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Exchange rate policies are germane to industrial subsector development and the country at large. In this regard; the study examines the asymmetric pass through of official exchange rate policy on Nigerian industrial Subsector from 1970Q1 to 2019Q4.  Non-linear ARDL method of estimation was adopted to ascertain the long run and short run asymmetric relation between official exchange rate and industrial output subsector. The results confirmed the presence of both long run and short run asymmetries between manufacturing output and official exchange rate. In the long run, increase in official exchange rate (appreciation) portends a corresponding increase in manufacturing output, while decrease in official exchange rate (depreciation) is negatively related to manufacturing output. On the other hand, the short run dynamics revealed that positive changes in official exchange rate choked off industrial output though statistically insignificance while negative change (depreciation) crowded in industrial output in Nigeria in the period under review against a priori expectation. The result also indicated that the crowding out impact of official exchange rate depreciation is more enduring (long lasting) compared to the positive variations. The presence of asymmetry is novel and instructive for policy pundits, executors, theorists, monetary authorities and allied agents to take decisive steps in order to stem the debilitating effects of exchange rate misalignment to encourage domestic investors, attract foreign investors and thus, stimulate the industrial subsector.

Asymmetric Dynamics of Industrial Response to Exchange Rate Variation in Nigeria