The Role Of Manufacturing Sector In Nigeria’s Economy

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Abstract

Over time, the absence of locally sourced inputs has resulted in low industrialization. This is as a result of the near total neglect of agriculture which has denied many manufacturers their primary source of raw materials. Some constrains faced in this sector among others include; high interest rates, low patronage, unpredictable government policy. The paper thus, empirically examines the role of manufacturing sector in gearing economic growth in Nigeria from 1986-2014. Time series experimental research was adopted. Unit root test was carried out to test the stationarity levels of the variables before conducting the regression analysis to avoid spurious regression results. The co-integration results showed that long-run equilibrium relationship exist among the variables used for the analysis at 5% level of significance. The findings revealed that variations in demand are a significant driving force for variations in capacity utilization. The findings further showed that a percentage change in manufacturing output on average increases GDP by 0.04%. Suggestive from the analysis therefore is that there is need for provision of incentives for productive diversification through information externalities and co-ordination externalities. Also, there should be promotion of regionally integrated value chains and markets to enhance investment in manufacturing and other sectors to enhance industrial competitiveness and regional economic transformation.

1.       Introduction

It has been debated that the fastest way through which a nation can achieve sustainable economic growth is neither by the level of its endowed resources, nor its vast human resources, but technological innovation, enterprise development and industrial capacity (Olamade et al, 2014).Despite the vast oil wealth, the World Bank Development indicators (2014) has shown that majority of Nigerians are poor with 84.5% of the population living on less than two dollar a day on a survey conducted in 2010 up from 63.1% reported in 2004 survey. The issue of poverty can only be traced to mono-economic practice and underutilization of the nation’s endowed resources, especially in manufacturing sector which could have opened up a lot of opportunities in job creation and economic growth.

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 who 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 landmarks into the world industrial markets. Also, another path to recovery requires an urgent rebuilding of deteriorated dilapidated 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.

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. An in-depth knowledge of the relative efficiency of industries in relation to economic growth and development could go a long way to 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.

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 gearing economic growth in the Nigerian economy. 

The broad objective of this study is to appraise critically, the role of the manufacturing sector in Nigerian economy. The specific objectives of the study include to:

  1. Investigate the extent to which manufacturing sector output has contributed to the Nigeria economy;
  2. Determine whether there is significant relationship between Manufacturing sector capacity utilization and economic growth in Nigeria

The paper provided answers to the following questions:

  1. To what extent has the Nigerian manufacturing sector output contributed to the of the growth Nigerian economy?
  2. What relationship exists between manufacturing sector capacity utilization and economic growth in Nigeria?

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

H01: Manufacturing sector output has not contributed significantly to growth of the Nigerian economy.

H02: Manufacturing sector capacity utilization and economic growth does not have significant relationship.

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