THE IMPACT OF INDUSTRIAL OUTPUT ON THE ECONOMY OF NIGERIA
ABSTRACT
This research work is on the “Impact of Industrial Output on the Economy of Nigeria” between the period of thirty years (30) covered from 1980-2010. Impact of industrial output on the economy of Nigeria is a continuous discussion to every economy especially developing economics which will give rise to economic growth and development of a nation. Secondary data was used on PC Give 8.00 version package to regress the model with GDP as the dependent variable, and industrial output, savings, net foreign capital flow, and inflation as independent variables. The model explain that the influence of industrial output on economic growth is not statistically significant, though the sign obtained from its à priori expectation is positively related to GDP but does not hold strong enough. Savings has a positive relationship and also significant impact on the economy. Inflation has a negative relationship while net foreign capital flow is positively significant on the impact of economic growth. R-squared shows a 76% increase on the GDP. Based on the findings, it is therefore recommended that some policies is to be made in ways to improve the establishment of industries especially the manufacturing industries to encourage industrialisation of the Nigerian economy so as to contribute to the strengthening of economic growth in the nation’s economy. Tax incentives through subsidies and government expenditure relate to increase in output and positive impact on economic growth. Increase in savings will make money available for the economy through high interest rate and income adjustments from the monetary policy.
INTRODUCTION
1.1 Background Of Study
The oil boom of the 1970s made Nigeria neglected its agricultural and light manufacturing bases in favour of an unhealthy dependence on crude oil. In 2000, oil and gas export accounted for more than 98% of export earning and about 83% of federal government revenue. New oil wealth, the concurrent decline of other economic model fuelled massive migration to the cities and led to increasingly wide spread poverty especially in rural areas. A collapse of basic infrastructures and social services since the early 1980s accompanied this trend, (CIA, 2010).
By 2000, Nigeria‟s per capita income had plunged to about one quarter of its mid 1970s high, below the level at independence. Along with the endemic malaise of Nigeria‟s non-oil sector, the economy continues to witness massive growth of „informal sector‟ economic activities estimated by some to be as high as 75% of the total economy. The U.S United State remains Nigeria‟s customer for crude oil accounting for 40% of the country‟s total oil export, Nigeria provides about 10% of overall U.S oil import and ranks as the fifth-largest source for U.S imported oil and ranked 44th worldwide and third in Africa in factor output. (Adeolu B Anyawale, 1997).
Impact Of Industrial Output On The Economy Of Nigeria (1988-2010)
Nigeria economy is struggling to leverage the country‟s vast wealth in fossil fuels in other to displace the crushing poverty that affects about 57% of its population. Economics refers to the consistence of vast wealth in national resources and extreme poverty in developing countries like Nigeria as a „resource course‟. 80% of Nigeria‟s revenue flow to the government, 16% covers operational cast and the remaining 4% goes to investors. World Bank has estimated that as a result of corruption, 80% of energy revenues, benefit only 1% of the population (Econspapers, hosted by Swedish Business School Orebro University).
Generally, the manufacturing sector which plays a catalytic role in a modern economy has many dynamic benefits crucial for economic transformation is a leading sector in many aspects (Oguma, 1995) says it creates investment capital at a faster rate than any other sector of the economy. Available evidence showed that the share of manufacturing value in the Gross Domestic Product (GDP) was 3.2% in 1960. In 1977, its share of GDP increased to 5.4% and in 1992 grew to 13%. The share of the manufacturing in GDP fell to 6.2 in 1993, while overall manufacturing capacity utilization rate fluctuated downwards to 2.4% in 1998.
In 2003, the manufacturing sector accounted for 4% of the Gross Domestic Product (GDP) (Ojo, 1987:256). A country is industrialised when at least one-quarter of this Gross Domestic Product(GDP) is produced in its industrial output arises in the manufacturing section of industrial sectors, and when at
Impact Of Industrial Output On The Economy Of Nigeria (1988-2010)
least one length of its total population is employed in the industrial sectors of the economy. The manufacturing sector is to be dominant in terms of contribution to the Gross Domestic Product of any economy especially that of Nigeria (Auty, 1993).
1.2 Statement Of The Research Problem
The malfunctioning of industrial sector in a country is widely seen as a major handicap improving a country‟s economy and power pushing many governments to encourage or enforce industrialization (Wikipedia, free encyclopaedia). One of the problems bedevilling the Nigeria economy is that of output from its industrial sector of the economy. Admittedly, the decay in the manufacturing sector is the result of diverse factors that conspire to render many industries comatose (ill). The study is therefore necessary to enable a thorough investigation of the problems of the industrial sector especially that of manufacturing industries and various government agencies set up to provide credit facilities to the industrial sector to ensure continual growth of this sector for rapid economic development of this nation. In the light of this exposition, the research work is guided by the following question.
1. What is the impact of industrial output on economic growth of Nigeria?
Impact Of Industrial Output On The Economy Of Nigeria (1988-2010)
2. What are the roles of manufacturing industries in the development of the Nigerian economy?
1.3 Objectives Of The Study
The broad objective of this study is to examine the impact of industrial on economic growth in Nigeria between the periods of (1980-2010).
The specific objective includes,
1. To appraise the origin and structure of Nigeria‟s manufacture sector.
2. To analyse industrial output and to determine the effect it has on the economic growth and development of the country.
3. To recommend possible solutions to the country‟s manufacturing sector.
1.4 Statement Of Research Hypothesis
The hypothesis of this study is stated as follows:
Ho: Industrial output rate has no significant impact on the level of economic growth (GDP).
H1: Industrial output rate has profound significant impact on the level of economic growth (GDP).
Impact Of Industrial Output On The Economy Of Nigeria (1988-2010)
1.5 Significance Of The Study
The significance of this study lies in the fact that the work will expose the extent of which industrial output has contributed to economic growth in Nigeria thereby highlighting some obstacles hindering increase in industrial output. This work will be relevant to the government policies and entrepreneurs directing them on industrial development plan. It adds to the already existing literature on industrial output in Nigeria.
Furthermore, the work will assist potential industrialist, economist, investors and other related users of this veritable material in this field of study, it is interesting to know that industrial output is the shortest route to economic development.
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