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DETERMINANTS OF MANUFACTURING GROWTH IN NIGERIA
Abstract
The manufacturing sector is seen as major catalyst to development due to the ripple effect of industrial growth on every part of a country’s economy. However, the structure of the manufacturing sector in developing economies like Nigeria has undermined its ability to make meaningful contribution to industrial development. This has shrouded the understanding of factors propelling growth in the manufacturing sector. This study examines the determinants of manufacturing sector growth in Nigeria from 1980-2018 with the aid of dynamic ordinary least square (DOLS) method of econometric analysis which has the potential to generate reliable estimates than the static OLS. In particular, DOLS accounts for endogeneity problem by adding leads and lags. Results of the study indicate that the main determinants of Nigeria’s manufacturing growth are foreign direct investment (FDI), interest rate, labour force, inflation and exchange rate. We therefore recommend a robust regulation of foreign capital importation and local content policies to stem capital flight and spur manufacturing growth in the country. Also, the interest rate regime should be made to favour domestic capital utilization. This should involve laying emphasis on single-digit interest rate in order to lower the cost of production and boost activities in the manufacturing sector.
Keywords: Manufacturing, Industrial development, Economic growth and development, Government Policy, Nigeria.