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ABSTRACT
The impact of trade on manufacturing industry has generated lots of empirical studies with different findings. Exchange rate is generally believed to be positively related with economic growth. More precisely, it is held that appropriate exchange rate policies in certain situations can be used to stimulate growth and development in the manufacturing industry and the economy in general. However, diverse opinions have continued to emerge on how exchange rate can affect manufacturing activities with respect to it's related variables such as import, exports, exchange rates amongst others. The main objective of this study is to ascertain the impact of exchange rate on manufacturing industry growth. Endogenous growth model is employed for the study with emphases on how export, import, and real exchange rate affect manufacturing industry growth in Nigeria. This study has empirically examined the impact of exchange rate on manufacturing industry growth in Nigeria using annual time series data for the period 1981-2019. The variables considered are manufacturing GDP, export value, import value, inflation and real exchange rate as independent variables. Augmented Dickey-fuller (ADF) test was used for the unit root test and the variables were found to be stationary at second difference. Then Johansen (1988) technique was used to establish if the stationary variables are co-integrated. Further, ECM is employed to correct any form of disequilibrium in the short run. The result of stationarity and normality test reveals that the model is fairly well specified and could be used for policy analysis. The analysis was based on data extracted from Central Bank of Nigeria (CBN) statistical bulletin and World Development Indicators (WDI). The result of the analysis shows that all the variables except real exchange rate and inflation rate were statistically significant at 5%. The study therefore suggest that the government should adopt policies capable of stimulating manufacturing activities as well as maintain a stable exchange rate which will ensure gainful trading activities to the country and its citizenry.
