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Determinants and Sustainability of Manufacturing Sector Performance in Nigeria: The Roles of Selected Macroeconomic Variables

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  • Falade Abidemi Olufemi Olusegun

Abstract

Manufacturing sector is a vibrant sector that spurs growth in every other sector of the economy. Despite this, macroeconomic environment in the country has not made this desire materialized. Therefore, the study examined the determinants and sustainability of manufacturing sector performance in Nigeria from 1994-2019. The data used include manufacturing sector output, interest rate, real exchange rate, tax rate, money supply and trade openness. Also, Error Correction Model (ECM) and Pairwise Granger Causality(PGC) techniques were used for the formulated objective. The unit root test confirmed stationarity of interest rate at level; while other were integrated of order one (D = 1). The Johansen co-integration established a long-run relationships. The ECM corrected the disequilibrium at an annual rate of 77.5%. Also, real exchange rate, tax rate and trade openness had a direct and significant effect on manufacturing sector output. While, interest rate and money supply were non-significance. The PGC result revealed a bi-directional causality between real exchange rate and manufacturing sector and tax rate and manufacturing sector output. It was concluded that increase in consumption tax, real exchange rate and liberation of the economy were the determinants of manufacturing sector performance, while appreciation of nigeria’s currency (naira) and increase in tax rate with proportional improvement in infrastructural facilities are needed to sustain it. Therefore, recommended that the financial institutions especially the apex bank should eliminate different bench-mark of exchange rate policy by allowing the market force of demand and supply to depict the real value of naira.

Suggested Citation

  • Falade Abidemi Olufemi Olusegun, 2021. "Determinants and Sustainability of Manufacturing Sector Performance in Nigeria: The Roles of Selected Macroeconomic Variables," Applied Finance and Accounting, Redfame publishing, vol. 7(2), pages 31-40, December.
    • Handle: RePEc:rfa:afajnl:v:7:y:2021:i:2:p:31-40
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    References listed on IDEAS

    as
    1. Claire Palmer & Zahid Usman & Osiris Canciglieri Junior & Andreia Malucelli & Robert I. M. Young, 2018. "Interoperable manufacturing knowledge systems," International Journal of Production Research, Taylor & Francis Journals, vol. 56(8), pages 2733-2752, April.
    2. Olorunfemi Sola & Tomola M Obamuyi & Felix O Adekunjo & E.O Ogunleye, 2013. "Manufacturing Performance in Nigeria: Implication for Sustainable Development," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(9), pages 1195-1213.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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