Abstract
The paper conducts a short-run analysis of the implications of oil price movements and exchange rate relationship for the Nigerian manufacturing sector growth between January 2008 and September 2017. Monthly data are extracted on variables such as oil price, exchange rate, inflation rate, interest (lending) rate, money supply and the manufacturing sector growth rate. Oil price movements are viewed in terms of both volatility and change. While EGARCH is used to estimate oil price volatility, oil price change is measured using Hamilton index for both oil price sharp drop and jump. The SVAR results indicate that exchange rate and inflation rate are more responsive to sharp drop in oil price. The two variables also have the highest impact on the manufacturing sector growth. Findings further indicate that Nigerian manufacturing sector is more affected at the cost side than the output side. This underscores the importance of tackling the inflation pressure in Nigeria from the structural perspective as against the monetary perspective.
Highlights
The trends of events in Nigeria in the recent times have brought about more quest for economic diversification, in which the manufacturing sector has been one of the major sectors in the economy primed to champion the course
The study has shown that it might be wrong for previous studies using SVAR to imply that a negative oil price shock will always produce reactions that are direct opposite to the positive oil price shocks
The Hamilton index adopted in the study has shown that both sharp jump and drop in oil price will make the inflation rate rise
Summary
The trends of events in Nigeria in the recent times have brought about more quest for economic diversification, in which the manufacturing sector has been one of the major sectors in the economy primed to champion the course. The vulnerability of the macroeconomic variables in the country to oil price movements has taken its toll on the growth of the manufacturing sector since 1979 when the country recorded the first oil boom. During this period, the price of oil rose astronomically from 56 USDpb to as high as 100 USDpb. During this period, the price of oil rose astronomically from 56 USDpb to as high as 100 USDpb This prompted the government to shift attention from other sectors to the oil sector leading to the problem of Dutch Disease (Resource Curse) (CBN, 2015). The manufacturing sector since has been experiencing unbalance and unsustainable output growth hindering the sector from playing its role in the diversification process to rescue the economy from its feeble economic status (Adeniyi, 2011)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
