Economic and Financial Review


Central Bank of Nigeria


Exchange Rate Exposure, Sector Stock Returns, Nominal Effective Exchange Rate, Bilateral Exchange Rate, Capital Market, Asset Pricing, Bond Interest Rates


Exchange rate exposure has been identified in the literature as one of the standard metrics for measuring the performance of stock returns in both advanced and developing economies. This study adopts the capital market approach in investigating the effects of exchange rate exposure on stock returns in Nigeria, using monthly data spanning 2009 to 2018. The findings show that three sector stock returns, namely the NSE30, pension and banking indices, were significantly vulnerable to nominal effective exchange rate and bilateral exchange rates shocks. The non-significance of energy sector, proxied by the oil and gas, to exchange rate risk, is puzzling, but was consistent with the findings of Xie (2011) for the Japanese economy. Results from the bilateral estimates indicated that the NSE30 was most sensitive to the euro exchange rate risk, while positive exposure was evident for the pension sector for all currencies. The study recommended the need to sustain the central bank’s current exchange rate policies, which had resulted in the convergence of rates in the market.

Author Bio

The authors are staff of the Research Department, Central Bank of Nigeria.

Publication Title

CBN Economic and Financial Review





Recommended Citation

Adebiyi, M. A. and Abeng, M. O. (2019). The Sensitivity of Sector Stock Returns to Exchange Rate Risks in Nigeria. CBN Economic and Financial Review. 57(2), 1-26.



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