Nigerian Journal of Banking and Financial Issues (NJBFI)
FOREIGN RESERVES AND MANUFACTURING SECTOR PERFORMANCE IN NIGERIA (1991-2021)
Abstract
This study examined the effect of foreign reserve on manufacturing sector performance in Nigeria covering 1991 to 2021. Foreign reserve was proxied with foreign reserve, trade openness, foreign direct investment and exchange rate while manufacturing sector performance, the dependent variable was proxied with manufacturing sector’s contribution to real gross domestic product (RGDP) in Nigeria. Data were sourced from Central Bank of Nigeria (CBN) Statistical Bulletin. The study employed Augmented Dickey-Fuller unit root test for pre-test. The data was analyzed using error correction mechanism (ECM) and Johansen Co-Integration. To determine the residual's normality, the study used post estimation tests such as the Breausch Godfrey serial correlation, the Breausch Pagan Godfrey test, and histogram. The study revealed that all the explanatory variables except exchange rate have a positive relationship with manufacturing sector performance. Specifically, external reserves has an insignificant positive effect on manufacturing sector’s performance with p-value of 0.070 > 0.05 and adjusted R2 of 60%. Consequently, the study concluded that foreign reserve has a positive effect but in significant effect on Nigerian manufacturing sector’s performance. Thus, the study recommended that managers of external reserves should design more positive and progressive measures to continue to stimulate growth of important sectors like manufacturing.
