Effect of Market Risks on the Financial Performance of Firms in Nigeria (Published)
Business operations are surrounded by different degrees of uncertainties (risks) ranging from market risks, financial risks and operating risks. This study has chosen to investigate one of the components of the risks (market risk) and to ascertain how the risks affect the activities of firms in Nigeria. Four hypotheses were formulated in line with the objectives of the study. The study employed causal research design and used secondary data. The research covers the twelve (12) firms listed under Oil and Gas sector on the Nigerian Stock Exchange. Secondary data were collected from Central Bank of Nigeria Statistical Bulletin and the financial statements of the firms which spanned from 2014 to 2018. The data were analysed with descriptive statistics, correlation and multiple regression analysis. The results therefrom indicate that exchange rate has significant effect on both ROA and ROE of Oil and Gas firms. Additionally interest rate has significant effect on ROE and insignificant effect on ROA. More results show that commodity price change has no significant effect on both ROA and ROE, also equity price change has no significant effect on ROA and ROE of firms in Oil and Gas sector in Nigeria. The study recommends among other things that the firms should adopt the use of hedging to control exchange rate changes and government should maintain a low interest rate that will aid firms increase their profitability.
Keywords: Exchange Rate, Market Risk, Oil price
The Application of the Capital Asset Pricing Model (CAPM) In the Nigerian Chemicals and Paints Industrial Sector (Published)
This paper calculated the (historical) betas of listed stocks in the chemicals and paints sector of the Nigerian Stock Exchange over a 13-year period (2000-2012). The beta estimation of listed stocks showed that the beta content of the entire sector ranges between 1.04% and -0.13 or between 6.78 and -2.31% providing an average beta content of 0.37 or 1.50% of the total risk for the sector. The results indicate that the unsystematic risk content in chemicals/paints sector stocks constitutes the bulk of the sector’s risk profile and that most of the stocks’ betas had defensive attributes over the study period. The investment implication is that including an appropriate mix of chemical and paints stocks in the investors’ portfolios would, ceteris paribus, help investors to achieve a combination of investments that are not highly correlated with larger economic cycle as well as higher-risk equity securities that can potentially yield higher returns than the market.
Keywords: Alpha Risk, Beta Risk, Capital Asset Pricing Model, Equity, Market Risk, Nigerian Stock Exchange, Systematic Risk, Total Risk, Unsystematic Risk, Volatility Level, beta