ABSTRACT:

This paper examines the implications of exchange rate instability on the macroeconomy with particular reference to unemployment. It focuses on the gross domestic investment and capacity utilization. The ordinary least square technique (OLS) was adopted using time series data on exchange rate, unemployment, gross domestic investment and capacity utilization. Data were sourced from central bank of Nigeria statistical bulletin. federal office of statistics of Nigeria and. allied sources. Exchange rate is measured by three years moving average of standard deviation of real exchange rate. This paper maintains that more foreign exchange should be appropriated for and or allocated to capacity utilization and building in order to enhance greater productivity in the economy thereby reducing the magnitude of unemployment. A negation of this fosters the severity of unemployment with all its attendant ills.