EFFECT OF EXCHANGE RATE FLUCTUATIONS ON NIGERIAN MANUFACTURING SECTOR

J.K.J Onuora, Aniedozie Mercy Obiamaka, Azubudike Osamor Dominic

Abstract


The study investigated the effect of exchange rate fluctuation on the Nigerian manufacturing sector. The variables of interest rate, inflation rate and exchange rate fluctuation were regressed on return on asset over the period 1986 to 2017. Econometric techniques, including Augmented Dicker Fuller and Philip Perron tests for unit roots and ordinary least square (OLS) were used. The result of regression indicate that interest rate has positive and significant effect in return on asset while inflation rate and exchange rate fluctuation have negative and insignificant effect on return on asset within the period under study. The study therefore concludes that exchange rate has adverse effect on the performance of manufacturing sector in Nigeria and has not helped to improve the rate of investment in Nigeria within the period under study. The study recommends that banks should reduce their interest rates in order to mobilize manufacturing sector since they canadjust to normalcy from adverse effects of interest rate. Since loan is the main source of funds for manufacturing sector, banks should give due emphasis to its loan and strive to reduce their interest rate on loans by providing excellent services for their customers.

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