This study examined the effect of exchange rate fluctuation on real sector output in Nigeria. It is the goal of every economy to have a stable rate of exchange with its trading partners. In Nigeria, this goal was not attained in spite of the fact that the country embarked on devaluation to promote export and stabilize the rate of exchange. Despite various efforts by the government to maintain a stable exchange rate, the Naira has depreciated throughout the 1980s to date. It is worrisome to note that Nigerian economy is under industrialized and its capacity utilization is also low. Specifically, this study examined the effect of exchange rate fluctuation on agricultural, industrial, building and construction, and trade sector outputs. It employed an ex-post facto research design and the main statistical was the Auto-Regressive Distributive Lag (ARDL) estimation technique using secondary data sourced from the Central bank of Nigeria statistical bulletins from 1986-2021. The result of the analyses revealed that exchange rate fluctuation had significant negative effect on agricultural sector output. Also, exchange rate was found to have a significant and negative effect on industrial, building and construction, and also trade sector output in Nigeria even though these effects were negative. The study concludes that although foreign exchange had significant effect on the real sector, such effect were negative thus displaying an inverse relationship. Sequel to these findings, there is a need for government at all levels (federal, state, and local) to actually invest in agriculture in an effort to match domestic demand and export to compete with crude oil for foreign exchange earnings. The Central Bank of Nigeria (CBN) is to provide foreign exchange relief measures for the acquisition of raw commodities that the nation naturally lacks while maintaining minimal exchange rate fluctuation to encourage local production by industries.
Exchange rate, real sector output
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