A PRAGMATIC OVERVIEW OF THE IMPACT OF EXCHANGE RATE ON INDUSTRIAL PRODUCTIVITY IN NIGERIA

Abomaye-Nimenibo, Williams Aminadokiari Samuel

Department of Economics,

Obong University, Obong Ntak, Akwa Ibom State, Nigeria

Email: wasanim2006@yayoo.com

Abstract: The study examined the impact of exchange rate on industrial productivity of Nigeria’s from 1980 to 2013. The empirical analysis revealed that there is a long-term relationship between the dependent and independent variables, showing positive autocorrelation. Exchange rate and government expenditure from the findings had a negative effect or impact on industrial productivity, whereas labour force and gross capital formation both had a positive effect on industrial productivity. The study revealed that the F-statistic (F_cal) is greater than the critical value at 5% level of significance, and so the null hypothesis (Ho) was rejected in favour of the alternate hypothesis that the variables are jointly statistically significant. To test for autocorrelation (AC), we make use of the Amended Durbin-Watson Statistic which result revealed that there is positive autocorrelation since dU > d < 4 – dU is equal to 1.8076 > 1.307127 < 2.1924.  The study further revealed that Exchange rate and government expenditure had a negative effect or impact on industrial productivity, whereas labour force and gross capital formation both had a positive effect on industrial productivity. Based on the findings the following recommendations are made to control exchange rate from fluctuating. Government should create incentive such as loan subsidy etc to small scale industries, thereby encouraging them to process domestic goods into processed goods for export. The government should encourage and promote export in order to maintain a surplus balance of trade. Effective fiscal and monetary policies should be put in place to bring about a realistic exchange rate for the naira. An appropriate environment and infrastructural facilities that will encourage industries to come in should be provided so that foreign investors will be attracted to invest in Nigeria thereby creating job opportunities. Finally, the government should influence the foreign exchange rate, through positive economic reforms that will reduce the adverse effect of unstable foreign exchange rate on the Nigerian economy.