The Impact of Industrialization on Economic Growth and Development in Nigeria
Chapter One
Objective of the study
The broad objective of the study is to determine the impact of industrialization on economic growth in Nigeria. Therefore, following the research questions developed above, the specific objectives of this study are to:
- Determine the impact of industrialization on the economic growth of Nigeria.
- Find out the existence or not of any causal relationship between industrialization and economic growth in Nigeria.
CHAPTER TWO
LITERATURE REVIEW
Theoretical literature
Theories of growth and industrialization
The concept of industrialization has found its way into numerous literatures. It is a system whereby an economy creates or grows wealth through industries and machines. Theories exist on the role of industrialization in economic growth and development.
Structural Change Theory
The structural change models of economic growth analyses the relationship between industrialization and economic growth. The theory formulates the hypothesis that underdevelopment is due to underutilization of resources arising from structural and institutional factors that have their origin in both domestic and international dualism. It theory advocates structural transformations as described in Todaro and Smith (2011) as “the process of transforming an economy in such a way that the contribution to national income by the manufacturing sector eventually surpasses the contribution by the Agricultural sector.
The description given by Jhingan (2011) is that “industrialization plays a major role in the economic development of LDCs. It is a pre-requisite for economic development as the history of advanced countries show. For development to occur the share of the industrial sector should rise and that of the agricultural sector decline”. He went ahead to state that “this is only possible through a policy of deliberate industrialization”.
The critical appraisal of the role of industrialization in economic growth and development presented by Jhingan suggests that “the policy of industrialization followed by LDCs in the early phase of their development has not brought the expected economic and social benefits. The reasons he adduce are that it has failed to reduce inequalities of income and wealth, unemployment and regional imbalances and the pace of development has been uneven with the neglect of the growth of other sectors. In addition, he notes that “ industrialization has created such serious problems as rural stagnation,, the mushrooming growth of the urban class, organizational power failures in government bureaucracies and the excessive high rate of the growth of population and the labour force, among others.
The Minimum Effort Thesis
This theory developed by Harvey Leibenstein quoted in Jhingan (2011) holds that critical “minimum effort” is the way out of the impasse of underdevelopment by the underdeveloped countries that are characterized by the vicious circles of poverty that keeps them around a low per capita income equilibrium sate. The minimum effort as envisaged by Leibenstein would raise the per capita income to a level at which sustained development could be maintained
The theory supposes that every economy undergo “shocks” and “stimulants”. While a shock has the capacity of reducing per capita income, a stimulant possesses the capacity of increasing it, and it is the stimulation of income-raising factors such as industrialization beyond income-depressing factors that secures the critical minimum and sets the economy on the path of development.
Stages of Growth Theory
Rowstow in his “Stages of economic growth” theory discussed the various phases undergone by countries as they transit from one level of economic development to another and how industrialization can spur growth and he described this in the take-off stage. Jinghan (2011) describes this stage as “when growth becomes its normal condition”. As prescribed by Rostow, one of the conditions for the take-off is the development of leading sectors in the economy such as industrial sectors and regards this as the analytical bone structure of the stages of economic growth.
CHAPTER THREE
METHODOLOGY
Research Design
This work adopts the experimental research design which combines theory and empirical exercises in estimating the impact of the explanatory variable on the explained variable.
The other procedure to be adopted for data verification include the unit root rest, co integration test, error connection mechanism (ECM) granger causality test, for test and the standard error test.
Model Specification
Hypothesis had earlier been stated in this study with a view of evaluating the impact of industrialization on economic growth in Nigeria. This study adopted, modified and used the model developed by Cripps and Tarlingin Duncan and Denburg (1988), the model is specified as
Q = β0+β1qm+ ut
Where Q = economic growth proxy by GDP
qm= manufacturing output
The model was employed in expressing the relationship between manufacturing output and growth of the economy of 12 advanced countries in 1973.
In order to take in the effect of some other key factors necessary for economic growth, the modified model used in this study is stated as follows
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF RESULT
Presentation of Result
The Unit Root Test
The Augmented Dickey Fuller test of stationarity was employed to test for the existence of unit roots and the result is presented below:
CHAPTER FIVE
CONCLUSION, SUMMARY OF FINDINGS AND POLICY RECOMMENDATIONS
Summary of Findings
This research work investigated the impact of industrialization proxy by industrialization (INDO) on economic growth in Nigeria proxy by gross domestic product (GDP). Related works of other scholars were also analyzed, and the outcome of this research indicates that industrialization has impacted positively but not significantly on economic growth in Nigeria with the sample period.
From the unit root test, three of the variables (LGDP, LINDO and EXR) became stationary at first difference 1(1) while inflation rate (INFR) was stationary at level 1(0). This led us to adopt the Autoregressive Distributed Lag (ARDL) cointegration test for long run relationship.
The significance of the probability value of the F-statistic from the ARDL estimate indicates the presence of cointegration relationship among the variables.
The adjusted coefficient of multiple determination of the long-run estimates shows that 98.77% of the total variations in gross domestic product (GDP) is accounted for by industrialization (LINDO), exchange rate (EXR) and inflation rate (INFR) while the remaining 1.23% is attributed to other growth factors not captured in the model.
Conclusion
The research analysis so far leads us to the conclusion that within the sample period, industrialization had positive but insignificant impact on economic growth in Nigeria. In addition, industrial policies if effectively implemented can drive the growth of output in Nigeria.
Policy Recommendations
Based on the outcome of the various tests carried out and the hypothesis evaluated, this research therefore makes the following recommendations:
- There is need for Government to, as a matter of urgency declare a state of emergency in the industrial sector
- The ministry of trade and industry should be audited to determine loopholes.
- Strategic efforts like building of capital goods manufacturing industries should be made by government to expand the sector in order to achieve the status of industrialization.
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