Foreign exchange risk management is complex and requires a thorough understanding of the banks business needs, its internal and external environment and exposures to the financial markets. Challenges abound as banking institutions commit themselves to improving risk management practices. The banking industry in Nigeria is characterized by numerous teething problems. These emanate from their calibre of target customers and the seemingly liberal and/or informal system of operations. Many of the standard tools used to hedge currency risk, such as futures, swaps and options contracts, are either not available in emerging markets or, where available, are traded in illiquid and inefficient markets, making the range of products available extremely limited. This has put an extra burden on corporate treasurers to be able to find adequate hedge to their exposures in exotic currencies. This study therefore effectively analyze the impact of foreign exchange risk management of the profitability level in the banking sectors. The research used a descriptive research design. The target population comprised of one hundred and forty-two (142) customers of two commercial banks in Nigeria. The study made use of primary data. The Statistical Package for Social Science (SPSS) version 20 was used to analysed data collected. The findings of the study revealed that there is significant relationship foreign exchange risk and the banking sector performance. It also showed that there exist a significant relationship between quality of management and profitability of the banking sector. The study therefore recommends that commercial banks should develop a foreign exchange risk management framework, which clearly shows their currency risk assessment procedure and implementation of currency risk management strategies and this should be monitored and make adjustments as necessary.
TABLE OF CONTENTS
CHAPTER ONE: Introduction
1.1 Background to the Study
1.2 Statement of the Problem
1.3 Objectives of the Study
1.4 Research Questions
1.5 Research Hypotheses
1.6 Scope of the Study
1.7 Justification of the Study
1.8 Definition of Terms
CHAPTER TWO: Literature Review
2.0. Introduction
2.1 Conceptual Framework
2.1.1 Market Risk
2.1.2 Liquidity Risk
2.1.3 Liquidity Policies
2.1.4 Risk Management Procedures
2.1.5 Performance, Financial Risk and their Connection
2.1.6 Risk Management
2.1.7 Risk Management and Bank Performance
2.1.8 Liquidity Risk Management Challenges
2.2 Theoretical Framework
2.3 Empirical Framework
CHAPTER THREE: Research Methodology
3.1 Introduction
3.2 Research Design
3.3 Population of the Study
3.4 Sample and Sampling Techniques
3.5 Research Instrument
3.6 Validity of Research Instrument
3.7 Reliability of Research Instrument
3.8 Procedure of Administration of Instrument
3.9 Method of Data Analysis
CHAPTER FOUR: Data Presentation, Analysis and Interpretation
4.0 Introduction
4.1 Presentation of Demographic Information
4.2 Testing of Hypotheses
CHAPTER FIVE: Summary, Conclusion and Recommendations
5.1 Summary of Findings
5.2 Conclusion
5.3 Recommendations
5.4 Area for further Research
References
Appendix: Questionnaire
