CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

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

Nigerians.

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.

1.2 STATEMENT OF THE PROBLEM

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.

1.3 OBJECTIVES OF THE STUDY

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

sector.

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.

1.4 RESEARCH QUESTIONS

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

sector?

3. What are the constraints that are confronting the manufacturing

sector?

4. What policy measures could be adopted to redress the persistent

decline in the manufacturing production?

1.5 STATEMENT OF RESEARCH HYPOTHESIS

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

H

0

: that the manufacturing sector does not contribute significantly

to Nigerian economy.

H

1

: that the manufacturing sector contributes significantly to

Nigerian economy.

1.6 SIGNIFICANCE OF THE STUDY

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.

1.7 SCOPE OF THE STUDY

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).

1.8 DEFINITION OF TERMS

(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).