Ogunleye, E.O., Department of Economics, University of Ado Ekiti, Nigeria
This paper investigates the impact of exchange rate deregulation on industrial performance in Nigeria between 1975 and 2006. The co-integration technique and chow breakpoint test were the analytical tools. Two measures of industrial performance -; industrial productivity growth rate and, ratio of industrial production to gross domestic product - were used. It was found that a long-run relationship exists between each of these measures on one hand and exchange rate, interest rate and terms of trade on the other. In particular exchange rate deregulation was found to have significant positive impact on industrial performance. In order to determine the short term dynamics around the equilibrium relationship, the study estimates an error correction model (ECM) and industrial productivity growth rate and contribution of industrial production to GDP lagged by one and two periods, exchange and interest rates emerged as significant determinant of industrial productivity growth rate in Nigeria. The result however suggests the importance, as well as the imperative for Nigeria to embark on comprehensive exchange rate policy in order to accelerate and sustain industrial growth performance. © EuroJournals Publishing, Inc. 2012.