Abstract

The study investigated foreign exchange rate risk exposure of 117 samples of Nigerian Listed firms for the period 1998 - 2007. The Jorion (1991) approach of measuring economic exposure as a slope coefficient of the regression of stock returns on exchange rates movements was used. The study utilized three alternative currencies exchange rates, viz; the US Dollar, the UK Pounds and the Euro effective real exchange rates. Findings reveal that Nigerian listed firms are generally exposed to adverse exchange rates risks of the three currencies under investigation, with a higher magnitude of exposure to the US dollar. The study further investigated differences in exposure by financial and non-financial sector firms. The results failed to indicate any significant differences in pattern of exposure between the financial and non-financial firms, thus providing no evidence to support the thesis that financial firms possess requisites to hedge exchange rates risks. The study concluded that exchange rates instability are significant hindrance to corporate performance in Nigerian listed firms.

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