The Impact of External Reserve on the Performance of Manufacturing Industry in Nigeria
Keywords:
Exchange Rate, Foreign Direct Investment, External Reserve, Manufacturing Sector PerformanceAbstract
This study investigates external reserve and performance of manufacturing industry in Nigeria spanning from 1981 to 2020. Data for the study were obtained from Central Bank of Nigeria statistical bulletin and world banks world development indicators 2021. The model of the study was subjected to unit root test using the augmented dickey fuller unit root approach. The augmented dickey fuller unit root result revealed a mixed order of integration. This implies that some of the variables were stationary at levels while other became stationary after first difference. Based on this, the auto-regressive distributive lag model was adopted to ascertain the both the short-run and long-run result as well as the speed of adjustment. The auto-regressive distributive lag bound test result reported existence of long-run relationship between the variables. Further result revealed that, exchange rate and share of manufacturing sector to gross domestic product indicate that exchange rate is positive to influence share of manufacturing sector to gross domestic product. Also, external reserve and share of manufacturing sector to gross domestic product revealed that external reserve has a negative but significant relationship with share of manufacturing sector to gross domestic product. Finally, foreign direct investment and share of manufacturing sector to gross domestic product showed a positive but insignificant between foreign direct investment and share of manufacturing sector to gross domestic product. In the long-run. The study recommended among others that government should adopt a blend of monetary and fiscal policy measures to grow the economy. This implication of this is that fiscal policy measures will help the government improve on her external reserve which can also be allocated to critical sectors of the economy like the manufacturing sector.
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