EFFECT OF EXCHANGE RATE ON THE PERFORMANCE OF THE MANUFACTURING SECTOR IN NIGERIA

ODEY PETER ODEY, CHIGOSIMUZO CHRISTOPHER AGUNOBI

Abstract


This study aims to investigate the impact of exchange rate on the manufacturing sector output in Nigeria. The manufacturing industry plays a crucial role in the economy by boosting productivity, creating employment opportunities, and generating revenue. The study notes that compared to Asian economies like China and Japan, the manufacturing sector in African countries, including Nigeria, has not grown to its potential due to macroeconomic neglect and low productivity. The exchange rate is an essential macroeconomic variable that affects the performance of the manufacturing sector, especially in a flexible exchange rate system like Nigeria's. The research design for this investigation is an ex-post facto approach, and the data collected is secondary, obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin of 2021. The study covers 41 observations from 1981 to 2021. The dependent variable used in the study is manufacturing sector output, proxied by GDPmfg, while the independent variables used are exchange rate (Fx), inflation rate (Inf), and real interest rate (RInt). Linear regression analysis is used to determine the relationship between these variables. The results reveal that the coefficient of FX is very small, with little effect on the manufacturing sector's GDP. The t-statistic for FX is small, and the p-value is large, indicating that the coefficient for FX is not statistically significant. Therefore, the null hypothesis is accepted, indicating that exchange rate have no significant effect on the manufacturing sector output in Nigeria. The study concludes that other variables such as inflation rate and real interest rate should be given more attention to boost the manufacturing sector's performance in Nigeria.

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References


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