Effect of Exchange Rate Fluctuations on Manufacturing Sector in Nigeria

Abstract

The title of this research paper is effects of exchange rate fluctuations on manufacturing sector in Nigeria. From current research, the issue of deciding on effective way to stabilize exchange rate of goods and services in manufacturing sector in Nigeria is one of the key elements of a firm’s financial strategy. Therefore, proper care and attention need to be given while such decision is taken. Exchange rate of a country plays a key role in international economic transactions because no nation can remain in autarky due to varying factor endowment. The purpose of this paper is to know the effects of exchange rate fluctuations on manufacturing sector in Nigeria over a period of 25 years (1985 – 2010). This work employed four (4) variables such as manufacturing gross domestic product (MGDP), manufacturing foreign private investment (MFPI), manufacturing employment rate (MER) and Exchange rate (ER). The ex-post facto research design was used for this study. Manufacturing gross domestic product (MGDP) stands as dependent variable while manufacturing foreign private investment (MFPI), manufacturing employment rate (MER) and Exchange rate (ER) as independent variables. The secondary data were obtained from CBN Statistical Bulletin and Nigeria Bureau of Statistics. Descriptive statistics and multiple regressions were employed to find out the effects of exchange rate fluctuations on manufacturing sector in Nigeria. The results of the analysis showed that all the independent variables have significant and positive relationship with dependent variable with R² at 80%. It also indicates that manufacturing foreign private investment (MFPI) and Exchange rate (ER) have positive effect on manufacturing gross domestic product (MGDP). Based on the above findings, the researcher recommends that government should stimulate export diversification in the area of agriculture; agro-investment, and agro-allied industries, oil allied industries such will improve Exchange rate fluctuations on manufacturing sector in Nigeria Economy. The government should restrict the importation of similar products manufactured in Nigeria to increase the buying of Nigerian products.

Keyword: Exchange rate, manufacturing employment rate, CBN Statistical Bulletin, Nigeria Bureau of statistics, manufacturing foreign private investment, Descriptive research, Regression, structural adjustment programmes and manufacturing gross domestic product.