Exchange Rate Volatility, Blue Economy, and Shipping Industry Financial Performance in Nigeria

Abstract

This study examined the effect of exchange rate volatility, and the blue economy on the financial performance of Nigeria’s shipping industry from 1990 to 2024. A longitudinal research design was adopted, allowing for the analysis of cause-and-effect relationships across time. Secondary data were sourced from the World Bank Development Indicators, and the Central Bank of Nigeria Statistical Bulletin, while exchange rate volatility was derived using the GARCH (1,1) model. The study employed an econometric framework grounded in the Traditional Flow Theory and the Balance of Payments (BoP) Theory to investigate how volatility in exchange rates and blue economy activities affect shipping sector financial performance. Financial performance was measured using container throughput revenue, shipping costs, and port revenue, while blue economy proxies include fisheries, aquaculture, and desalination, controlled by macroeconomic variables such as inflation, labour force, and trade freedom. The analysis adopted the autoregressive distributed lags (ARDL) framework to capture both short-run and long-run relationships among the variables. Empirical findings showed that exchange rate volatility reduced container throughput revenue and port revenues while increasing shipping costs. Fisheries had a short-term positive impact, while, aquaculture significantly boosted long-run performance by lowering costs and raising revenues. Desalination has limited influence, showing short-term benefits but long-term drawbacks. The study recommended that the Central Bank of Nigeria (CBN) and other statutory Ministries Departments and Agencies (MDA’s) connected with blue economy, and, the shipping and maritime sector of the economy; formulate policies and embark on activities that will help stabilize the naira, promote risk hedging instruments, and encourage investments in fisheries terminals, aquaculture integration, and desalination facilities.