Efficacy of Exchange Rates Management and Performance of Banking Institutions in Nigeria: Empirical Survey

This study empirically evaluated the efficacy of Exchange Rates Management and Banking Institutions’ performance with particular focus on the Unified Exchange Rate policy recently adopted in Nigeria. The research employed survey research design. Data sourced through questionnaire administration were estimated using Econometric View (E-View) software and analysis was by means of Multiple Regression Model (MRM) techniques. The correlation matrix exhibited high coefficients implying strong inter-relationships and the adjusted R-squared and F-statistics parameters passed the test of significance leading us to conclude that the model has reasonable predictive power, meaning that the variables, Unified Exchange Rate (UFX) and Multiple Exchange Rate (MFX) have powerful control and influence on Return on Asset (ROA), the proxy for banking performance. Though these result appeared robust but they somewhat also contradict the prevailing economic situation in Nigeria as the setting up and initiation of the UFX appeared to have been accompanied by inflationary pressures. Therefore, taking into consideration the practical aspect of inflation, we recommend close monitoring of the rate of inflation so as to be able to predict what potential influence it could have on ROA of banking firms and also recommend the review of currency management strategies in order to ensure that they account for inflation differences with other countries.