DETERMINANTS OF INVESTMENT IN NIGERIAN MANUFACTURING 1981-1997
DETERMINANTS OF INVESTMENT IN NIGERIAN MANUFACTURING 1981-1997
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Date
2000-09
Authors
EMEKA, ASOMUGHA KINGSLEY
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Abstract
Many economists agree that the expansion of private
investment especially in manufacturing should be the main
impetus for economic growth in developing countries. But
after' a decade of economic adjustment, the recovery of this
sector in Nigeria has remained very weak and slow; and as
usual, inappropriate macroeconomic policies, macroeconomic
instability and structural factors are blamed for this. This
issue has received only limited attention in empirical studies
on the experience of Nigeria. This study uses data from
Nigeria during 1981-1997 to perform the empirical analysis.
In exploring the association between manufacturing investment
and macroeconomic policies (including fiscal policy, exchange
rate and monetary policy) with particular reference to
Nigeria, the study finds that macroeconomic policy variables
do actually affect manufacturing investment in Nigeria.
Furthermore, the study confirms the negative impact of foreign
exchange rates, unguarded deregulation of interest rate and
high domestic inflation rates on manufacturing investment in
Nigeria and highlights the adverse impact of large budget
deficits on private capital accumulation. The study sharply
brings to focus the macroeconomic uncertainty associated with
high external debt ratio.
On the other hand, private manufacturing investment is
determined by the rate of capacity utilization, credit to the
sector and the growth rate of real GDP, which suggest that
developments within these three variables have significant
positive effects on manufacturing investment in Nigeria.
Supplementing regression analysis with historical and
qualitative insights, the study establishes that other
structural factors like low managerial skill and technological
capability explain low investment in manufacturing.
Policy wise, these results suggest that strategies to
boost' manufacturing investment must take into account both
macroeconomic stability and structural incentives. Also, the
removal of structural constraints should be stressed.
Manufacturing investment being mostly long-term by nature
requires a predictable and stable business environment,
reliable and efficient infrastructure, high level managerial
skill and technological capability, diversified export base,
political and social stability and transparency.
These are some of the factors required for the growth of
manufacturing investment and development in Nigeria.
Description
BEING A THESIS SUBMITTED TO THE POSTGRADUATE
SCHOOL IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE AWARD OF MASTER OF SCIENCE (M.S.C) DEGREE
IN ECONOMICS
DEPARTMENT OF ECONOMICS
FACULTY OF SOCIAL SCIENCES
AHMADU BELLO UNIVERSITY
ZARIA
SEPTEMBER, 2000
Keywords
DETERMINANTS,, INVESTMENT,, NIGERIAN,, MANUFACTURING,