ASYMMETRIC EXCHANGE RATE EXPOSURE OF FINANCIAL PERFORMANCE: EMPIRICAL EVIDENCE THROUGH ARDL AND NON-LINEAR ARDL

Eunice OLUGANNA, Adeniyi Mufutau IJAIYA (Prof.), Ebenezer Adesoji OLUBIYI (Ph.D.)

Abstract

The importance of banking sector in the foreign exchange market cannot be overemphasized because of their central role in financial intermediation. However, exchange rate changes have greatly affected Nigerian banks competitive position with other international banks. Hence, the need to examine the asymmetric exchange rate exposure of deposit money banks in Nigeria. Quarterly data spanning 2002-2018 were extracted and Autoregressive Distributed Lag (ARDL) and non-linear Autoregressive Distributed Lag are employed to check the symmetrical and asymmetrical effect. The empirical results indicate that deposit money banks are asymmetrical exposed to exchange rate changes. Furthermore, inflation hinders bank performance both at the short run and long run. It was recommended that CBN need to consistently be aware of the depreciation and appreciation of currency for each trading partner.

Full Text:

PDF