External Sector Indicators and Industrial Sector Performance in Nigeria

By: Christian Ugondah Nyenke & Firstborn Woke

Pages: 242–257, Volume: 3, Number: 2

Published by: AEFUNAI Journal of Economics, Finance and Development Studies, Alex Ekwueme Federal University, Ndufu-Alike, 8/1/2026, 2026

ISSN (Electronic): 2536-6742

DOI:

External Sector Indicators and Industrial Sector Performance in Nigeria

Abstract:

This study examined the relationship between external sector indicators and industrial sector performance in Nigeria. The study collected data from the Central Bank of Nigeria statistical bulletin. The study adopted the ordinary least squares (OLS) technique, such as the Augmented Dickey-Fuller (ADF) test, Johansen Cointegration test, and Error Correction Mechanism. The results revealed that foreign direct investment (FDI) inflow and trade openness (TOP), exchange rate (EXR), and net export (NEX) were not rightly signed. This implies that an increase in these variables affects the industrial sector negatively in Nigeria in the period under study. On the other hand, external reserves (ERS) and inflation rate (IFR) showed a positive relationship with the industrial sector in Nigeria. This is in line with theoretical a priori expectations. However, the failure of FDI, TOP, EXR, and NEX to improve the performance of the industrial sector may be attributed to unreliable data in Nigeria. The hypotheses tested proved that FDI and ERS have a significant impact on the industrial sector in Nigeria. But TOP, IFR, NEX, and EXR were not significantly related to industrial sector performance in Nigeria. Based on the findings, it was recommended, among other things, that the monetary authority should devote effort to building sustainable external reserves to a level that supports international liquidity and convertibility of the domestic currency and growth of the Nigerian industrial sector. There should be preferences in the foreign exchange allocation to the manufacturing subsector. A parallel exchange rate market would be advantageous to the industries.

Keywords: External sector, Industrial sector, FDI, Trade openness, External reserves