ASSESSMENT OF THE IMPACT OF MANUFACTURING SECTOR ON ECONOMIC GROWTH IN NIGERIA (1980-2015)

Abstract

The importance of manufacturing sector to the growth of any economy and survival cannot be overemphasized. In an attempt to advance on this, this study attempts to investigate the assessment of the impact of manufacturing sector on economic growth in Nigeria from 1980 – 2015, Ordinary Least Square (OLS) econometric technique was used on time series data of relevant variables of manufacturing Output, investment and capacity utilization; The study found that manufacturing output, investment and capacity utilization has a significant relationship with the economy. Meaning that manufacturing output, investment and capacity utilization exerts impact on economic growth via manufacturing sector of the economy. The study recommends that efforts should be geared toward strengthening the macroeconomic, socio-infrastructural and institutional environment of the nation, thus bringing a good linkage between domestic and external institutions with the ultimate aim of properly harnessing funds so mobilized towards productive manufacturing sector of the economy.

CHAPTER ONE

INTRODUCTION

1.1       Background of the Study

Prolonged economic recession occasioned by the collapse of the world oil market from the early 1980s and the attendant sharp fall in foreign exchange earnings have adversely affected economic growth and development in Nigeria. Other problems of the economy include excessive dependence on imports for bothconsumption and capital goods, dysfunctional social and economic infrastructure, unprecedented fall in capacity utilization rate in industry and neglect of the agricultural sector, among others (Ku et al, 2010; Adesina, 1992). These have resulted in fallen incomes and devalued standards of living amongst Nigerians.

Although the structural adjustment programme (SAP) was introduced in 1986 to address these problems, no notable improvement took place. From a middle-income nation in the 1970s and early 1980s, Nigeria is today among the 30 poorest nations in the world. Putting the country back on the path of recovery and growth will require urgently rebuilding deteriorated infrastructure and making more goods and services available to the citizenry at affordable prices. This would imply a quantum leap in output of goods and services.

The path to economic recovery and growth may require increasing production inputs – land, labour, capital and technology – and or increasing their productivity (Kayode and Teriba, 1977). Increasing productivity should be the focus because many other countries that have found themselves in the same predicaments have resolved them through productivity enhancement schemes. For instance, Japan from the end of the World War II and the United States of America from the 1970s have made high productivity the centre point of their economic planning and the results have been resounding. Also, middle income countries like Hong Kong, South Korea, Singapore and India have embraced boosting productivity schemes as an integral part of their national planning and today they have made significant in-roads into the world industrial markets.

Given the importance of high productivity in boosting economic growth and the standards of living of the people, it is necessary to evaluate the productivity of the Nigerian manufacturing sector. This will be useful in ascertaining the relative efficiency of firms, sub-sectors and sectors. A knowledge of the relative efficiency of industries in relation to economic growth and development could aid government in planning its programmes and policies, especially in deciding on which industries should be accorded priority. In the light of the foregoing, there cannot be a more appropriate time to evaluate the role of the Nigerian manufacturing sector in the economic growth and the development of the country than now.

1.2       Statement of the Problem

The history of industrial development and manufacturing in Nigeria is a classic illustration of how a nation could neglect a vital sector through policy inconsistencies and distractions attributable to the discovery of oil (Adeola, 2005). The near total neglect of agriculture has denied many manufacturers and industries their primary source of raw materials. The absence of locally sourced inputs has resulted in low industrialization.  Some of the constraints faced in this sector include: High interest rates, Unpredictable government policies, Non-implementation of existing policies, Lack of effective regulatory agencies, Infrastructural inadequacies, Dumping of cheap products, Unfair tariff regime, Low patronage. It is in the light of the foregoing that this study seeks to evaluate the role of the manufacturing sector in the Nigerian economy.

1.3       Objectives of the Study

The broad objective of this study is to assess the impact of manufacturing sector on economic growth in Nigeria.

The specific objectives of the study include:

i.            to assess the effect of investment on the manufacturing sector on economic growth in Nigeria.

ii.            to assess the effect of capacity utilization by the manufacturing sector on the economy.

iii.            to identify the effect of manufacturing output on the economy.

1.4       Research Questions

The study would examine the following questions:

1.      what is the effect of investment on the manufacturing sector on the economy?

2.      has capacity utilization by the manufacturing sector affected economic growth?

3.      what is the effect of manufacturing output on the economy?

1.5       Research Hypotheses

The hypotheses to be tested in the course of the analysis are stated below:

H01:There is no significant relationship between investment and economic growth in Nigeria

H02:There is no significant relationship between capacity utilization and economic growth.

H03:     There is no significant relationship between manufacturing output and economic growth in Nigeria

1.6       Significance of the Study

This study is significant in the following ways:

It will influence various economic units both in the public and private sectors of the Nigerian economy;

It will be a veritable source of information to various categories of students as well as researchers wishing to conduct further research in this area;

It will be relevant to policy makers especially when making policy decisions on the choice of policy that will suit the Nigerian manufacturing sector.

Finally, the study will be useful to institutions outside the ones mentioned above.