AN EMPIRICAL STUDY OF THE IMPACT OF MANUFACTURING SECTOR ON THE ECONOMIC GROWTH OF
This research work examines econometrically the impact of manufacturing sector on economic growth in Nigeria, from 1981 to 2010. It assesses the effect of manufacturing output (mangdp), investment (inv), government expenditure (govexp) and money supply (m2) on log of real gross domestic product (lrgdp). Appropriate multiple regression model is specified with parameters, which are estimated using the ordinary least square (OLS) technique. Test of hypothesis is carried out and the result shows a positive and significant relationship between manufacturing output and economic growth in Nigeria within the period under investigation. Among other recommendations the study opines that manufacturing outfits should 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
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 both consumption 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 adorable 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.