Exchange Rate Fluctuations and Firm’s Survival: Is Exchange Rate Fluctuation Good for a Growing Economy Like Nigeria?

Abstract

The volatility of exchange rates has presented a persistent challenge for developing countries, particularly in the sub-Saharan African region. The purpose of this research is to analyse how changes in the exchange rate have affected the ability of Nigeria's manufacturing sector to contribute to the country's GDP. This study used a retrospective Ex Post Facto research strategy with time series data. The analysis relied on secondary data collected from the statistics bulletin of the Central Bank of Nigeria and the Annual Abstract of the National Bureau of Statistics, both of which cover the time period of 1990 through 2020. The impact of variations in the exchange rate on the long-term viability of a company was analysed by employing ordinary least squares estimate and a regression analysis. The research shows that rising exchange rates are significantly related to increased output. Furthermore, the data show that interest rates, trade openness, and exchange rates are statistically significant at the 5% level, whereas inflation is not. These findings indicate that exchange rate fluctuations are detrimental to the growth of an economy like Nigeria. Based on these research findings, the study recommends the implementation of effective monetary policies to ensure a realistic exchange rate, thereby enhancing the performance of the manufacturing sector in Nigeria.