Foreign Exchange and the Permaformance of Manufacturing Sector in Nigeria: A Disaggragrated Anaylsis

Abstract

The manufacturing sector in sub Saharan–Africa, particularly Nigeria is handicapped with numerous challenges like affordable energy, multiple taxation and foreign exchange; a key driver of manufacturing activities. Therefore the primary objective of this study is to examine the impact of foreign exchange on the performance of the manufacturing sector in Nigeria using disaggregated analysis. Data were sourced from secondary materials collected from the Central Bank of Nigeria Statistical Bulletin on manufacturing sector output, foreign exchange availability, foreign exchange rate, Nigeria foreign reserves and inflation rate from 1999 -2021.  Econometric-view (E-view version 9) statistical tool was used to run the Ordinary Least Square Regression Analysis. The findings of the study revealed that during the period under consideration, foreign exchange availability (FEA) has negative and significant impact on the growth of the manufacturing sector at P-value of 0.017. Foreign exchange rate (EXR) has positive and significant impact on the manufacturing sector of Nigeria, while Nigeria foreign reserves (NFR) has positive but insignificant impact at P-value of 0.547. Inflation rate has a negative and insignificant impact on the growth of manufacturing sector at -1.187 (P = 0.256).  Based on the findings, the study recommended that monetary authority should take urgent steps to tackle the foreign exchange crisis and maintain a sustainable exchange rate. Importantly, foreign exchange is made available to importers of industrial raw materials and at the same time grow the country’s foreign reserves. Also, local industries should be developed to reduce dependence on imported materials and thereby conserved foreign exchange.