Effect of Manufacturing Sub-Sector Performance on Productivity in Nigeria

Abstract

Kaldor’s theory of growth is one theory that advocates for the manufacturing sector as a channel of increasing productivity and increasing employment. However, many developing countries like Nigeria seem to be bypassing the dynamism of the manufacturing sector. This study looked at the role of manufacturing sector to the productivity of the economy for the period 1986 to 2018, bearing in mind that productivity growth reflects in the GDP (gross domestic product) of a country. The study applied the Autoregressive Distributed Lag model (ARDL) and the Granger Causality technique. The major finding of this study is that manufacturing export, manufacturing capacity utilization, credit to manufacturing, manufacturing output were positively related while manufacturing value added and unemployment were negatively related to labour productivity. Negative relationship that exists in manufacturing value added which shows that there is no actual value addition in this sector even when manufacturers output increases. MCU (Manufacturing capacity utilization) was seen to cause Labour productivity while Labour productivity in turn brought about increase in manufacturing output and manufacturing export. This implies that there is room for achieving more in this sector by increasing value addition and increasing manufacturers utilization capacity, which will support more output, export, job opportunities and growth in the economy. The study therefore suggests that the advantage in this sector be harnessed by increasing manufacturers’ value addition and capacity utilization, giving them what it takes to do so which will inadvertently boost the economy.