This study examines the impact of key monetary policy variables money supply, interest rate, inflation, and exchange rate on manufacturing output in Nigeria from 1986 to 2023 using a Structural Equation Modeling (SEM) approach. Annual time-series data were sourced from the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS). The findings reveal that money supply has a positive and statistically significant impact on manufacturing output, with a unit increase leading to a 177.5-unit rise, highlighting the importance of liquidity in supporting manufacturing sector growth. In contrast, interest rate, inflation, and exchange rate exert negative impacts, with inflation and exchange rate showing statistical significance. Specifically, a one-unit rise in interest rate, inflation, and exchange rate reduces manufacturing output by approximately 79.34, 50.56, and 16.94 units, respectively. These outcomes align with Monetarist and Keynesian theories, which emphasize the role of monetary expansion and macroeconomic stability in enhancing productive capacity. The study recommends an expansionary monetary policy through targeted credit interventions, a strengthened inflation-targeting framework, a unified and rules-based foreign exchange regime, and improved access to affordable credit for manufacturers. These strategies are crucial for promoting sustainable growth in Nigeria’s manufacturing sector and achieving broader macroeconomic stability.