Imported Intermediate Inputs and Manufactured Exports in Nigeria: The Role of Dual Exchange Rate Regime

Abstract

This study examines the direction and significance of imported intermediate inputs on manufactured exports in Nigeria under the role of dual exchange rate regime between the period of Q1 2000 to Q4 2018 using data sourced from the World Bank, African Development Bank and Central Bank of Nigeria databases. Vector Error Correction Model was employed to ascertain the relationship among the variables. The results show that all explanatory variables are cointegrated in the long run. The findings from the impulse response analysis points to the existence of a negative response from imported intermediate inputs to manufacturing export, though statistically insignificant. The results indicate a positive and significant response of exchange rate spread on export performance. The result of the Variance Decomposition shows that in addition to own shocks, between 5 to 12 per cent of the variations in manufacturing export are due to shocks in imported intermediate inputs and exchange rate spread respectively. Policy that will work towards achieving a unified the exchange rate system, boosting intermediate imports of intermediate inputs used by local manufacturers to help expand manufacturing exports are recommended based on the findings.