Exchange Rate Volatility and the Performance of Manufacturing Sector in Nigeria (1981 – 2016)

Abstract

The study examined the effect of exchange rate volatility on the performance of manufacturing sector in Nigeria for the period of 1981 to 2016. Annual data were sourced from World Development Indicators of World Bank and Statistical Bulletin of the Central Bank of Nigeria. Based on the result of unit root test, an ARDL technique of estimation was employed.  The result from Bounds Test for cointegration revealed the evidence of long-run relationship among manufacturing sector’s value added, exchange rate, exchange rate volatility, interest rate, inflation, import and gross capital formation. Findings from the study revealed that the impact of exchange rate volatility on manufacturing sector’s performance is positive and significant both in the long-run and short-run. In addition, the study found that the impact of exchange rate on manufacturing sector’s output is positive but not significant in the long-run while its impact is negative and significant in the short-run. Furthermore, the effect of import on manufacturing sector’s performance is negative and significant in the long-run and short-run.