Macroeconomic Variables and Industrial Goods Sector Index Performance: Evidence from the Nigerian Exchange Group (NGX)

Abstract

This study examines the effect of exchange rate, interest rate, and inflation on the Industrial Goods Sector Index of the Nigerian Exchange Group, addressing the limited sector-specific evidence in existing literature. An ex post facto research design is adopted using monthly secondary data from 2012 to 2025 sourced from the Nigerian Exchange Group and the National Bureau of Statistics. The Vector Error Correction Model (VECM) is employed to analyze both short-run dynamics and long-run relationships. The findings confirm a significant long-run cointegrating relationship between macroeconomic variables and the Industrial Goods Sector Index. Inflation has a positive and statistically significant long-run effect, while exchange rate and interest rate are insignificant in both the short and long run. The error correction term indicates a strong adjustment process, correcting about 61% of disequilibrium monthly. The study concludes that inflation is the dominant driver of industrial sector performance in Nigeria. Therefore, policymakers should prioritize inflation control to ensure sector stability. Investors should focus on inflation trends and adopt long-term strategies, while firms should implement measures to hedge against inflationary pressures.