Abstract: The research investigates the effect of foreign direct investment (FDI) on the manufacturing sector in Nigeria, and its importance in the Nigeria economy in general. The main issues in this paper relates to understanding the effects and impact of foreign direct investments on the manufacturing sector, as well as our ability to attract adequate funds, sufficient enough to accelerate the pace of our economic growth and development. In order to analyse the data, both econometric and statistical methods were used. The econometric regression model of ordinary least square was applied in evaluating the relationship between foreign direct investment and major economic indicators such as manufacturing output, exchange rate and interest rate. The model revealed a positive relationship between foreign direct investment and each of the variables (manufacturing output, exchange rate and interest rate). Foreign Direct Investment has a positive relationship on the manufacturing sector in Nigeria. In addition, there is a positive and significant relationship between Exchange rate (EXCH) and manufacturing output (MOUTPUT) in Nigeria. Some recommendations were made therein that government should step up efforts in attracting foreign direct investment into the sector by ensuring that investor confidence is protected. The study also suggest that despite the fact that the importance of FDI cannot be over accentuated, there is the need for government and policy makers to realize the fact that the fundamental element in any successful development strategy ought to be the encouragement of domestic investors first before going after foreign investors.