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Effect of Market Risk on Financial Performance of Firms in Nigeria

Offia, Anthonia Chioma PhD, Asogwa, Chinedu Ugonma PhD

Abstract

This study examined the effect of market risk on the financial performance of oil and gas firms in Nigeria over the period 2019–2024. Specifically, exchange rate risk, interest rate risk and commodity price change were employed as proxies for market risk, while return on assets served as the measure of financial performance. The study utilised a sample of seven firms listed in the Oil and Gas sector of the Nigerian Exchange Group as at 2024. Secondary data were sourced from the Central Bank of Nigeria Statistical Bulletin and the annual financial statements of the selected firms. Data were analysed using descriptive statistics, correlation analysis and multiple regression analysis. The empirical findings revealed that exchange rate risk has a statistically significant effect on the ROA of oil and gas firms in Nigeria. In contrast, interest rate risk was found to have an insignificant effect on financial performance. Similarly, commodity price change showed no statistically significant influence on ROA within the study period. Based on these findings, the study recommends that firms adopt robust hedging strategies, including forward contracts and currency diversification, to mitigate exchange rate volatility. Furthermore, firms should maintain prudent debt management practices and optimise their capital structure to minimise exposure to interest rate fluctuations. Finally, enhanced monitoring and management of commodity price movements are essential to strengthen resilience against market uncertainties.

Keywords

Market RiskExchange Rate RiskInterest Rate RiskCommodity Price Change and Firm Performance.

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