IMPACT OF INFLATION ON MANUFACTURING OUTPUT IN NIGERIA FROM 1990 TO 2023

The study investigates the relationship between inflation and manufacturing output in Nigeria from 1990 to 2023 using data from the Central Bank of Nigeria. The study also examines the relationship between inflation, exchange rate, and manufacturing output, as well as the causal relationships between these variables. Control variables such as exchange rate, interest rate, capital, and labor are included in the analysis. Non-linear unit root tests (KSS and ADF) are conducted to assess the stationarity of the variables. The results indicate that all variables are unit root processes and not stationary non-linear ESTAR series. Cointegration analysis is performed using a linear ARDL model with four cointegrating equations identified. However, bound tests suggest that there is no long-run relationship between inflation, exchange rate, and manufacturing output. In terms of short-run effects, inflation hurts manufacturing output but this impact is not statistically significant. Similarly, the exchange rate has a negative relationship with manufacturing output in the short run but it is also not statistically significant. Additionally, there is no evidence to suggest that inflation causes changes in manufacturing output in the short run or vice versa. Based on these findings, policy recommendations include curbing artificial inflation through fiscal policy measures to discourage monopolies in the manufacturing sector and managing prices to promote healthy growth. The study suggests that controlling inflation and promoting healthy growth in the manufacturing sector should be key priorities for policymakers.