ABSTRACT
This project examined the Contribution of Financial
Institutions in Nigeria to the Growth of Manufacturing Industry. The research adopted ex-post
facto research method. Data was
basically collected by secondary means through CBN Statistical Bulletin. Data
garthered span 2005 to 2014.
Three hypotheses were formulated and tested
with the used of regression analysis and T-test. Based on the result of the
analysis, the three null hypotheses were rejected and the alternate hypotheses
accepted. It was thereby concluded that; Interest rate has significant impact on manufacturing output; Bank credit does not have
significant impact on the output of the manufacturing Sector in Nigeria; that bank
credit has significant impact on the output of the manufacturing Sector in
Nigeria and there is significant relationship between manufacturing output and
economic growth of Nigeria.
Recommendations were proffered to Bank to give credit
to the manufacturing sector of the economic as it is contributing significantly
for the growth of GDP in Nigeria.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE SYUDY
There has been a growing concern on
the decline of the output of the manufacturing sector in Nigeria in recent
times, despite the fact that the government embarked on several strategies
aimed at improving industrial production and capacity utilization of the
sector. This worry is understandable in view of the fact that it has been
generally acclaimed, through the Kaldor’s first law, that manufacturing sector
is regarded as the engine of growth of the economy (Libanio, 2006). The
unimpressive performance of the sector in Nigeria is mainly due to massive
importation of finished goods and inadequate financial support for the
manufacturing sector, which ultimately has contributed to the reduction in
capacity utilization of the manufacturing sector in the country. Enebong (2003)
argued that the level of the Nigerian manufacturing organisations’ performance
will continue to see a decline because as it is now, the manufacturers will
have even more problems in assessing raw materials due to stiff competition
from the foreign firms.
Even the financial sector reform of
the Structural Adjustment Programme (SAP) in 1986, which was meant to correct
the structural imbalance in the economy and liberalize the financial systems
did not achieve the expected results. As Edirisuriya (2008) reported, financial
sector reforms are expected to promote a more efficient allocation of resources
and ensure that financial intermediation occurs as efficiently as possible.
This also implies that financial sector liberalization brings competition in
the financial markets, raises interest rate to encourage savings, thereby
making funds available for investment, and hence lead to economic growth
(Asamoah, 2008). Therefore, it is logical to assume that financial
liberalization enhances funds mobilization and accessibility, which are
required for firms’ performance and economic growth.
However, this research project has
been designed to examine the contributions of financial institutions to the
growth of manufacturing industry.
1.2 STATEMENT OF THE PROBLEM
This study was motivated by the
challenges pose by the lack of sufficient bank credits to meet the increasing
needs in the manufacturing sector of the Nigerian economy. There is no iota of
doubt that bank credits is very crucial and essential in revitalizing the
manufacturing sector. As important as bank credits is to the sector in
spite the continuous policy strategies to attract credits to the sector, most
Nigerian enterprises have remained unattractive for bank credits For instance,
as indicated in central Bank of Nigeria (CBN) reports, almost throughout the
regulatory era, commercial bank’s loans and advances to the manufacturing
sector deviated persistently from prescribed minima. Furthermore, the
enhanced financial intermediation in the economy following the financial
reforms of the 1990s notwithstanding, credits to manufacturing as a proportion
of total banking credits has not improved significantly averaging 15.7 percent
between 1990 and 1994 and 25.8% between 1995 and 2000. Consequently, many
manufacturing firms in the country have continue to rely heavily on internally
generated funds, which have tended to limit their scope of operating.
The above problems can be summarized
as follows;
i.
High
interest rate on Bank lending to the manufacturing sector.
ii.
Financial
institutions have not played vital role in revitalizing the manufacturing
sector. The output of the manufacturing Sector has in Nigeria?
iii.
The
economic impact of the manufacturing industry is not felt has most products are
still imported into the country for consumption
1.3 OBJECTIVE
OF THE STUDY
The main objective of this study is
to examine the contribution of financial institutions in Nigeria to the growth
of manufacturing industry. However, other specific objectives include:
i.
Examining
the impact of interest rate on manufacturing output of the manufacturing sector
ii.
To
assess the impact of bank credit on the output of the manufacturing sector in
Nigeria.
iii.
To
assert the relationship between manufacturing output and economic growth of
Nigeria
1.4 RESEARCH QUESTIONS
In order to achieve the purpose of
this research study, the study will attempt to provide answers to the following
research questions.
i.
How
does interest rate impact the manufacturing output of the manufacturing sector?
ii.
To
what extent does bank credit impact the output of the manufacturing Sector in
Nigeria?
iii.
What
is the extent of the relationship between manufacturing output and economic
growth of Nigeria
1.5 STATEMENT OF RESEARCH
HYPOTHESES
Hypothesis is a tentative answer to a
research question. It is a conjectural statement about the relationship that
exist between two or more variables which needs to be tested empirically before
they can be accepted or rejected. To provide answer to the research questions
arising from this study, the following hypotheses are postulated.
Hypothesis One
Ho: Interest
rate does not have significant impact on manufacturing output
H1: Interest rate does has significant impact
on manufacturing output
Hypothesis Two
Ho: Bank
credit does not have significant impact on the output of the manufacturing
Sector in Nigeria
H1: Bank credit
has significant impact on the output of the manufacturing Sector in Nigeria
Hypothesis Three
Ho: There
is no significant relationship between manufacturing output and economic growth
of Nigeria
H1: There is
significant relationship between manufacturing output and economic growth of
Nigeria
1.6 SIGNIFICANCE
OF THE STUDY
This research work tends to examine
the contribution of financial institutions to the growth of manufacturing
industry. An insights on the empirical relationship between financial sector
reforms and manufacturing output, can assist the government in formulating
accommodating policies to enhance industrial production and economic growth.
The study contributes to knowledge in
three ways: First, it reveals the current situation of manufacturing sector in
Nigeria. Second, the link between manufacturing output and economic growth will
also be established. Finally, the determinants of manufacturing output will be
identified. Thus, the appropriate policy towards accelerating growth through
manufacturing sector can be formulated and implemented.
1.7 SCOPE OF THE STUDY
This research work is to examine the contribution
of financial institutions to the growth of manufacturing industry. The scope of
the study is the entire manufacturing sector of Nigeria economy in large. The
geographical location of the research in Nigeria. The study covers data for
period 2005 – 2014. The organization of the research is Nigeria Breweries Plc.
The sample size would be limited to one
hundred which will be drawn from the population. The simple sampling technique
will be used in drawing the sample.