The study examined the effect of foreign exchange income on financial performance of deposit money banks in Nigeria. The specific objectives of the study were to ascertain the effect of nominal exchange rate, real exchange rate, and exchange rate on return on asset of deposit money banks in Nigeria. nominal exchange rate, real exchange rate, and exchange rate were the independent variables, while return on asset was the dependent variable. The study adopted an ex-post-facto research design, covering the period between 2011 and 2020. Secondary data were extracted from the annual reports and accounts of sampled deposit money banks in Nigeria. Multiple regression techniques were used for test of hypotheses. From the data analysis, it was revealed that nominal exchange rate has a significant negative effect on return on asset of deposit money banks in Nigeria. real exchange rates have a significant positive effect on return on asset of deposit money banks in Nigeria. However, exchange rate has a nonsignificant negative effect on return on asset of deposit money banks in Nigeria. This implies that among the foreign exchange income variables, nominal exchange rate and real exchange rate can be used to predict return on asset of deposit money banks in Nigeria. The study, therefore, recommends that federal money the sources of deficit financing. They should reduce their public debt so as to allow foreigners invest in securities with naira denomination. They should reduce the extent the deplete our foreign exchange reserve because such moves increase the exchange rate, which affects banks performance negatively. The central bank of Nigeria and the ministry of finance should reduce the rate they give out dollars to politicians because it affects our exchange rate and banks’ performance negatively.
Keywords: Deposit Money Banks, Exchange Rate, Nominal exchange rate, Real Exchange Rate, Return on Asset
