An Assessment of the Manufacturing Sector Output on the Economic Growth in Nigeria (1985 to 2019)

An Assessment of the Manufacturing Sector Output on the Economic Growth in Nigeria (1985 to 2019)

Chapter One

Objective of the study

The aim/objective of the study is to find out the role of manufacturing sector output on the economic growth in Nigeria. The specific objectives are;

to investigate the impact of the manufacturing sector output on the economic growth of Nigeria.
to assess the level of productivity in the Nigerian manufacturing sector.
to identify the major constraints confronting the Nigerian Manufacturing sector.
to find out the various policy measures available to the government that can be used to redress the persistent decline in the manufacturing production.

CHAPTER TWO

LITERATURE REVIEW

INTRODUCTION

African countries continue to liberalize their domestic economies with a view to integrating into the world economy, and to this end their barriers to imports are gradually reduced. Integration offers them the opportunities to join in world economic expansion amidst formidable challenges, and undoubtedly creates competitive pressures for efficiency gains. Efficiency gains, in terms of increased value added, productivity, profitability and wages, do not seem to be abundant across African manufacturing firms, and there is little evidence that the overall performance of the manufacturing sector has improved significantly. Enhanced efficiency gains also tend to remain concentrated with dynamic firms, their affiliates and enterprises that capture market niches through quick leverage with new industrial realities, but the vast majority fails to plug into the sources of dynamic industrial growth

This chapter considers the current literature which deals with the manufacturing sector. Although, many of the studies reviewed in this chapter did not address the Nigerian manufacturing sector directly, their findings are considered applicable to the Nigerian scenario. Importantly, the studies discussed in this chapter represent only a small subset of the studies conducted on the manufacturing sector, and were chosen to be illustrative rather than comprehensive

ROLE OF MANUFACTURING SECTOR IN AN ECONOMY

Historically, the growth in manufacturing output has been a key element in the successful transformation of most economies that have seen sustained rises in their per capita incomes. In most of Africa, performance in this area has been poor over the last decades. The lack of high-quality data constitutes a major impediment for rigorous policy relevant research on African industry, and the majority of previous economic research on Africa has therefore been based on aggregate data.

Opaluwa et al (2010) opine that the manufacturing sector plays catalytic role in a modern economy and has many dynamic benefits that are crucial for economic transformation. They noted that in an advanced country, the manufacturing sector is a leading sector in many respects; it is an avenue for increasing productivity in relation to import substitution and export expansion, creating foreign exchange earning capacity, raising employment, promoting the growth of investment at a faster rate than any other sector of the economy, as well as wider and more efficient linkage among different sectors

Obasan and Adediran (2010) argue that when industrialisation is compared to agriculture, the manufacturing sector offered special opportunities for capital accumulation. They explained that capital accumulation can be more easily realised in spatially concentrated manufacturing than in spatially dispersed agriculture. This is one of the reasons why the emergence of manufacturing has been so important in growth and development. Obasan and Adediran (2010) note that the contribution of the manufacturing industries in the Nigerian economy cannot be over emphasized when considering its employment potentials and financial impacts on the economy. Apart from its role of building grounds for development by laying solid foundation for the economy, they argue that it also serve as import substituting industry and provide ready market for intermediate goods.

CHAPTER THREE

RESEARCH METHODOLOGY

INTRODUCTION

This chapter is devoted to the research methodology adopted in this project. The chapter specifies the research design, sources of data analyzed, data analysis procedure, data analysis technique, models specification etc.

RE-STATEMENT OF RESEARCH QUESTIONS

This study examines the following research questions:

To what extent has the Nigerian manufacturing sector output contributed to the economic growth and development of the country?
What has been the performance of the Nigerian manufacturing sector?
What are the constraints that are confronting the manufacturing sector?
What policy measures could be adopted to redress the persistent decline in the manufacturing production?

RE-STATEMENT OF RESEARCH HYPOTHESIS

The hypothesis tested in the course of the analysis is stated below:

H0: that the manufacturing sector does not contribute significantly to Nigerian economy.

H1: that the manufacturing sector contributes significantly to Nigerian economy.’

CHAPTER FOUR

PRESENTATION AND ANALYSIS OF DATA

PRESENTATION OF REGRESSION RESULT

The result of the OLS model is presented in the table below

Table 4.1.

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

SUMMARY OF FINDINGS

This research work seeks to assess the impact of manufacturing sector on economic growth in Nigeria. The dependent variable is log of Real Gross Domestic Product (Lrgdp) used as proxy for economic growth. The major explanatory variable is manufacturing output (Mangdp) which has been used as major proxy for manufacturing sector. Other explanatory variables are investment (inv), government expenditure (govexp) and money supply (M₂)

In line with the a priori expectation, the result shows a significant positive relationship between manufacturing output and economic growth. A positive relationship is also shown between investment and economic growth, though insignificant. Government expenditure is shown to have a significant positive relationship with economic growth. This also meets the a priori expectation. Contrary to a priori expectation in which an increase in money supply (M₂) leads to an increase in economic growth the result shows a negative relationship between the two variables. This has been attributed to the influence of inflation especially considering the fact that real GDP has been used as against nominal values.

R² value of 95.84% shows high goodness of fit implying that the explanatory variables adequately explained the behaviour of the dependent variables.

CONCLUSION

The impact of manufacturing sector on economic growth in Nigeria has been evaluated by a proper introduction of the subject, an extensive review of related literature and empirically addressing relevant hypotheses. In spite of the fact that the Nigerian economy is dualistic, more or less traditional, with a large rural agricultural sector and relatively small manufacturing sector on one hand, and mono culturally dependent on crude oil exports, it has been possible to specify appropriate model, whose parameter estimates have facilitated the estimation of the impact of manufacturing sector on economic growth in Nigeria.

RECOMMENDATION

The study recommends as follows:

That manufacturing outfits be encouraged by the government through policy packages such as tax holiday and other helpful concessions in order to enhance manufacturing output in the country.

That financial authorities in Nigeria specify guidelines that will increase credit accessibility for investment in the manufacturing sector.
That more emphasis be placed on technical education in Nigeria so as to strengthen the country’s industrial base thereby enhancing manufacturing output.
That strategies be put in place to increase the participation of the private sector in the economy.
That industrial policy implementation be made consistent enough to impact appropriately on economic growth in Nigeria.

References

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Havrylyshyn, O. (1990). Trade policy and productivity gains in developing countries: A survey of the literature. The World Bank Research Observer. pp.1–24.
Kaldor, N. (1967). Strategic Factors in Economic Development. New York: W.F. Humphrey Press.
Kayode, M. O. & Teriba, O. (1977). Industrial Development in Nigeria. Ibadan: University Press.
Krueger, A. O. & Tuncer, B. (1982). An empirical test of the infant industry argument. World Bank Reprint Series. No 284, December.
Nadiri, M. I. (1972). Review of Income and Wealth. International studies of factor inputs and total factor productivity: A brief survey. pp. 194-254.
Pack, H. (1988). Handbook of Development Economics. Industrialization and trade. In: H. Chenery and T.N. Srinivasan, eds., B.V. Elsevier Science Publishers.
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Central Bank of Nigeria (2011). Statement of Accounts and Annual Reports.Abuja: Central Bank of Nigeria.

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