THE IMPACT OF THE MANUFACTURING SECTOR ON ECONOMIC GROWTH IN NIGERIA

CHAPTER ONE

Background of Study

The manufacturing sector plays a significant role in economic development. Industries act as a catalyst that accelerates the pace of structural transformation and diversification of economy to enable a country to fully utilize its factor endowment and to depend less on foreign aid and supply of finished goods or raw materials for its economic growth, development and sustainability. In other words, in Nigeria, it has always been realized that economic development requires growth with structural change. In considering the Nigeria economic development experiences therefore, it is instrumental to examine the growth and structural change in certain major aspects of the economy (Ajakaye, 2002). 

Productivity is more in the manufacturing sector than in the agricultural sector.

The extended economic recession occasioned by the collapse of world oil market from the early 1980s and the associated 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 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 caused fallen incomes and devalued standards of living amongst Nigerians.

Despite the introduction of structural adjustment programme (SAP) in 19986, was 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. The path to economic recovery and growth may require increasing production in puts land, labour, capital and technology and or increasing their productivity (Kayode and Teriba 1997).

A knowledge of the relative efficiency of industries in relations to economic growth and programs and polices especially in deciding on which industries should be accorded priority. In the light of the foregone, there cannot be a more appropriate time to evaluate the role of Nigerian manufacturing sector in the economic growth and development of the country than now.

Statement of problem

The Nigerian industrial development and manufacturing in Nigeria is a classic illustration of how a nation could neglect a vital sector through policy inconsistencies and distraction attributable to the discovery of oil (Adeola 2005). That the country’s oil is not major source of employment, and its benefit to the other sector in the economy is limited since the government has not adequately developed the capacity to pursue the more valued-added activities of the petrochemical value chain. As a result, the oil industry does not allow for any agglomeration of the technological spillover effects, Ogbu (2012) stresses.  

Upon several government policies on the stability of Nigeria economy through manufacturing industry, there have been a lot of challenges facing the growth of Nigerian manufacturing sector as industrial by researcher.  These challenges include: corruption and ineffective policies (Anyanwu 2007); lack of integration of macroeconomic plans and the absences of harmonization coordination of fiscal policy (Onoh, 2007), gross mismanagement/misappropriate of public funds (Okemini and Uranta, 2008); and lack of economic potential for economic growth and development (Ogbele 2010). Despite the emphasis placed on fiscal policy in the management of the economy, the management of the economy, the manufacturing sector inclusive, Nigerian economy is yet to come on the path of sound growth and development because of low out output in the manufacturing sector to the economy (GDP).

The near total neglect of agriculture and industries their primary source of raw materials. The absence of locally sourced imparts has resulted in low industrialization

Some of the constraints traced in this sector include:

High interest rate

Dumping of   cheap products Infrastructural in adequate Lack of effective regulatory agencies Unpredictable government policies Non-implementation of existing policies Low patronage Unfair tariff regime

It is in the light of the foregoing that this study seeks to evaluate the role of the manufacturing sector in the Nigerian economy.

  Research Questions

The study would examine the following questions:

To what extent has the Nigerian manufacturing sector contributed to the economic growth? What the major constraints confronting the Nigerian manufacturing sector?

Objective of the study

This study has the central objective of exploring issues relating to how manufacturing sector can influence Nigeria’s economic growth by facilitating the transfer of technology and other associated benefits, while in specific terms the study is set to.

To determine the impact of manufacturing sector on Nigeria’s economic growth. To investigate the major constraints confronting the Nigerian manufacturing sector.

Research hypothesis

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

The manufacturing sector does not contribute significantly to the Nigeria economy. There exist major constraints confronting the Nigerian manufacturing sector.

Significance of the study

The study will contribute greatly in aiding the government, policy makers, economic planners, researchers and the academia generally. This will provide an insight and understanding to the government on how to be prudent in spending public funds to boost the manufacturing sector to bring about economic growth and development.

It will influence various economic units both in the public and private sectors of the Nigerian economy. 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. The findings of this research will assist monetary authorities in assessing the performance of the fiscal policy in Nigeria particularly in terms of their impact on the output of manufacturing sector. This work is also immense benefit to the policy makers and economic planners in terms of using its findings in formulating and implementing appropriate policy measures towards accelerating economic growth through the manufacturing.

Scope of the study

The study shows the role of Nigerian manufacturing sector in relation to the growth of the economy.

The major constraints that confronting the sector would be identified in the course of examining the overall development in the sector. The analysis of the contribution of the manufacturing sector to the economic growth of Nigeria is restricted to the period between 2013 and 2017 using only relevant performance indicators such as index of manufacturing production, manufacturing capacity utilization rate.

Definition of terms   

Productivity: Is an economic measure of output per unit of input. Inputs include labour and capital while output is typically measured in revenues and other gross domestic product (GDP) components such as business inventories.

Economic development: The focus of federal, state and local government to improve our standard of living through the creation of jobs, the support of innovation and new ideas, the creation of higher wealth and the creation of overall better quality of life.

Trade liberalization: This is the removal or reduction of restrictions or barriers on the free exchange of goods between nations. This includes the removal or reduction of tariff obstacles, such as duties and surcharges and non-tariff obstacles such as licensing rules, quotas and other requirements.

Industrial Policy: Industrial policy of a country sometimes denoted IP, is its official strategic effort to encourage the development and growth of part or all of the manufacturing sector as well as other sectors of the economy.

Economic liberalization: This is the lessening of government regulations and restrictions in an economy in exchange for greater participation by private entities, the doctrine is associated with classical liberalism