EXTERNAL SECTOR AND INDUSTRIAL PERFORMANCE IN NIGERIA

This study determines the effect of external sector on industrial performance in Nigeria. A data period
of 1985 to 2023 is considered. The industrial performance in Nigeria is examined using manufacturing
sector gross domestic product as the indicator, with exchange rate, net export, foreign direct
investment, external debt, and degree of trade openness employed as fundamentals of the external
sector. Relevant yearly secondary data were gathered from the Statistical bulletins of the Central Bank
of Nigeria (CBN) and reports from the National Bureau of Statistics (NBS). The data analysis process
was conducted using the techniques of Augmented Dickey-Fuller (ADF) unit root test, bounds cointegration test, and Autoregressive Distributive Lag (ARDL) approach. The unit root test yielded a
mixture of I(0) and I(1) orders of integration, and the bounds co-integration test exhibited long run
association among the variables. The ARDL estimates revealed that exchange rate substantially and
inversely influenced manufacturing performance. Conversely, the degree of trade openness and foreign
direct investment had substantial and driving impact on the manufacturing sector. In the short and
long-term, the outcome of external debt and net exports are both positive but not significant. Thus, it is
necessarily concluded that industrial performance through the lens of manufacturing sector’s domestic
output in Nigeria is substantially influenced by the selected external sector variables. The Nigerian
government should implement policies to stabilise the exchange rate and reduce volatility which
adversely affects industrial production costs, encourage foreign direct investment inflows, and utilise
external debt to provide production enablers, among other recommendations.