The effect of foreign exchange rate volatility on the financial performance of Oil marketing Companies in Kenya

Abstract

The main objective of the study was to establish the effect of foreign exchange rate volatility on financial performance of local oil marketing companies in Kenya. The population under study was 55 oil marketing companies. The collection of the primary data was done using structured questionnaires that were pilot tested in order to ensure that there was reliability as well as validity. Secondary data was also used in the study and was obtained from the Petroleum Institute of East Africa, Central Bank of Kenya and Kenya National Bureau of Statistics respectively. The data was analyzed with the use of Microsoft Excel as well as SPSS in order to generate the descriptive statistics for instance frequencies and percentages. The presentation of the results was in form of figures, tables as well as cross tabulations.The findings on the background information revealed that the majority of the respondents were of male while females were the minority. The results indicated that there exists no significant relationship between inflation and financial performance with a p value of .392. In the same regard, the study revealed that there was no significant relationship between performance and interest rates with a p-value of (.497). Further the study showed no significant relationship between foreign exchange volatility and performance with a p-value of (.306). This paper gives a recommendation that oil marketing companies should consider adopting Domestic or Multi-domestic strategies which are suitable for local economic environment other than applying global strategies that may be affected by forex volatility. The study further observes and recommends blending of foreign exchange rate risk management strategies that are best suited for the oil marketing companies.