Effect of Exchange Rates on Manufacturing Sector Growth in Nigeria: 1986-2014 (original) (raw)
Since the adoption of exchange rate deregulation policy in Nigeria, the exchange rate, which is the price of domestic currency in terms of foreign currency, has become so volatile. Aside this also is the snail speed situation of the development of the manufacturing sector of the Nation Nigeria. The study thus undertakes an empirical analysis to examine the impact of exchange rates on the performance of the manufacturing sector in Nigeria between 1986 and 2014 using Ordinary least square (OLS) regression method. Pre-estimation diagnostics test revealed that the variables were stationary at first difference and they all have long-run equilibrium relationship among them. Findings from the study revealed that there is a significant relationship between exchange rates and manufacturing outputs in Nigeria. It was revealed also that exchange rates have a significant impact on manufacturing capacity utilization in-line with our empirical literatures. The study thus suggests that change in exchange rate management strategy should be allowed to run a reasonable course of time. Jettisoning strategies at will and on frequent basis has implication for exchange rate and obvious consequence for a sector that depends on foreign inputs. More so, manufacturing activities should be encouraged by government by giving incentives and subsides to local manufacturers and improving the technological and infrastructural development so as to increase the sector's contribution to gross domestic product and employment within the country.
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