Implications of Exchange Rate Flexibility on a Developing Sub-Saharan Economy: Evidence from Manufacturing Sub-Sector of Nigeria

Abstract:     
This paper articulates implications of exchange rate movement on the manufacturing sub-sector of a developing economy with particular reference to Nigeria. The basic question is to ascertain the implications of exchange rate instability on the performance of the manufacturing sector. The ordinary least square (OLS) technique was adopted using times series data on exchange rate manufacturing sector, government expenditure on manufacturing, economic growth, labour force and volatility of exchange rate. Exchange rate movement is determined (measured) by using three years moving Average of standard deviation of real exchange rate. The result of the analysis is respectable and satisfactory. The study maintains that since manufacturing sector has strong relationship with exchange rate movement vis-à-vis export and import of goods and services therefore more foreign exchange should be made available aimed at maximizing the gains of industrialization.

Keywords: Exchange Rate, Flexibility, Manufacturing

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