Effect of Selected Macroeconomic Variables on Manufacturing Sector Output in Nigeria

JUSTINE David

doi:10.56201/ijefm.v10.no2.2025.pg78.98

📄 Download Paper

Effect of Selected Macroeconomic Variables on Manufacturing Sector Output in Nigeria

JUSTINE David

Abstract

This study examines the effect of selected macroeconomic variables—exchange rate, interest rate, money supply, unemployment rate, and inflation rate—on the manufacturing sector output in Nigeria. The study employs an ex post facto research design and utilizes the Autoregressive Distributed Lag (ARDL) model for regression analysis to explore both short-run and long-run dynamics. The findings reveal that, in the long run, the exchange rate has a significant positive effect on manufacturing sector output in Nigeria, indicating that exchange rate stability fosters industrial growth. Conversely, inflation rate, money supply, and unemployment rate were found to have no significant effect on manufacturing output in the long term. Additionally, the interest rate was found to have a significant negative effect on industrial sector output, suggesting that high borrowing costs deter investment in the manufacturing sector. In the short run, the exchange rate, money supply, and unemployment rate were statistically significant in influencing industrial output, while the inflation rate and interest rate did not show any significant impact. Based on these findings, the study recommends that the Nigerian government should focus on diversifying the economy to reduce dependency on oil and mitigate the impact of external shocks, such as global oil price fluctuations. The government should also encourage the development of financial markets to support industrial growth, promote public-private partnerships (PPPs) for skills development in the manufacturing sector, and reduce interest rates to improve access to affordable financing, especially for small and medium-sized enterprises (SMEs). Furthermore, introducing foreign exchange hedging mechanisms could help manufacturers manage risks related to exchange rate volatility.

Keywords

ARDL ModelExchange RateInterest RateInflation RateMacroeconomicvariablesMoney SupplyUnemployment RateManufacturing Sector Output

References

Abiola, Olawale .M, (2024). Impact of exchange rate volatility on the manufacturing sector growth performance in Nigeria. Adebiyi, M. (2022). "Inflation and its impact on Nigerian industrial growth." Journal of Economics and Development. Adesanya, T. A., & Ajala, O. A. The effect of interest rate on manufacturing output in Nigeria: An ARDL Approach. 2(1) 23-34 Akintoye, I. (2020). "Interest rate and investment in Nigeria's manufacturing sector." African Journal of Economic Review.3(2) 23-34 Amri, F. (2022). The effect of inflation, exchange rate, labor, and money supply on the manufacturing industry sector in INDONESIA 2011--2020. Jurnal Ilmu Ekonomi Terapan, 7(1). Anochie, U. C., Okereafor, G. and Bashir, M. O. (2023). Macroeconomic variables and productivity of Nigeria’s manufacturing sector. Nigerian Journal of Management Sciences, 24(1), 244 – 254. Anyanwu, J. C. (2020). "Unemployment and its effect on manufacturing sector performance in Nigeria." Journal of Development Studies. David-Wayas, O. M., Ugwu, J. O., Chukwuma, Q. O., & Anyaegbuna, P. C. (2018). The impact of macroeconomic variables on manufacturing productivity in Nigeria. International Journal of Recent Research in Social Sciences and Humanities, 5(1), 246-258. Eze, S., & Okoye, O. (2021). "Money supply and inflationary pressure in the Nigerian economy." Nigeria Economic Review. Ezeani, E., & Okeke, C. (2021). The impact of power supply on industrial productivity in Nigeria. Energy Economics. Ezu, G. Jeff-Anyeneh, S. E. & Adaora, O. N. (2019) Macroeconomic variables and performance of manufacturing sector in Nigeria. IOSR Journal of Business and Management, 22(11). Ghareli, S. & Mohammadi, A. (2016). A study on the effect of macroeconomic variables and firm characteristics on the quality of financial reporting of listed firms in the Tehran stock exchange. Journal of Fundamental and Applied Sciences, 8(25), 1777-1797 Haruna, A., & Chiebonam, O. G. (2022). Interest rate and its effect on economic growth: An issue for Nigeria industrial sectors. Journal Of Advanced Education and Sciences, 2(1), 01-04. Li, Y., Hu, M., & Zhao, L. (2023). Study on the impact of industrial green development and technological innovation on employment structure. Ogujiuba, K., & Adeniran, O. (2020). "The effect of exchange rate volatility on manufacturing performance in Nigeria." International Journal of Economics. 5(6) 35-46 Ogunleye, A. (2021). "The role of manufacturing in Nigeria's economic development." Economic Development Quarterly. Olalekan, B., & Akinbobola, S. (2022). "Macroeconomic challenges and the Nigerian manufacturing sector." Global Economic Insights.ISN155534 Olaniyan, S. (2021). Exchange rate volatility and industrial output in Nigeria. Journal of Economic Studies, 46(5), 77-93. Olasehinde, O., Olaolu, E. O., Adeleke, L., & Enueshike, P. (2022). Effect of selected macroeconomic variables on share price performance in the Nigerian banking industry.Quest Journals Journal of Research in Business and Management, 10(10), 14-21. Olokoyo, F. O., Ibhagui, O. W., & Babajide, A. (2020). Macroeconomic indicators and capital market performance: Are the links sustainable?Cogent Business & Management, 7(1). Tapsin, G. (2017). The impact of selected macroeconomic variables on the balance sheets of manufacturing sector in Turkey. Account and Financial Management Journal, 2(5), 737- World Bank. (2023). Public-Private Partnerships and Industrial Development in Nigeria.

Effect of Selected Macroeconomic Variables on Manufacturing Sector Output in Nigeria

Abstract

Keywords

References

More Articles from INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT