Foreign Exchange Risk Management Practices in Nigerian Import-Dependent Firms

Foreign exchange risk represents a persistent operational challenge for Nigerian firms that depend on imported raw materials, machinery, and finished goods, particularly given the volatility of the naira against major trading currencies since 2020. This study examines the foreign exchange risk management practices of import-dependent firms in Nigeria, with case studies drawn from the pharmaceutical, food processing, and textile industries. A mixed-methods design is adopted, combining structured questionnaires administered to 100 treasury and finance managers with an analysis of audited financial statements for a three-year period. The study focuses on firms registered with the Manufacturers Association of Nigeria and operating across the Lagos, Ogun, and Kano industrial corridors. Data analysis employs descriptive statistics, thematic analysis, and multiple regression to evaluate the effectiveness of hedging instruments and internal risk mitigation techniques. The research is grounded in risk management theory and recent Central Bank of Nigeria foreign exchange policy pronouncements. A critical review of the literature reveals that the majority of Nigerian firms rely on natural hedging and invoice currency adjustments rather than derivative instruments due to the underdeveloped state of Nigeria's foreign exchange derivatives market. The study is expected to yield findings relevant to the Central Bank of Nigeria, the Manufacturers Association of Nigeria, and financial institutions interested in expanding trade finance products. Keywords: foreign exchange risk, hedging, import-dependent firms, naira volatility, treasury management