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 co- integration 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.