The Impact of Real Exchange Rate Fluctuation on Industrial Output in Nigeria

Jongbo, Olajide Clement

doi:10.12816/0011197

Cited by 17 publications

(13 citation statements)

References 4 publications

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“…This study agreed with Olufayo and Fagite (2014) who found no significant impact of exchange rate fluctuation on the non-oil sector. It however disagreed with the findings of Gatawa and Mahmud (2017) and Jongbo (2014) who found a significant impact of exchange rate fluctuation on agricultural export and industrial output respectively.…”

Section: Summary Of Findingscontrasting

confidence: 99%

Impact of Exchange Rate Fluctuation on Selected Economic Sectors of the Nigerian Economy

Víctor

Kizito

Chukwuka

et al. 2019

International Journal of Sustainable Development & World Po

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The study investigated the impact of exchange rate fluctuation on selected economic sectors of the Nigerian economy. The study covered the agricultural (AGDP), manufacturing (MGDP), petroleum (PGDP) and service sector (SGDP) of the Nigerian economy. The petroleum sector represented the oil sector while the agricultural (AGDP), manufacturing (MGDP), and service sector (SGDP) represented the non-oil sector. The main objective of the study was to determine whether exchange rate fluctuations had a significant impact on the selected sectors of the economy. These sectors were invariably the largest contributors to the GDP. The time scope covered 1981-2016. Data for the study were obtained specifically from CBN statistical bulletin (2016). The data were analysed using the Auto Regressive Distributed Lagged (ARDL) model. The study concluded that there was no significant impact of exchange rate on AGDP, MGDP and SGDP respectively. However, there was a positive and significant impact of exchange rate on PGDP. The study recommended that Nigeria"s economy should be diversified to enable the non-oil sector to become significant foreign exchange earners. Contribution/Originality: This study contributes to the existing literature by unbundling Nigeria"s economy into its component sectors and determining the impact of exchange rate fluctuations on each sector. This study uses a relatively new estimation methodology of Auto-Regressive Distributed Lagged model (ARDL). This study originates a new formula which integrates lagged variables into the model.

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Section: Summary Of Findingscontrasting

confidence: 99%

Impact of Exchange Rate Fluctuation on Selected Economic Sectors of the Nigerian Economy

Víctor

Kizito

Chukwuka

et al. 2019

International Journal of Sustainable Development & World Po

View full text Add to dashboard Cite

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“…The channels through which an exchange rate volatility induces growth or the otherwise in an industry value addition was not clear. Jongbo (2014) examined the impact of real exchange rate fluctuation on industrial output using OLS. The results show that the real exchange rate plays a significant role in determining the industrial output in Nigeria.…”

Section: Empirical Reviewmentioning

confidence: 99%

“…The reality of these hypothetical situations is that the real exchange rate should be co-integrated with the comparable levels of domestic industrial output. Scholars such as Oseni (2016), Ilechukwu & Nwokoye (2015), Jongbo (2014), Muhammad, Streissle, & Kunst (2012); Khondker, Bidisha, & Razzaque (2012), among others, are of the opinion that favourable exchange rate causes sectoral growth and subsequently economic growth, whiles Addae & Ackah (2017) and Sattar & ur Rehman (2012) argue that an output growth causes an exchange rate appreciation. The inconclusiveness of the theoretical positions, as well as the divide in the extant literature, needs further verification to ascertain the direction of causality that exists between an exchange rate volatility and an industrial output growth in Nigeria.…”

Section: Introductionmentioning

confidence: 99%

Exchange rate volatility and industrial output growth in Nigeria

Oseni

Adekunle

Alabi

2019

JEM

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Aim/purpose -This paper examines the relationship between exchange rate volatility and industrial output growth in Nigeria. In spite of the massive revenue emanating from oil wealth, Nigeria has wallowed in intergenerational poverty due to the inability to grow its industrial sector. The dilemma of exchange rate allowed growth of the industrial sector to become enormous. As such, this paper attempts a quantitative analysis of industrial output growth in Nigeria as predicted by an exchange rate volatility using a time series data from the exchange rate and the industry value added from 1986 through 2017. Design/methodology/approach -This paper adopts a quantitative analysis of exchange rate volatility as a predictor of changes in industrial output in Nigeria. Monthly Data on exchange rate from 1986 through 2017 were first analysed to show for their clustering behaviour. Thus, ascertaining whether they are volatile or not. The study employs AR(k)-EGARCH(p,q) models for the calculation of volatility in the growth rate of nominal exchange rates. Then the paper adopts the Auto-Regressive Distributed Lag Approach to account for the long-run and short-run dynamics of industrial output in Nigeria as induced by volatility in the exchange rate for different regimes under the scope.Findings -The findings reveal that the real exchange rate volatility determines industrial production as well as availability of foreign exchange increments arising from the various export drives contributing tremendously to the increase in the industrial output in Nigeria. It is further revealed that the capacity utilisation ratio was low. Research implications/limitations -Established evidence of low capacity utilisation may be due to the epileptic power supply, inadequate technological know-how. As such, the government should maintain a flexible exchange rate system to maximally harness the benefits of growth emanating from the industrial sector. Originality/value/contribution -The paper specifically offers an experimental proof to the underlying relationship between industrial output and exchange rate volatility in Nigeria. Previous studies reviewed in the literature have mostly focused on the growth effect of the exchange rate neglecting the important nexus it shares with the industrial sector (a bedrock of sustainable development).

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“…Agreeing with Ngene [9] and Alalade, et al [10]; Jongbo [11] argued that real exchange rate play a significant role in determining the industrial output and that foreign exchange increase through contentious export drive from both oil and non-oil products contribute tremendously to increase industrial output. He further argued that the capacity utilization ratio is low, partly due to epileptic power supply, lack of adequate and appropriate technology.…”

Section: Literature Reviewmentioning

confidence: 99%