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ABSTRACT
This study focuses on the effect of exchange rate fluctuation on manufacturing sector output in Nigeria. The objectives of the study are to investigate the relationship between exchange rate fluctuations and manufacturing output, investigate if consumption expenditure affects manufacturing output and to also determine if exchange rate affects manufacturing output. The study uses annual time series data from 1981-2020. A simple regression model was formulated and estimated using manufacturing output as the variable of interest. After obtaining data stationarity using the Augmented Dickey Fuller test for unit root, OLS was employed for data analysis. It was discovered from this study that exchange rate fluctuation does not significantly affect manufacturing output. However, exchange rate has a significant effect on manufacturing output. The study therefore recommends that since exchange rate significantly affects manufacturing output, Government should adopt policies that would decrease exchange rate (appreciate the value of Naira), thus stimulating the level of manufacturing output in Nigeria. Also, the Nigerian Government should adopt measures that will increase the level of consumption expenditure of locally made goods as this will significantly increase the level of manufacturing output in Nigeria. They can achieve this by placing bans and tariffs on importation of consumers’ goods. Finally, the CBN, which is the apex monetary authority in Nigeria should, adopt and implement measures that would reduce the exchange rate fluctuations to an acceptable level.
