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The study examined the impact of the manufacturing sector on Nigeria’s economic growth from 1985 to 2020. Utilized were the Autoregressive Distributed Lag (ARDL) model and the Granger causality approach. The Central Bank of Nigeria’s data bulletin on real gross domestic product (RGDP), manufacturing capacity utilization (MCU), manufacturing output (LMO), government investment expenditure (GINVEXP), money supply (LM2), and interest rate (INR) were utilized. There is evidence of long-term and short-term correlations between the variables. The results indicated that MCU has a favorable effect on RGDP, while LMO has a good effect. It also revealed that GINVEXP has a negative effect on RGDP whereas LM2 has a good effect. In addition, there is evidence of unidirectional causality between RGDP and MCU, LMO and LM2. Therefore, the government should intensify efforts to promote socio-economic infrastructure, macroeconomic framework, and institutional framework in Nigeria in order to provide a favorable environment for interactions between external and domestic institutions; consequently, mobilized funds should be effectively channeled toward the productive manufacturing sector.


Chapter one


Background of the study

Kuznets (1966) described long-term development patterns of countries based on empirical analyses of national accounts and argued that industrialization or increases in the share of manufacturing in GDP is a key characteristic of modern economic growth, which is significantly different from the much lower growth rates observed in the world prior to the industrial revolution. Kaldor investigated the relationship between industrial development and economic growth and, based on empirical findings, identified the manufacturing sector as “the primary engine of rapid growth” (Kaldor, 1967:48).

It is generally acknowledged that manufacturing is the engine of growth and development for any nation. In contemporary economies, industrialization under the industrial sector is usually regarded as a crucial instrument for speeding economic development and progress. It is a conduit for the manufacturing of goods and services, the creation of vast employment opportunities, and the generation of earnings (Olorunfemi, Tomola, Felix &Ogunleye, 2013). According to Adofu, Taiga, and Tijani (2015), manufacturing is the fabrication of goods for sale or usage using tools, machinery, labor, chemical, and biological formulations. It utilizes both human handcraft and advanced technology to change or convert raw materials into finished goods on a huge scale.

rationalization of effective tactics. This simply refers to the transition of an economy from a traditional system of low production to a modern system of mass production, which involves a more efficient and automated system through the sustained and deliberate combination and application of management techniques, suitable technology, and other resources that promote high tech production techniques (Ayodele&Falokun, 2003). It has been stated that the fastest route to rapid, sustained growth and development in any country is through industrial capacity, technological innovation, and firm expansion, as opposed to massive human and material resources (Olamade, Oyebisi&Olabode, 2014). Due to their effective exploitation of the industrial sector, the majority of developed nations, such as Germany, have risen to become some of the greatest economies in the world today, despite their lack of natural resources and the chronic inflation they have experienced since the 1920s. In addition, Bennett, Anyanwu, and Kalu (2015) theorized that industrial growth involves the application of contemporary equipment, machineries, and technology in the creation of goods and services, as well as to alleviate human suffering and promote societal welfare. Thus, current manufacturing processes necessitate the development of managerial and entrepreneurial abilities as well as high-tech breakthroughs that frequently encourage large-scale productivity and enhanced living conditions.

In Nigeria, the history of manufacturing and industrial development illustrates how a nation could neglect a vital sector due to economic policy inconsistencies and the abandonment of the agricultural sector for the oil sector, which was the country’s primary economic base following the discovery of commercial quantities of oil in the 1970s (Adeola, 2005). Ogbu (2012) argued that the oil industry in Nigeria has limited contributions to other sectors of the economy because the government has not yet acquired the capacity to energetically pursue the more value-added businesses of the petrochemical value chain. Consequently, the oil business lacks technological spillover effects. For example, the manufacturing sector contributed 10% to economic growth in Nigeria prior to the 1970s. Adofu, Taiga, and Tijani (2015) stated that Nigeria’s economic growth was negatively impacted by a protracted economic crisis brought on by a fall in the world oil market in the early 1980s and a dramatic reduction in foreign exchange revenues. As a result, the economy experienced a number of issues, such as excessive reliance on imports for consumption and input materials, deterioration of socio-economic infrastructure, capacity under-utilization in the industrial sector, poor management strategies and institutional framework, and neglect of the agricultural sector, which was formerly the foundation of the Nigerian economy, etc. As a result, the economy has remained undiversified, resulting in lower incomes and living standards (Adesina, 1992)

