Abstract
Purpose. The purpose of this study was to investigate the relationship between changes in international oil price, foreign exchange and interest rates of the United States and Nigerian foreign exchange earnings and interest payments on external debt. Methodology. This study was a macroeconomic case study utilizing secondary data analysis and a correlational design. Multiple regression analysis was used to investigate whether changes in international oil price, foreign exchange and interest rates of the United States are related to variations in Nigerian foreign exchange earnings and interest payments. Findings and conclusions. The study found that changes in international oil price and U.S. exchange rates are related to variations in Nigerian foreign exchange earnings (or assets). The study also found that changes in U.S. exchange and interest rates are related to variations in Nigerian interest payments (or liabilities). Recommendations. Nigeria could use market-based financial instruments such as forwards, futures, options, swaps and commodity linked loans for short and longer term hedges of its exposure to oil price, currency and interest rate risks. Use of these instruments by way of hedging, could reduce Nigeria's exposure to external variables beyond the control of its policy makers. A risk management program for Nigeria however, would require an organizational structure with clearly defined objectives and performance criteria, and run by qualified staff, according to sound risk management principles.