The re-basing of the Nigerian economic data since 2013 has shown the growing relevance of the service sector to the economic development of Nigeria. The need to investigate the nexus between the service sector and macroeconomic variables become imperative in view of inadequate research attention in the past and the present desirable concern for policy shifts in favor of promoting activities in the sector. It is in this context that our paper considered the effects of exchange rate behavior on the performance of the service industry in Nigeria. More so that it is becoming increasingly clear that the openness of the Nigerian economy to the outside world and the seeming dollarization of earnings from economic activities, even with high local content, have varied impacts on economic behavior in many sectors of the economy. A comprehensive study was carried out to determine the relationship between the dynamics of exchange rate and the service industry activities. The data used include services, exchange rates, money supply, domestic credit, interest rate and inflation covering the period of 1981- 2015. Using the ARDL, a 10% point increase in exchange rate volatility and domestic credit increases service output growth (SER) by 0.68% and 5.15% respectively. The paper thus suggest that there must be reforms in government polices to remove barriers to entry by private investors into certain services in order to prevent market distortions and reduce cost of capital so as to enhance an integrated services-manufacturing industrial growth.