The Impact of Exchange Rate on Industrial Growth in Nigeria

Adeyemi; P. A.; Ph.D Awe; F.D.; Ph.D; Ilori O.O.; Ph.D

doi:10.56201/ijefm.v11.no6.2026.pg278.288

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The Impact of Exchange Rate on Industrial Growth in Nigeria

Adeyemi, P. A., Ph.D Awe, F.D., Ph.D, Ilori O.O., Ph.D

Abstract

Despite various exchange rate policies put in place by successive governments in the country to enhance industrial growth, the desired result in terms of output growth is yet to be achieved. The study therefore broadly investigated the impact of exchange rate fluctuation on industrial growth in Nigeria. Specifically, the study examined the direction of causality between the exchange rate and industrial growth in Nigeria. The study covers the period between 1986 and 2023, utilizing data sourced from the Central Bank of Nigeria statistical bulletins and National Bureau of Statistics. Relevant literature was reviewed in the study, ranging from conceptual issues and theoretical literature to the empirical studies by past researchers. Co-integration analysis, ARDL model and Pairwise Granger Causality test were employed to capture the stated objectives. The ARDL bound test result confirmed a significant long-run relationship among industrial output , exchange rate , interest rate , inflation and foreign direct investment . The results in both short and long-run of the estimated ARDL model revealed that exchange rate, interest rate and inflation have a significant negative impact on industrial output with coefficients of -0.042(p=0.008), -0.031(p=0.013) and -0.027(p=0.018) respectively. However, foreign direct investment exerted a significant positive impact on industrial output with a coefficient of 0.058(p-0.012) in the short run. The result of Pairwise Granger Causality test showed that uni-directional causality runs from exchange rate to industrial output. In line with these findings, monetary authorities should embark on policies that ensure stability of the exchange rate for sustainable industrial growth in Nigeria. Moreover, price stability should be prioritized through prudent fiscal and monetary interventions to enhance industrial competitiveness and efficiency.

Keywords

Exchange rateIndustrial OutputARDL model.

References

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The Impact of Exchange Rate on Industrial Growth in Nigeria

Abstract

Keywords

References

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