The Effect of Exchange Rate Volatility on Financial Reporting in Nigerian Multinational Companies: A Case Study of Unilever Nigeria
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Background of the Study
Exchange rate volatility is a major challenge for multinational companies operating in Nigeria, as it affects their financial stability and reporting. Fluctuations in the value of the Naira against major foreign currencies, such as the US dollar, create complexities in valuing assets, liabilities, and revenues denominated in foreign currencies (Adebisi & Adewale, 2024).
Unilever Nigeria, as part of a global multinational corporation, conducts transactions in multiple currencies and is significantly impacted by exchange rate changes. These fluctuations complicate the preparation of accurate financial statements, introduce currency translation risks, and affect reported profitability. This study explores how exchange rate volatility influences the financial reporting practices of Unilever Nigeria, highlighting the strategies adopted to address these challenges.
Statement of the Problem
The persistent instability of the Naira poses challenges for multinational companies in Nigeria. Exchange rate volatility creates discrepancies in financial reporting, leading to potential misrepresentation of financial performance. Despite regulatory frameworks such as International Financial Reporting Standards (IFRS), companies like Unilever Nigeria struggle to present reliable financial statements amidst exchange rate unpredictability.
This study investigates the extent to which exchange rate volatility impacts the financial reporting practices of Nigerian multinationals, using Unilever Nigeria as a case study. It aims to uncover the implications for compliance, investor confidence, and financial performance (Okonkwo & Eze, 2023).
Objectives of the Study
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To assess the impact of exchange rate volatility on the accuracy of financial reporting in Unilever Nigeria.
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To identify the challenges posed by exchange rate fluctuations on multinational companies in Nigeria.
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To recommend strategies for mitigating the effects of exchange rate volatility on financial reporting.
Research Questions
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How does exchange rate volatility affect the accuracy of financial reporting in Unilever Nigeria?
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What challenges do Nigerian multinationals face due to exchange rate fluctuations?
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What strategies can mitigate the impact of exchange rate volatility on financial reporting?
Research Hypotheses
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Exchange rate volatility significantly impacts the accuracy of financial reporting in Unilever Nigeria.
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The challenges posed by exchange rate fluctuations hinder compliance with financial reporting standards.
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Implementing hedging strategies reduces the impact of exchange rate volatility on financial reporting.
Scope and Limitations of the Study
The study focuses on Unilever Nigeria’s financial reporting practices between 2015 and 2025, emphasizing the influence of exchange rate volatility. It examines financial statements, currency translation methods, and hedging strategies. Limitations include access to proprietary financial data and external economic factors beyond the scope of this research.
Definition of Terms
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Exchange Rate Volatility: Frequent fluctuations in the value of one currency relative to another.
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Financial Reporting: The process of preparing financial statements for stakeholders.
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Unilever Nigeria: A multinational consumer goods company operating in Nigeria.
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