FINANCE CHALLENGES OF MANUFACTURING COMPANIES IN NIGERIA AND THEIR CONTRIBUTIONS TO THE ECONOMIC GROWTH OF NIGERIA

FINANCE CHALLENGES OF MANUFACTURING COMPANIES IN NIGERIA AND THEIR CONTRIBUTIONS TO THE ECONOMIC GROWTH OF NIGERIA

Chapter one

INTRODUCTION

1.1 Background of the Study

The manufacturing sector is a catalyst in today’s economy and provides numerous dynamic benefits that are critical to economic transformation. In many ways, the industrial sector is the most important in an advanced country. It is an avenue for increasing productivity through import replacement and export expansion, creating foreign exchange earning capacity, and increasing employment and per capita income, resulting in unique consumption patterns.

Furthermore, it generates investment capital at a quicker rate than any other sector of the economy, fostering broader and more effective links between sectors.

In terms of contribution to GDP, the manufacturing sector is dominating, but it has been surpassed by the services sector in a number of Organisation for Economic Cooperation and Development (OECD) nations.

Before independence, agricultural products dominated Nigeria’s economy and accounted for the majority of its foreign exchange revenues. Initially, insufficient capital investment allowed only a modest increase of manufacturing operations.

Early manufacturing initiatives were aimed at implementing an import substitution strategy, with formal trade companies embarking on light industry and assembly-related manufacturing operations.

Until around 1970, the private sector was the primary driver of manufacturing operations, having created certain agro-based light manufacturing facilities such as vegetable oil extraction plants, turneries, tobacco processing, textiles, beverages, and petroleum products.

The strategy of light and assembly manufacturing switched slightly to heavy industries under the third National Development Plan (1975-1980), when the government intervened to develop care industrial units to supply basic imports to downstream industries.

The import-dependent industrialisation model nearly came to an end in the late 1970s and early 1980s, when the liberal trade policy increased finished products imports at the expense of home industry.

In this regard, industrialisation is a viable means of achieving the lofty and desired vision and goals of increased quality of life for the public.

Thus, in a supportive mood, Lavis (1967) assumes that in any economy, one or more sectors act as a primary mover, propelling the rest of the economy forward. The industrial sector has traditionally served the role of growth engine or leading sector during the industrialisation process.

Against this background, industrialization implies considerable technology based development of the productive (manufacturing) system of an economy.

Thus, the development of the industrial sector represents the deliberate and sustained application and combination of appropriate technology, management techniques, and other resources to transition the economy from its traditional low level of production to a more automated and efficient system of mass production of goods and services.

Given the aforementioned centrality of industrialisation as the pivot of economic growth and development, the industrialisation process appears to be the main hope of most emerging countries, including Nigeria, which has a big population and work force.

Despite these aspirations, which should have supported an effective industrialisation process in an economically advantageous manufacturing environment, the majority of these outcomes, as represented in the performance of the manufacturing sector, remain socioeconomically undesired.

Against this backdrop, current economic planning and policy instruments are aimed at developing major productive sectors, particularly manufacturing and commerce, in order to promote Nigeria’s industrialisation at a faster speed.