Macroeconomic Implications of Exchange Rate Fluctuations on the Manufacturing Sector Performance in Nigeria

The study focuses on the macroeconomic implications of exchange rate fluctuation on manufacturing sector performance in Nigeria between 1981 and 2016. variable such as manufacturing capacity utilization, manufacturing value added, and manufacturing output are used to proxy manufacturing sector performance while exchange rate was used as the explanatory variable. data were analyzed using the vector autorepression estimation technique while the GARCH was used to determine exchange rate volatility. the unit root results confirm that all the variables were stationary at first difference, while the Johannsen cointegration test confirms that long run relationship exists between the variables employed in the study. Empirical results confirm that exchange rate depreciation has a positive impact on manufacturing output and manufacturing value added while it enhances manufacturing capacity utilization. it indicates that exchange rate fluctuation restricts the performance of the manufacturing sector in Nigeria and hence has a strong macroeconomic implication on the sector. efforts should be targeted at stimulating manufacturing output whenever there is depreciation of the domestic currency to stabilize the sector’s performance.