IMPACT OF EXCHANGE RATE ON MANUFACTURING SECTOR OUTPUT IN NIGERIA: VAR APPROACH

Abstract

The study examined the impact of exchange rate on 
manufacturing sector output in Nigeria for the period 1990 
to 2024.Data were generated from the database of National 
Bureau of Statistic (NBS) and Central Bank of Nigeria (CBN) 
2024 Statistical Bulletin. The research design adopted was 
the ex-post facto. The analysis was carried out using Vector 
Auto regression (VAR) method. Results of the analysis 
showed that real exchange rate (RER) has positive and 
significant impact on manufacturing sector output. Nominal 
exchange rate (NER) also has a positive and significant 
impact on manufacturing sector output during the period 
under study. While floating exchange rate (FER) have a 
positive and insignificant impact on manufacturing sector 
output (MSO) in Nigeria. The study concluded that the 
performance of the manufacturing sector output is found to 
be in great need of reforms and improvement because its 
contribution to the economic growth in Nigeria is low. 
Consequently, the study recommended Based on the findings, 
that Nigeria government should come up with a feasible and 
regulated real exchange rate policy so that the Naira 
exchange can be effectively advantageous above any foreign 
currency. It also recommends that government should adopt 
realistic approach in management of exchange rate policies
in a well monitored way to improve the value of our domestic 
currency in Nigeria. The study further recommends 
pragmatic changes in floating exchange rate regulatory 
framework to focus more on Naira and de-dollarized the 
economy for the better strive of the Naira. The study therefore 
recommends generally that the government should focus on 
placing priority where it’s needed by giving subsidies for 
exchange rate to the manufacturing industries for the 
betterment of manufacturing sector output in Nigeria.