Authors: Haruna Jane Azume, Ajidani Moses Sabo
Abstract: This study investigated the effect of exchange rate fluctuation on agricultural and manufacturing export in Nigeria from 1984 to 2021. Using annual data on agricultural export volume (AEV), manufacturing export volume (MEV), official exchange rate (OER), relative export prices, government expenditures, net domestic credit and interest rates, the study employed the Toda–Yamamoto modified Granger causality approach within a Vector Autoregression (VAR) framework to capture both short- and long-run dynamics for variables of mixed integration orders. The results indicated that exchange rate fluctuation have a significant positive effect on agricultural exports, enhancing international price competitiveness while manufacturing exports are largely unresponsive due to structural constraints and capacity limitations. Causality analysis revealed no uni-directional or bi-directional causal relationship between agricultural and manufacturing export in Nigeria. This suggests sectorial independence and limited inter-sectorial spillovers. Forecast error variance decomposition showed that agricultural export is substantially influenced by exchange rate whereas manufacturing export variance is predominantly explained by its own innovations. These findings highlight the importance of stable and competitive exchange rate policies complemented by sector-specific interventions and structural reforms to stimulate sustainable export growth. Policy recommendations include improving agricultural infrastructure, enhancing manufacturing capacity, promoting export diversification and aligning macroeconomic management with sectorial development objectives.
DOI: https://doi.org/10.5281/zenodo.19460713
