchange Risk: Models, Instruments, and Strategies, (London: Risk Publications).

Hatemi-J, A. (2009). The international Fisher effect: theory and application. Investment Management and Financial Innovations, (6, Iss. 1), 117-121.

He, Y. (2018). A Study on the International Fisher Effect: An Investigation from South Korea and China. The Journal of Industrial Distribution & Business, 9(7), 33-42.

Hull, J. C., & Basu, S. (2016). Options, futures, and other derivatives. Pearson Education India.

Jacob, J. M., & Rosemary, E. A. (2019). Effects of Exchange Rate Fluctuation on Economic Growth in Nigeria 1981-2018. International Journal of Intellectual Discourse, 2(2), 1-11. Retrieved online from: [accessed May 29, 2024].

Jacque, L. (1996). Management and Control of Foreign Exchange Risk, (Norwell, Massachusetts: Kluwer Academic Publishers).

Joksimović, M., Joksimović, D., & Grujić Vučkovski, B. (2020). A test of international fisher effect: researching from Serbia and the European Union. Ekonomika, 66(2), 49-61.

Low, Y. W., & Chan, T. H. (2017). Foreign exchange rate, interest rate, inflation rate and economic growth in malaysia. Glob. Bus. Manag. Res. Int. J, 9, 110-127.

Madura, J, 1989, International Financial Management, 2nd ed. (St. Paul, Minnesota: West Publishing Company).

Papaioannou, M. G. (2006). Exchange Rate Risk Measurement and Management: Issues and Approaches for Firms. IMF Working Paper No. 06/255. Retrieved online from: [accessed April 29, 2024].

Statista (2023). Nigeria: quarterly GDP 2023. Retrieved online from: [accessed May 17, 2024].

Tonye, T., & Nwikina, C. G. (2023). Effects Of Exchange and Interest Rates on Manufacturing Sector Performance in Nigeria: Arch and Garch Approach. Gusau Journal of Economics and Development Studies, 4(1), 182-198.

Venkatesh, H., & Hiremath, G. S. (2021). The Impact of Foreign Currency Exposure on Economic Growth. Retrieved online from: [accessed May 18, 2024].