Exchange rate volatility and manufacturing exports in Nigeria: 1986-2020

Abstract

The study examines the effect of exchange rate volatility on manufacturing exports in Nigeria using data from World Bank and United Nations Conference on Trade and Development (UNCTAD). The study employed Exponential Generalized Autoregressive Conditional Heteroscedasticity (EGARCH) to estimate the volatility and generate the volatility series (EXCHVOL) and Vector Error Correction Mechanism (VECM) as a form of Vector Auto-regression (VAR) to estimate the effects and forecast results. The results proved there is significant volatility in the endogenous variable EXCH and the further estimates found that the effect of EXCHVOL on MEX is positive but short-lived and the effect of FDI on MEX is near-zero. However, the most prominent effect on MEX is of INF which impacts it negatively and does not get corrected in the forecasted period of 10 years. The study suggests greater loan services to manufacturing companies to boost productivity and better infrastructural provision to better support industrial activities.