IMPACT OF EXCHANGE RATE VOLATILITY ON MANUFACTURING OUTPUT IN NIGERIA

Abstract

Exchange rate volatility has remained a major challenge for Nigeria’s economic stability and industrial growth over the past decade. The manufacturing sector, which should serve as a driver of structural transformation, has been particularly vulnerable to persistent fluctuations in the naira. This study investigates the impact of exchange rate volatility on manufacturing output in Nigeria between 2014 and 2024, using secondary data obtained exclusively from the World Bank World Development Indicators. Trend analysis was conducted through tables and graphs in Excel, capturing the trajectory of the official exchange rate, the real effective exchange rate, and key measures of manufacturing performance, including value added, growth rate, and contribution to GDP. The findings reveal that despite sustained depreciation of the naira, the manufacturing sector has not experienced the anticipated export competitiveness gains. Instead, volatility has raised production costs, constrained capacity utilizations, and reduced the sector’s GDP share from over 10% in 2014 to around 6% in 2023. The study concludes that exchange rate instability has acted more as a drag than a stimulus to industrial growth. It recommends the adoption of a coordinated policy mix that includes exchange rate stabilisation, targeted support for import-substitution industries, improved infrastructure, and consistent fiscal measures to strengthen manufacturing competitiveness and resilience.