MANUFACTURING SECTOR CAPACITY UTILIZATION AND OUTPUT PERFORMANCE IN NIGERIA: EMPIRICAL INVESTIGATION

Abstract

This study examines the relationship between exchange rates, inflation, and manufacturing capacity utilization in Nigeria from 1981 to 2023 using the Autoregressive Distributed Lag model. Findings revealed significant and dynamic interactions among the variables. A one percent increase in the exchange rate leads to a rise in manufacturing output in the current period, suggesting that exchange rate depreciation may enhance sectoral competitiveness. Inflation negatively affects manufacturing output after one and four years. The study recommends stable foreign exchange access for manufacturing firms and policies to stabilize prices of manufacturing inputs such as energy, transportation, and raw materials.