This study investigates the effects of monetary policy and domestic investment on manufacturing output in Nigeria using the Autoregressive Distributed Lag (ARDL) approach, covering the period from 1980 to 2023. The long-run results reveal that the monetary policy rate has a significantly negative effect on manufacturing output, suggesting that higher interest rates impede industrial growth. In contrast, broad money supply, lending interest rate, exchange rate depreciation, and domestic investment exert positive and statistically significant impacts on manufacturing performance. Inflation, while negative, remains statistically insignificant, highlighting the complex and often inconclusive relationship between price levels and output in developing economies. In the short run, lagged monetary policy rate and domestic investment significantly enhance manufacturing output, whereas recent exchange rate depreciation temporarily constrains growth due to increased input costs. The error correction term confirms the existence of a stable long-run relationship, with a moderate speed of adjustment. The study concludes that enhancing manufacturing sector performance in Nigeria requires a balanced and responsive monetary policy, improved financial liquidity, greater domestic investment, and strategic exchange rate management. Policy recommendations include the implementation of
targeted credit interventions, financial sector reforms, investment-friendly policies, and coordinated macroeconomic strategies to promote sustainable industrial development.
Keywords: Monetary Policy, Manufacturing Output, Domestic Investment, Nigeria
Article-17-Abdullahi-Nadabo