EXCHANGE RATE VOLATILITY AND MANUFACTURING SECTOR OUTPUT IN NIGERIA
KUROTAMUNOBARAOMI, Tamunosiki
Department of Accountancy, Port Harcourt Polytechnic
Rumuola, Port Harcourt
AKANI, Elfreda N.
Banking and Finance Department, Faculty of Management Sciences
Rivers State University, Port Harcourt
and
NWOSI, Anele A.
Banking and Finance Department, Port Harcourt Polytechnic
Rumuola, Port Harcourt
ABSTRACT
This study empirically investigated the relationship between exchange rate volatility and Nigeria’s manufacturing sector output by utilising both official and parallel market exchange rates. Secondary time series data for the official and parallel exchange rates as well as manufacturing sector contribution to Gross Domestic Product that span 1982 to 2019 were sourced from the CBN’s annual statistical bulletin and analysed by a combination of descriptive and econometric analytical techniques that include mean, skewness, Ordinary Least Square, Pairwise Granger Causality test, and the GARCH model. From the results it was found that official exchange rate volatility has a negative relationship with manufacturing output, while parallel market exchange rate volatility is positively related to manufacturing sector output in Nigeria. Both variables are further observed to be independently insignificant, but collectively significant. There is also unidirectiomal causal relationship spilling from official exchange rate volatility to manufacturing sector output and parallel market exchange rate volatility to manufacturing sector output. Consequently, it is recommended (among others) that activities of the parallel FX market should be curtailed, and the official market should be made accessible to manufacturers.
Keywords: Exchange rate, Volatility, Parallel Market, Official Market, GARCH