The manufacturing sector has been identified in extant economic literature as a critical sector in an economy. It has a huge potential for promoting and stimulating economic growth, reducing poverty and creating employment for a large number of people especially in developing countries. Thus, the objective of this paper is to empirically examine the effect of crude oil revenue on manufacturing sector output in Nigeria between 1981 and 2017. Time series data were sourced from secondary sources on Manufacturing Sector Output (MAN), Crude Oil Revenue (COR), Labour (LAB), Interest Rate (INR) and Exchange Rate (EXR). The data sets employed Vector Auto Regressive (VAR) modeling technique for the analysis. The result of the analysis shows that the shocks due to exchange rate (EXR) contributes more to variance in manufacturing sector output (MAN) with an average of about 15.85 per cent followed by interest rate (INR) with an average of about 15.33 per cent within the period under review. The study also reveals that crude oil revenue (COR) contributed the least to variance in manufacturing sector by about 1.42 per cent. This implies that crude oil revenue (COR) is not the main shocks causing the variation in manufacturing sector output (MAN) in Nigeria but exchange rate and interest rate within the period of study. Based on this finding, the study recommends that government should diversify the economic base of the nation by investing substantial share of the oil revenue into the productive (real) sector of the economy especially the manufacturing sector.