More than fifty percent of the country’s gross domestic product (GDP) is provided by a single primary sector, which is characteristic of an underdeveloped nation. Statistics revealed that the manufacturing sector’s capacity utilization has been sluggish and very low in comparison to other strong economies around the world. For instance, the industrial sector’s capacity utilization in Nigeria was 40% in 1990 and 53.9% in 2008. In 2009, the manufacturing sector’s capacity utilization was 55.88%; by 2015, it had increased to 60.5%. Theoretically, economic theory posits that an increase in manufacturing activity, where manufacturing capacity utilization is the primary indicator, results in an increase in a nation’s gross domestic product. Nevertheless, as demonstrated by the trend analysis presented previously, even while manufacturing capacity utilization improves with time, this sector’s growth remains negligible in comparison to the growth rate of manufacturing capacity utilization in the economy as a whole. On the basis of this context, the researcher wishes to analyze the impact of the manufacturing sector on economic growth in selected west African nations. The investigation will utilize west African Nigeria.

1.2 Statement of the problem

Increasing economic growth and the level of living of citizens necessitates a rise in productivity. In light of this, it is necessary to reevaluate the manufacturing sector’s productivity in Nigeria. Adofu et al. (2015) suggested that the manufacturing sector is more dynamic than other economic sectors because the movement of productive resources to more dynamic sectors increases economic growth. However, the manufacturing industry in Nigeria is currently experiencing a number of challenges, including a weak technological base due to insufficient investment in research and a lack of economic innovation and development. Due to foreign exchange constraints, firms relied largely on the importation of machinery and other equipment to continue their industrial production process. As a result, the sector’s contribution to the gross domestic product has remained negligible. Despite the fact that manufacturing capacity utilization increases over time, the growth rate of the manufacturing sector’s contribution to GDP remains negligible in comparison to the growth rate of manufacturing capacity utilization in the economy, as demonstrated by the trend analysis presented previously. Against this backdrop, this study evaluates the impact of Nigeria’s manufacturing sector on economic growth.

1.3 Objectives of the study

The purpose of this study is to determine the impact of Nigeria’s manufacturing sector on economic growth. In addition, the following specific objectives will be evaluated:

To determine the manufacturing sector’s contribution to Nigeria’s GDP
Determine the effect of manufacturing capacity on the nation’s gross domestic product
Determine the rate of development of manufacturing capacity utilization in Nigeria’s economy

1.4 Research Hypotheses

Throughout the course of this investigation, three basic theories are developed.

First Hypothesis:

The manufacturing sector has no impact on the Nigerian economy.

The manufacturing industry does contribute to the Nigerian economy.

The second hypothesis

There is no relationship between manufacturing capacity and gross domestic product.

There is an effect of manufacturing capacity on the nation’s gross domestic product.

The Third Hypothesis

There is no manufacturing capacity utilization growth rate in the Nigerian economy.

True: Nigeria’s economy is experiencing a rising rate of manufacturing capacity utilization.

1.5 Significance of the Study

It is anticipated that the outcomes of this study would reveal the impact of the manufacturing sector on the Nigerian economy and the manner in which it tends to foster economic growth.

It will also reveal the manufacturing industry’s historical trend.

It will also demonstrate how export supply capacity has increased and Nigerian import dependence has decreased. In addition, it will act as a guide for the nation’s economists and policymakers on how to steer and manage the economy in a healthy path.

1.6 Scope of the study

The scope of the study includes an evaluation of the impact of Nigeria’s manufacturing sector on economic growth. The study will utilize a 35-year time series. Between 1985 and 2020. The data will be obtained from the CBN bulletin.

1.7 Limitations of the study

Financial constraint: Inadequate funds tend to restrict the researcher’s efficiency in locating relevant resources, literature, or information and in collecting data (internet, questionnaire and interview).

Due to time constraints, the researcher will conduct this study alongside other academic duties. This will consequently reduce the time spent conducting research.

Insufficient research materials are provided to the researcher, consequently limiting the scope of the investigation.

1.8 Definition of Terms

Modern manufacturing encompasses all procedures intermediary to the manufacture and integration of a product’s constituent parts. Some businesses, such as those that produce semiconductors and steel, use the term fabrication instead. The manufacturing industry has deep ties to engineering and industrial design.

Economic development is the process by which a country enhances the economic, political, and social well-being of its citizens. In the 20th and 21st centuries, economists, politicians, and others commonly employed the term. However, the concept has been in the West for millennia.




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