ROLE OF MANUFACTURING SECTOR ON ECONOMIC GROWTH AND DEVELOPMENT IN NIGERIA.
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ROLE OF MANUFACTURING SECTOR ON ECONOMIC GROWTH AND DEVELOPMENT IN NIGERIA.
Chapter one
INTRODUCTION
1.1 Background for the Study
The manufacturing sector contributes significantly to economic development. Industrialization serves as a catalyst for the acceleration of structural transformation and economic diversification, allowing a country to fully utilise its factor endowment and rely less on foreign supplies of finished goods or raw materials for economic growth, development, and sustainability.
Industrialization, defined as the purposeful and persistent application and integration of relevant technology, infrastructure, management expertise, and other critical resources, has recently piqued the interest of many developing economies. (Okefor, 2005)
Between the 1960s and the first half of the 1980s, Nigeria’s exchange rate saw a dramatic shift from the long-standing fixed regime. When structural adjustment programmes (SAP) began in the second half of 1986, it switched dramatically to a more flexible regime. Since the transition to a more liberalised system, the economy has seen a number of changes that have had a significant impact on the rate’s trajectory and stability.
In other words, in Nigeria, it has long been recognised that economic development necessitates growth and structural transformation. When considering Nigerian economic development experiences, it is useful to assess growth and structural change in specific important components of the economy (Ajakaye, 2002). Manufacturing is more productive than agriculture.
The movement of resources from agricultural to manufacturing generates a structural change bonus. We investigated sectoral productivity levels in 19 Latin American and Asian economies and discovered that between 1950 and 2005, industrial value added was consistently substantially higher than agriculture (Szirmai, 2008).
One perplexing discovery was that in postwar Latin America, value added per worker in services was more than in industry. This shows that the structural change bonus for services may have been even bigger than for manufacturing, which exceeded those in services.
The structural change bonus argument focuses on the dynamics of sectors. Manufacturing is thought to be more dynamic than other sectors. A movement of productive resources to more dynamic areas adds to growth.
Here, the evidence was relatively equivocal (Szirmai, 2008). Between 1950 and 1973, productivity growth in manufacturing was significantly higher than in agriculture. However, after 1973, this was reversed.
Agriculture in developing countries tends to grow at a faster rate than manufacturing, just like in advanced economies. Manufacturing continues to outperform agriculture in terms of output growth in both advanced and developing nations, despite the fact that its percentage of the total economy is declining everywhere.
The macro and micro studies on manufacturing enterprises were conducted to determine the impact of trade liberalisation on the industrial sector in African countries. Inter-border trade dominates today’s economies.
This is made feasible by variances in each economy’s factor endowment, as proposed by popular comparative and absolute advantage theories. When comparing industrialization to agriculture, some argue that the manufacturing sector provided unique opportunities for capital accumulation.
Capital accumulation is more easily realised in spatially concentrated industry than in geographically distributed agriculture. This is one of the reasons why the rise of manufacturing has been so critical to growth and progress.
Sectoral capital stock estimates for developing nations remain limited, but available data show that manufacturing became significantly more capital intensive after 1950 than other sectors (Szirmai, 2008).
1.2 Statement of Problem
Nigeria’s manufacturing industry is ailing. The productive sector is in crisis, as its average contribution to the nation’s GDP over the last few years has barely exceeded 5%.
Many years of neglect and maladministration by successive military and civilian regimes, combined with corruption and indiscriminate policy reversals, have all conspired to render the manufacturing sector inefficient in terms of productivity.
Government after government has failed to pursue policies that could create a vibrant real sector, resulting in a steady decline in the manufacturing sector’s impact over time and a disappointingly low contribution to national growth and development (Banmijoko 2001).
Some of the factors that have a profound negative influence on the manufacturing sector include: institutional framework and management strategies; inflation rate; trends and outcomes of exchange rate management strategies;
poor or inadequate infrastructural facilities, particularly electricity power supply; and thus have a significant impact on Nigeria’s growth and development, resulting in the problem of economic diversification to other sectors of the economy.
1.3 The Objectives of the Study
The primary goal of this research is to investigate the impact of the manufacturing sector on economic growth and development in Nigeria.
Other study objectives include:
1) To look into how the manufacturing sector affects Nigeria’s economic growth and development.
2) To analyse the level of productivity in Nigeria’s industrial industry.
3) To identify the major constraints confronting the Nigerian Manufacturing sector.
4) To find out the various policy solutions accessible to the government that can be employed to remedy the continuing fall in the manufacturing production.
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