Macroeconomic Variables and the Productivity of the Manufacturing Sector in Nigeria: A Static Analysis Approach
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Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB)
This paper empirically investigates the impact of macroeconomic factors on manufacturing productivity in Nigeria over the period 1975-2011. The analysis starts with examining stochastic characteristics of each time series by testing their stationarity using Augmented Dickey Fuller (ADF) test and estimate error correction mechanism model. The findings were reinforced by the presence of a long-term equilibrium relationship, as evidenced by the cointegrating equation of the VECM. Our findings show that credit to the manufacturing sector in the form of loans and advances and foreign direct investment have the capacity to sharply increase the level of manufacturing productivity in Nigeria, while broad money supply has less impact. The study, therefore, recommends that government must create ‘’enabling environment’’ for manufacturers in the area of infrastructure, financial, legal and property rights. High cost of borrowing is due to high interest rate spread. Therefore, this paper advocates a cut in margin between lending and deposit rates. For a resounding performance, the establishment of Microfinance Banks, Small and Medium Industries Equity Investment Scheme and Small and Medium Enterprises Development Agencies of Nigeria, Bank of Industry should be overhauled for development and improvement in the local production. Also, efforts should be made to achieve a more realistic and stable trade balance through liberalization (through FDI) that will guarantee output growth in the both short and long run.
Macroeconomic Variables , Manufacturing Sector , Static Analysis
Odior, E. S. (2013), ‘Macroeconomic Variables and the Productivity of the Manufacturing Sector in Nigeria: A Static Analysis Approach’, Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB) (ISSN: 2306 367X) Vol. 1 No.5, Dubai, United Arab Emirates, Pp, 362 – 380.