LIQUIDITY, FOREIGN EXCHANGE FLUACTUATION AND FINANCIAL PERFORMANCE IN NIGERIA’S MANUFACTURING INDUSTRY
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ABSTRACT
This study examines liquidity, foreign exchange flunctuation and financial performance in Nigeria’s manufacturing industry. This study commences with a brief introduction of the content, background and scope of the work. The objectives, research questions, hypotheses, review of relevant literature and applicable theories are fully discussed. The study adopts the use of secondary data from 10 manufacturing firms listed on the Nigeria stock exchange for five years (2006-2016). Relevant data were extracted from the published financial reports, CBN bulletin, and National bureau of statistics corporate website. The Ex-post facto research method is adopted for the purpose of achieving the objectives of the study. Panel data is applied to the study for the purpose of capturing the space and time dimensions. Descriptive and inferential statistical analyses were adopted.
The financial performance indicator is (dependent variable) is used alongside the independent variable (liquidity and foreign exchange fluctuation). The panel data regression was subjected to Hausman test to make appropriate choice between fixed effect estimator and random effect estimator.
The result stated that considering the result of the empirical analysis, there are different patterns of relationship that were displayed between the dependent variables and independent variables in our model; there is a significant relationship between liquidity and foreign exchange fluctuation as proxy by current asset ratio, acid test ratio, cash and cash equivalent ratio, inflation rate, interest rate, exchange rate of manufacturing firms, all the independent variables show a significant relationship with dependent variable.
The study concludes that there is a significant relationship between liquidity, foreign exchange fluctuation and performance.
The study recommended that; Government should ensure that capital expenditure and recurrent expenditure are properly managed in a manner that it will raise the nation’s production capacity; Government should direct its expenditure towards the productive sectors like manufacturing sector as it would reduce the cost of doing business as well as raise the standard living of poor ones in the country; There is need for efficient management of exchange, inflation and liqudity rates in such a way to stimulate the economy to grow; That foreign exchange rate could be maintained at a low rate if there is a consistent growth in corporate earnings.
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