Exchange Rate Fluctuations and Economic Performance of Manufacturing Sector: Evidence from Nigeria

Abstract

Persistent fall in the value of Nigeria currency compared to other foreign currencies, constant fluctuations in the exchange rate and increase in the price of goods and services necessitated the examination of the effects of exchange rate fluctuations on the economic performance of manufacturing sector in Nigeria. Ex-post facto research design was adopted. Manufacturing gross domestic product (MGDP) was proxied for performance; Naira/Dollar exchange rate (NDE), Naira/Pounds exchange rate (NPE), Foreign exchange supply (FES) were used for exchange rate fluctuations; and Inflation rate (INF) was a control variable. Data were collected from CBN Statistical Bulletin (2020) also World Development Indicators of the World Bank, while data collected were analysed using Descriptive analysis, unit root, bounds cointegration test, ARDL.Findings showed that changes in Naira/Dollar exchange rate (NDE) and Naira/Pound Sterling exchange rate negatively but significantly impact on the economic performance of the manufacturing sector, while foreign exchange supply leads to a positive insignificant effect on the economic performance of the manufacturing. The study concludes that exchange rate fluctuations impact negatively on the performance of manufacturing sector in Nigeria. While recommending diversification into agriculture, agro-investment and agro-allied industries, that would boost export, in order to improve the value of Naira, thereby, stabilizing the exchange rate.