EXPLORING THE NEXUS BETWEEN EXCHANGE RATE VOLATILITY AND MANUFACTURING SECTOR OUTPUT IN NIGERIA: A QUANTITATIVE ANALYSIS

##plugins.themes.academic_pro.article.sidebar##

Published Dec 31, 2024
Download
PDF
Statistic
Vol. 7 No. 2 (2024): December 2024

##plugins.themes.academic_pro.article.main##

Gideon Gokum GOSHIT
Department of Economics, University of Jos, Jos, Plateau State, Nigeria
Alanana Christopher ABIMIKU
Department of Economics, University of Jos, Jos, Plateau State, Nigeria
Sekyen Kumshin BAKLE
Department of Business Education, Federal University of Education, Pankshin, Plateau State, Nigeria

Abstract

This study examined the impact of exchange rate volatility on the manufacturing sector output between 1980 and 2021. The manufacturing sector is one of the sectors whose success or failure depends on the stability of exchange rate. This is because its depreciation or appreciation has negative or positive repercussions on all the sectors of the economy, especially the manufacturing sector. Using the Autoregressive Distributed Lag Model, the study examined the short run and long run relationship between exchange rate volatility and manufacturing sector output in Nigeria. The estimated results revealed that exchange rate volatility had negative and statistically significant impact on manufacturing sector output in Nigeria. The study concluded that exchange rate volatility has negative impact on manufacturing sector output in Nigeria due to the dependence of the manufacturing sector on imported raw materials and machines. The study, therefore, recommended amongst others that manufacturers should explore diversifying their sources of inputs to include a mixture of local content which can help reduce vulnerability to currency fluctuations and enhance stability in the production process. This could help mitigate the negative effects and enhance the resilience of the manufacturing sector.

##plugins.themes.academic_pro.article.details##

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

References

  1. Adebayo, R. I. (2010). Zakat and poverty alleviation: A lesson for the fiscal policy makers in Nigeria. Journal of Islamic Economics, Banking and Finance, 7(4), 26–41.
  2. Adenekan, A. T., Sanni, G. K., & Itodo, A. I. (2019). Investigating the impact of exchange rate volatility on Naira exchange rate in Nigeria CBN Economic and Financial Review, 57(3), 17–38.
  3. Ayobami, O. T. (2019). Exchange rate volatility and the performance of manufacturing sector in Nigeria (1981–2016). African Journal of Economic Review, 7(2), 27–41.
  4. Dickson, D. A. (2010). The recent trends and patterns in Nigeria’s industrial development. Development of Social Science Research in Africa, 32(2), 139–155.
  5. Fahrettin, Y. (2001). Choice of exchange rate regimes and developing countries, Africa Region working paper series No. 16, 1–36.
  6. George-Anokwuru, C. C. Obayori, J. B., & Oriji, C. E. (2018). Exchange rate and manufacturing sector output in Nigeria. International Journal of Education and Social Science Research, 1(6), 116–126.
  7. Ihezie, O. E. (2022). Exchange rate volatility and manufacturing output in Ecowas economies. Management of Sustainable Development Journal, 14(1). Retrieved from https://ideas.repec.org/a/blg/msudev/v14y2022i1p43-50n7.html
  8. Ismaila, M. (2016). Exchange rate depreciation and Nigeria economic performance after Structural Adjustment Programmes (SAPs). Journal of Social Development, 5(2), 122–132.
  9. Krotamunobaromi, T., Akani, E. N., & Nwosu, A. A. (2020). Exchange Rate Volatility and Manufacturing Output in Nigeria. Nigeria Journal of Management Sciences, 21(1&2), 232–246.
  10. Mlambo, C. (2020). Exchange rate and manufacturing sector performance in SACU states. Cogent Business & Management, 7(1), 1–16.
  11. Mordi, M. C. (2006). The challenges of exchange rate volatility in economic management in Nigeria. CBN Bulletin, 30(3), 17–25.
  12. Mundell, R. A. (1960). The monetary dynamics of international adjustment under fixed and flexible exchange rates. Quarterly Journal of Economics, 74, 227–57.
  13. Nsofo, E. S., Takson, S. M., & Ugwuegbe, S. U. (2017). Modeling exchange rate volatility and economic growth in Nigeria. Noble International Journal of Economics and Financial Research, 2(6), 88–97.
  14. Ochei, A. I., Aregha, A. & Tochukwu, C. O (2016). Deregulation of foreign exchange market and its effect on industrial produce in Nigeria. Global Media Journal, 1(7), 18–56.
  15. Ojo, M. O. (1998). Exchange Rate Development in Nigeria: A Historical Perspective. Being Text of a Paper delivered at a Seminar on 'Exchange Rate Determination and Arithmetic' by Unilag Consult.
  16. Opaluwa, D, Umeh, J. C., & Ameh, A. A. (2012). The effect of exchange rate fluctuations on the Nigerian manufacturing sector. African Journal of Business Management, 4(14), 2994–2998.
  17. Owolabi, A. U., & Adegbite, T. A. (2013). Effect of exchange rate volatility on Nigeria economy. International journal of Academic Research in Economics and Management Sciences, 2(6), 2226–3624.
  18. Rasaq, A. D. (2013). The impact of exchange rate volatility on the macro economic variables in Nigeria European Scientific Journal, 9(7), 152–163.
  19. Tams-alasia, O., Olokoyo, F. O., Okoye, L. U., Ejemeyovwi, J. O. (2018). Impact of exchange rate deregulation on manufacturing sector performance in Nigeria. International Journal of Environment, Agriculture and Biotechnology (IJEAB), 3(3), 994–1001.
  20. Ugwu O. J. (2017) Foreign exchange rate dynamics and manufacturing firms ‘performance in Nigeria. International Journal of Humanities and Social Science Invention (IJHSSI), 6(9), 09–14.
  21. World Bank. (2020). World development report. World Bank, Washington, DC.
  22. World Bank. (2020). World Development Index – WDI. http://databank.worldbank.org/data/report.aspx?source=world-development-indicators#