The Effect of Foreign Exchange Transaction on the Performance of Nigerian Banks

  • Takon Samuel Manyo Inance University of Calabar
  • Nsofor Ebele Sabina Finance Caritas University Emene Enugu
  • Ugwuegbe Sebastine Ugochukwu Finance Caritas University Emene Enugu
DOI: https://doi.org/10.53555/bm.v2i11.1533
Keywords: Foreign Exchange Transaction, Profitability, Nigerian Banks

Abstract

This study investigated the effect of foreign exchange transaction on the profitability of Nigerian
banks for the period of 2010 to 2014. The study employed annual data generated from the
annual report of ten (10) publicly quoted banks in Nigeria. To test for the properties of panel
data, Levin, Lin and Chu (2002), Breitung (2000), Im, Pesaran and Shin (2003), Hadri (2000)
and Maddala and Wu (1999) test of panel unit root were deployed. Based on the popularity of
the result we concluded that the variables are integrated of order one I(1). The result of Kao
panel co-integration test indicates that there exists a long run relationship between the variables
under study. The result of the DOLS revealed that foreign exchange income has a negative and
insignificant effect on the profitability of Nigerian banks for the period. Total asset which was
used as a control variable was shown to exert positive impact on the profitability of Nigerian
banks, while total equity has a negative effect on profitability of banks in Nigeria for the same
period under study. The studies recommend that CBN and other monetary authorities should
monitor the activities of the banks to ensure that they don’t charge high premium for selling or
buying foreign exchange to their customers. Banks should enhance their assets base so as to
increase profitability.

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Author Biographies

Takon Samuel Manyo, Inance University of Calabar

Department of Banking and Finance University of Calabar

Nsofor Ebele Sabina, Finance Caritas University Emene Enugu

epartment of Banking and Finance Caritas University Emene Enugu

Ugwuegbe Sebastine Ugochukwu, Finance Caritas University Emene Enugu

Department of Banking and Finance Caritas University Emene Enugu

Published
2016-11-30
How to Cite
Manyo, T. S., Sabina, N. E., & Ugochukwu, U. S. (2016). The Effect of Foreign Exchange Transaction on the Performance of Nigerian Banks. IJRDO - Journal of Business Management, 2(11), 139-154. https://doi.org/10.53555/bm.v2i11.1533
Issue
Vol. 2 No. 11 (2016): IJRDO - Journal of Business Management
Section
Articles

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