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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
Title page = = = = = = = = i
Certification= = = = = = = ii
Approval page = = = = = = = iii
Acknowledgement = = = = = = iv
Abstract = = = = = = = = v
1.1 background of the study = = = = 1-2
1.2 statement of problem = = = = = 3
1.3 objectives of the study = = = = = 3-4
1.4 research questions = = = = = 4-5
1.5 statement of research hypothesis = = = 5
1.6 significance of the study = = = = 5-6
1.7 scope of the study = = = = = 6
1.8 definition of terms = = = = = 7-8
2.1 Introduction = = = = = = 9-10
2.2 Role of Manufacturing Sector in an Economy = 10-12
2.3 Review of Productivity = = = = = 12-18
2.4 Structure of Nigerian Manufacturing Sector = 18-23
2.5 Evaluation of the Performance of Nigerian
Manufacturing Sector = = = = = 23-27
2.6 Overview of Nigerian Industrial Policy = = 27-31
2.7 Theoretical Framework = = = = = 31-34
2.8 The Problems of Capacity utilization in
Economic Growth = = = = = = 34-36
2.9 Empirical review = = = = = = 36-40
3.1 Introduction = = = = = = 41
3.2 Re- Statement of Research Questions = = 41
3.3 Re- Statement of Research Hypothesis = = 42
3.4 Research design = = = = = = 42
3.5 Sources of Data = = = == = = 43
3.6 Data Analysis Technique = = = = 43-44
3.7 Model Specification = = = = = 44
3.8 A’ Priori Expectation = = = = = 45-46
4.1 Presentation of regression of regression result= 47
4.2 Interpretation of regression result = = = 47
4.2.1. Econometric A’priori Test = = = = 47-48
4.2.2. Statistical Tests = = = = = = 48-50
4.2.3. Evaluation Based On Econometric Criteria = 50-53
5.1 Summary of findings = = = == = 54-55
5.2 Recommendation = = = = = = 55
5.3 Conclusion = = = = = = = 56
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
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 affordable
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.
The history of industrial development and manufacturing in Nigeria is a
classic illustration of how a nation could neglect a vital sector through policy
inconsistencies and distractions attributable to the discovery of oil (Adeola,
2005). 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 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:
1. to investigate the impact of the manufacturing sector on the
economic growth and development of Nigeria.
2. to assess the level of productivity in the Nigerian manufacturing
3. to identify the major constraints confronting the Nigerian
Manufacturing sector.
4. to find out the various policy measures available to the government
that can be used to redress the persistent decline in the
manufacturing production.
The study would examine the following questions:
1. To what extent has the Nigerian manufacturing sector contributed to
the economic growth and development of the country?
2. What has been the performance of the Nigerian manufacturing
3. What are the constraints that are confronting the manufacturing
4. What policy measures could be adopted to redress the persistent
decline in the manufacturing production?
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.
This study on the impact of manufacturing sector on economic growth in
Nigeria is significant in the following ways:
i. It will influence various economic units both in the public and private
sectors of the Nigerian economy;
ii. The research report will be a veritable source of information to
various categories of students as well as researchers wishing to
conduct further research in this area;
iii. It will be relevant topolicy makers especially when making policy
decisions on the choice of policy that will suit the Nigerian
manufacturing sector.
Finally, the study will be useful to institutions outside the ones
mentioned above.
This study evaluates the role of the Nigerian manufacturing sector in
relation to the growth of the economy. The major constraints that confront the
sector would be identified in the course of examining the overall development in
the sector since the adoption of SAP.
The analysis of the contribution of the manufacturing sector to the economic growth of Nigeria shall be restricted to the period from
1981 to 2010 using only relevant performance indicators such as index of manufacturing, sector’s contribution to the Gross Domestic
Product (GDP) and other control variables.
Most of the information and data needed for the study would be gathered
from existing literature and from relevant government agencies such as the
Central Bank of Nigeria, National Bureau of Statistics (NBS), Manufacturing
Association of Nigeria (MAN) as well as international organizations such as
United Nations Industrial Development Organization (UNIDO).
(i) Productivity: It has been defined by Economists as the ratio of output to
input in a given period of time. In other words, it is the amount of
output produced by each unit of input.
(ii) Economic Development: This is the ability of a nation to expand its output
at a rate faster than the growth rate of its population. Economic development
viewed in this way has to do with growth of per capita GNP which will also
determine the standard of living of the people.
(iii) Trade Liberalisation: This is the elimination of non-tariff barriers to imports,
the rationalisation and reduction of tariffs, the institution of market determined
exchange rates and the removal of fiscal disincentives and regulatory
deterrents to exports.
(iv) Industrial policy: This is a systematic government involvement, through
specifically designed policies in industrial affairs, arising from the inadequacy of
macroeconomic policies in regulating the growth of industry.
(v) Economic liberalization: This is a replacement of a state-led economy to
private sector dominated economy. It focuses on privatization, deregulation of
foreign investments, trade liberalisation, deregulation of credit policy and the
introduction of the Foreign Exchange Market (FEM).


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