ABSTRACT

This research work set out to investigate industrial sector growth and economic performance in Nigeria. The study employed multiple regression models and Granger causality model using secondary data from 1981 to 2015. Results show that the coefficient of crude petroleum and natural gas, solid mineral variables and manufacturing sub-sector growth are positive and statistically significant. From the Granger causality result, bidirectional causality does not exist between economic growth and industrial sector performance in Nigeria. However, there is a unidirectional causal relationship between industrial sector performance and economic growth at lag 4 and lag 6. However, there is no significant structural break in economic growth especially between military and democratic rules in Nigeria. Also, the Engle-Granger cointegration suggests that there is a long-run relationship. Also, the ECM result suggests that about 15% of the short-run disequilibrium in the model would be corrected in the next period. The study concludes that industrial sector growth is a significant factor affecting economic growth in Nigeria and recommends that industrial sector growth should be boosted by appropriate package of incentive to induce entrepreneurs and investors to undertake profitable investment particularly for export oriented industries.

Background of the Study

The critical role of the industrial sector is predicated on the fact that it acts as an engine of growth bybroadening the productive and export base of the economy, reducing unemployment and stemming rural-urbandrift as well as helping to reduce poverty, (Umoro and Eborieme, 2013). Nigeria is an open economy. Accordingly, developments ininternational circles have profound implications on the path the country is going in terms of the development ofher industrial sector. It has been the goal of trading with countries to obtain improved and more secureaccess to markets abroad. This is intended to provide the country with the opportunity to explore economies ofscale beyond the limit of the domestic market and facilitate access to foreign exchange with which to financecritical imports needed for development (Adenikinju 2002). It is true that trade and trade policies are importantdeterminants of economic performance. International trade offers opportunities for greater specialization,increased capacity utilization and import of goods and services. Within the Nigerian context, there has been aconsiderable amount of discussion on the inter-relationship between trade policy reforms, economic performanceand industrial growth.

In the development literature, industrialization has been accepted as the major driving force of the modern economy. In most modern economies, industrial sector serves as the vehicle for the production of goods and services, the generation of employment and the enhancement of incomes.