Statistical Analysis of Exchange Rate Volatility and Its Effects on Import-Dependent Industries in Kano State

This study conducts a statistical analysis of naira exchange rate volatility and its effects on import-dependent manufacturing industries in Kano State, North West Nigeria, one of the country's most important industrial and commercial centres and the hub of a textile and leather goods manufacturing sector heavily reliant on imported inputs. The sustained depreciation and heightened volatility of the Nigerian naira following successive foreign exchange market reforms by the Central Bank of Nigeria since 2021 have imposed substantial cost shocks on manufacturers dependent on imported raw materials, machinery, and intermediate goods. Monthly nominal effective exchange rate data are sourced from the Central Bank of Nigeria Statistical Bulletin for the period 2019 to 2024, and production cost index data are obtained through structured questionnaires administered to 35 registered manufacturing firms in Kano's Challawa and Sharada industrial estates. Descriptive statistics and generalised autoregressive conditional heteroscedasticity models are applied to characterise exchange rate volatility dynamics. Pearson correlation and Granger causality tests are used to assess the statistical relationship between exchange rate shocks and production cost variability at the firm level. Results confirm a statistically significant positive relationship between naira volatility and production cost instability, with firms in the textile sub-sector most severely affected. The study recommends the establishment of forward currency contracts through commercial banks as a hedging instrument for manufacturing importers. Keywords: exchange rate volatility, GARCH, manufacturing costs, import dependence, Kano State