Manufacturing Sector Performance and Selected Macroeconomic Variables in Nigeria: 1970-2009

Abstract

This study employs time series data to investigate empirically how the various macroeconomic variables affect the performance of the manufacturing sector in Nigeria for the period 1970-2009. It found out that over the sample period, the rate of growth of the manufacturing sector responds to variation in selected Macroeconomic variables such as Real Gross Domestic Product (RGDP), real interest rate, credit to private sector, real exchange rate, trade openness and political economy. However, the relationship between the growth rate and any of the real interest rate and exchange rate was found not to be statistically significant. Empirical evidence further revealed that the relationship between the growth rate of the manufacturing sector and the variables of the interest was found to exist even in the long run due to the fact that these variables were found to be co-integrated. The paper therefore recommends that policy makers need to exercise great care on prescribing international trade policies, while less emphasis should be laid on exchange rate policies because this would have no form of effect on the growth rate on the manufacturing sector. Also interest rate policies should not be used to drive the rate of growth of the manufacturing sector as they have no impact on the sector while efforts should be made to sustain the present civilian government .