Exchange Rate and Manufacturing Performance in Nigeria

The aim of the study was to ascertain the performance level of the Nigeria manufacturing output with variations and increase in exchange rate level in Nigeria. The study made use of four explanatory variables (exchange rate, interest rate, inflation rate and capacity utilization rate) to test for the performance of the output of the manufacturing sector in the Nigeria economy. Unit root test using the Augmented Dickey Fuller test was conducted to test for stationarity among variables employed. The Johansen Co-integration test was also employed to test for long run equilibrium relationship among the variables while the pair-wise correlation matrix was used to test for multi collinearity among variables. The study concluded that despite the deregulation of exchange rate in 1986, the manufacturing sector performance yielded little or no improvement with its contribution to the GDP still less than 10% which falls short of requirement to stimulate the general output of goods and services in the economy. This was attributed to the devaluation of the naira which led to high importation, the continuous fall in the value of the naira and infrastructural decay. The paper proffered improvement in agricultural production to reduce importation of raw materials needed for manufacturing production, appreciation of the exchange rate and infrastructural improvement.