ABSTRACT

The study examined the effect of foreign exchange income on financial performance of commercial banks in Nigeria. Using ex-post facto research design, the study analyzed data gotten from 10 purposively sampled commercial banks out of a population of 14; the data are analyzed using a multivariate regression technique with the aid of Stata version 13. The study result revealed that, foreign exchange income has a positive and significant effect on profit after tax of listed commercial banks in Nigeria. Further findings revealed that, foreign exchange income has a negative and significant effect on return on assets of listed commercial banks in Nigeria. Lastly, the study revealed that, foreign exchange income has a positive and insignificant effect on earnings per share of listed commercial banks in Nigeria. As a result, the study recommends that, banks should ensure they make good estimates for foreign exchange transactions in other to capture the favorable changes which might serve as income for the banks. This will increase the profit after tax of the banks. Furthermore, banks should be more focus on forecasting exchange rate fluctuation that might be risky for loans and other contracts they hold. As banks assets are largely liquid in nature, a loss in foreign exchange transaction might reduce the return on the liquid assets of the banks. There is general perception that, banks are volatile to how they hedge their earnings against foreign exchange risk. The study recommends that, the bank should use hedge accounting techniques in improving the banks financial performances and earnings per share.