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Macroeconomic Implications of Exchange Rate Fluctuations on the Manufacturing Sector Performance in Nigeria

Author

Listed:
  • Amadi
  • Agatha Nkemjika
  • Nwidobie
  • Barine Micheal
  • Adesina
  • Julius Babatunde

Abstract

This study focuses on the macroeconomic implications of exchange rate fluctuation on manufacturing sector performance in Nigeria between 1981 and 2016. Variables such as manufacturing capacity utilisation, manufacturing value added, and manufacturing output are used to proxy manufacturing sector performance while exchange rate was used as the explanatory variable. Data were analyzed using the vector autoregression estimation technique while the GARCH was used to determine exchange rate volatility. The unit root results confirm that all the variables were stationary at first difference, while the Johansen cointegration test confirms that long run relationship exists between the variables employed in the study. Empirical results confirm that exchange rate depreciation has a positive impact on manufacturing output and manufacturing value added while it enhances manufacturing capacity utilisation. It indicates that exchange rate fluctuation restricts the performance of the manufacturing sector in Nigeria and hence has a strong macroeconomic implication on the sector. Efforts should be targeted at stimulating manufacturing output whenever there is depreciation of the domestic currency to stabilize the sector’s performance.  JEL classification numbers: F31, L16, F62.

Suggested Citation

  • Amadi & Agatha Nkemjika & Nwidobie & Barine Micheal & Adesina & Julius Babatunde, 2018. "Macroeconomic Implications of Exchange Rate Fluctuations on the Manufacturing Sector Performance in Nigeria," Business & Entrepreneurship Journal, SCIENPRESS Ltd, vol. 7(2), pages 1-1.
    • Handle: RePEc:spt:busent:v:7:y:2018:i:2:f:7_2_1
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    References listed on IDEAS

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    More about this item

    Keywords

    Capacity Utilisation; Exchange Rate; Macroeconomic; Manufacturing; Utilisation; Nigeria.;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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