ECONOMIC IMPLICATIONS OF EXCHANGE RATE FLUCTUATIONS ON THE PERFORMANCE OF DOMESTIC FIRMS IN NIGERIA

ABSTRACT This study examines the economic implications of exchange rate fluctuations on the performance of domestic firms in Nigeria from 1999 to 2023. The problem of exchange rate fluctuations has been a major challenge to the performance of domestic firms in Nigeria, leading to reduced output, capacity utilization, and export. The broad objective of this study is to investigate the economic implications of exchange rate fluctuations on the performance of domestic firms in Nigeria, with specific attention to the impact on output, capacity utilization, and export.A review of the literature reveals that previous studies have shown that exchange rate fluctuations have a significant effect on the performance of firms. However, most of these studies focused on developed economies, with limited research on developing economies like Nigeria.This study uses a quantitative research approach, with data obtained from the Central Bank of Nigeria (CBN) Bulletins, National Bureau of Statistics (NBS) publications, and World Bank Development Indicators (WDI) database. The data, which covers a sample size of 25 years (1999-2023), is analyzed using descriptive statistics, test of unit root, and linear regression analysis.The findings of this study reveal that exchange rate fluctuations have significant economic implications for the output, capacity utilization, and export of domestic firms in Nigeria. The study concludes that exchange rate fluctuations are a significant determinant of the performance of domestic firms in Nigeria. The study recommends that policymakers should implement policies to stabilize the exchange rate and reduce its volatility, and domestic firms should also hedge against exchange rate fluctuations to minimize their economic implications on performance.