The Determinants of Output Expansion in the Nigerian Manufacturing Industries

Abstract

AbstractThe study investigates the determinants of output expansion in the Nigerian manufacturing industries between 1980-2010. OLS method was adopted and important determinants were detected. One of the important findings of the preceding analysis is that inflation rate plays the highest significant role in explaining manufacturing output expansion between 1980 -2010. Any policy measure that can curb inflation will surely increase output. Real GDP and per capita real GDP have positive and significant roles to play in the manufacturing output expansion. The inverse relationship between output expansion and capacity utilization in manufacturing is not surprising. Low demand due to ineffective purchasing power caused by inflation will result into excess capacity. A negative relationship between this variable and manufacturing output expansion is not surprising, simply because, if inflation is growing there will be higher prices which could increase the value of output at the expense of lower capacity and lower demand. The significance of the study lies on the fact that if the determinants of output expansion in the manufacturing industries are known, then, policies could be introduced to take care of them and thereby strengthened the position of the manufacturing sector. This could lead to output expansion and employment generationKeywords: manufacturing, capacity utilization, labour supply, export, competitiveness(ProQuest: ... denotes formulae omitted.)INTRODUCTIONManufacturing plays a dominant role among other sectors of the economy. It signifies modernization in terms of production and distribution. This singular sector has many dynamic benefits that are crucial for economic transformation. It is one of the sectors where forward and backward linkages can effectively take place. According to Ogwuma (1995), the manufacturing sector has a wider and more effective linkage among different sectors. This sector also create investment capital at a faster rate than any other sector of the economy. In terms of its contribution to GDP, the manufacturing sector is very important.Early effort in the manufacturing sector were actually oriented towards the adoption of an import substitution strategy in which light industries and assembly related manufacturing ventures were embarked upon by the former colonial masters companies. Being a leading sector in any economy, this position must be maintained. To maintain it will depend on the productivity of this sector, the level of output and its competitive position. The focus of this study is on the determinants of output expansion in the Nigerian manufacturing sector. The objective is to determine those factors that the determine output expansion, whereby improvement could be recommended for greater output in this sector. The whole essence is to promote economic development at national level.The structural Adjustment Programme (SAP) which was introduced in 1986 by the Nigerian government was partly designed to address some of the problems of the manufacturing sector. The aim was to revitalize the manufacturing sector by shifting emphasis on the domestic sourcing of inputs by this sector. A way of motivating the sector to adopt this strategy, incentives were given to firms that comply. These incentives included monetary and fiscal incentives. Looking at the manufacturing sector over the years, it could be seen that the contribution of the sector in terms of its shares in GDP has been relatively low recording in 1970 (9%) in 1980 (10%) in 1990 (8%) in 1998 (6%) in 2004 (3.7), in 2008 (4.9).The capacity utilization fell below54% in 2008 and 2010 respectively. (CBN documents).OBJECTIVE OF THE STUDYThe main objective of this study is to establish those determinants of manufacturing output expansion and also to determine the extent of the impact of each of the determinants of manufacturing output performance.LITERATURE REVIEWThe importance of manufacturing can be examined from various angles. …

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