Impact of Exchange Rate Volatility on Shipping Industry Financial Performance in Nigeria

Abstract

This study examined the effect of exchange rate volatility on the financial performance of the Nigerian shipping industry from 1990 to 2024. The Generalized Autoregressive Conditional Heteroscedasticity (GARCH 1,1) method was used to estimate the exchange rate volatility effect, while the ARDL method is used to evaluate the short-run and long-run effects on the financial performance of the shipping industry. Within the context of this study, the exchange rate volatility does not significantly affect the financial performance of the shipping industry. In this study, the dynamics of the labor force and the freedom of trade significantly affect the financial performance of the shipping industry. Therefore, the research concludes that the shipping industry operating in Nigeria has developed mechanisms that help the shipping industry operate efficiently despite the exchange rate risks. This study contributes to existing literature by examining how exchange rate volatility affects the financial performance of Nigeria's shipping industry. Although the maritime sector plays a vital role in the country's economy and international trade, limited empirical research has specifically explored the effect of exchange rate fluctuations on the financial performance of shipping firms in Nigeria. By addressing this gap, the study provides new evidence to enhance understanding of exchange rate risk within the Nigerian maritime industry.