ABSTRACT
This paper examines the effect of exchange rate fluctuations
on the Nigerian manufacturing sector during a twenty five (25) years period
(1986 – 2010). The argument is that fluctuation in exchange rate adversely
affects output of manufacturing sector. This is because Nigerian manufacturing
is highly dependent on import of input and capital goods. The methodology
adopted for this study is empirical. The econometric tool of regression was
used for the analysis. The population target of this study is the total number
of 25 years from (1986 – 2010) (25) annual time series as data relating to
other years after 2010 are not available. The used in this study is the
secondary source of data. The data to be utilized in this study we be sourced
through library research, publications of the Central Bank of Nigerian (CBN)
i.e. statistic bulletin, National Bureau of Statistic(NBS), on line information
and economic journals. Based on the findings, the researcher found out that
exchange rate has no significant effect on economic growth of Nigeria also that
there is no significant effect of fluctuation on exchange rate on the
manufacturing sector. Some recommendations for policy were made based on the
findings. Amongst others is the need to strengthen the link between agriculture
and manufacturing‟s sector through local sourcing of raw materials thereby
reducing reliance of the sector on import of input to a reasonable level.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF
THE STUDY
Following the fluctuation of the naira in 1986, a policy
induced by the structural adjustment programme (SAP), the subject of exchange
rate fluctuation has become a topical issue in Nigeria. This is because it is
the goal of every economy to have a stable rate of exchange with its trading
partners. In Nigeria, this goal was not reached in spite of the fact that the
country embarked on devaluation to promote export and stabilize the rate of
exchange. The failure to realize this goal subjected the Nigerian manufacturing
sector to the challenge of a constantly fluctuating exchange rate. This was not
necessitated by the devaluation of the naira but the weak and narrow productive
base of the sector and the rising import bills also strengthening it. In order
to stem this development and ensure a stable exchange rate, the monetary
authority put in place a number of exchange rate policies.