The Effect of Exchange Rate Fluctuations on the Performance of Oil and Gas Companies in Nigeria

Exchange rate instability has become a defining feature of Nigeria's macroeconomic environment, with far-reaching implications for firms operating in the oil and gas sector whose revenues are predominantly dollar-denominated while operational costs increasingly reflect naira pressures. This study examines the effect of exchange rate fluctuations on the financial performance of quoted oil and gas companies on the Nigerian Exchange Group from 2018 to 2023. Secondary data are obtained from company financial statements, the Central Bank of Nigeria exchange rate database, and sector reports from the Nigerian Upstream Petroleum Regulatory Commission. Panel regression analysis is employed, with exchange rate volatility, measured using the standard deviation of monthly rates, as the key explanatory variable, and return on assets and profit before tax as performance proxies. The study also explores whether exposure to exchange rate risk differs between upstream, midstream, and downstream operations. Theoretical grounding is provided by the purchasing power parity theory and exchange rate exposure literature from international finance. The period under review encompasses significant exchange rate policy shifts including the 2023 unification of the official and parallel market rates, which provides a natural quasi-experimental setting. The study contributes timely empirical evidence on exchange rate-performance linkages in the Nigerian energy sector, with implications for the Nigerian National Petroleum Company Limited, independent oil producers, and the Central Bank of Nigeria's foreign exchange management frameworks. Keywords: exchange rate, oil and gas, financial performance, naira, currency risk