CHAPTER ONE

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).

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

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?

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).

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.

1.6 Scope Of The Study

The researcher tends to find out the impact of industrial output on economic

growth. The study covers a general contribution of manufacturing industries in

Nigeria toward the attainment of economic growth from (1980-2010).

1.7 Methodology and Sources of Data

The validity and reliability of this research work will depend on the use of

statistical data using simple regression model and the hypothesis setting that

requires testing the validity of the analysis.

The researcher made use of secondary data obtained from the publications of

the Central Bank of Nigeria Central Bank of Nigeria statistical bulletin and the

annual report of accounts as well as resource materials from the library and the

internet.

1.8 Limitation Of The Study

A study of this nature cannot be researched without encountering constraints

some of which includes;

1. Finance: Financial constraint or inadequacy was the major limitation for

this research to gather materials logistics etc.

2. Data: There was a problem of acquiring all necessary data through the

researcher has to rely on the ones available.