CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The manufacturing sector plays a
significant role in economic development. Industrialization acts as a
catalyst that accelerates the pace of structural transformation and
diversification of economic, enable a country to fully utilize its
factor endowment and to depend less on foreign supply of finished goods
or raw materials for its economic growth, development and
sustainability. Industrialization which is a deliberate and sustained
application and combination of an appropriate technology, infrastructure
managerial expertise and other important resources has attracted
considerable interest in development economies in recent times. (Okafor,
2005) Exchange rate in Nigeria witnessed a radical change from the long
operated fixed system between the 1960s and the first half of the
1980s. It shifted dramatically from the second half of 1986 to a
flexible regime when the structural adjustment programmes (SAP) began.
Since the move to liberalized system, the economy witnessed series of
changes that have substantially affected the trend and stability of the
rate.
In other words, in Nigeria, it has
always been realized that economic development requires growth with
structural change. In considering the Nigerian economic development
experiences therefore, it is instrumental to examine the growth and
structural change in certain major aspects of the economy (Ajakaye,
2002). Productivity is higher in the manufacturing sector than in the
agricultural sector. The transfer of resources from agriculture to
manufacturing provides a structural change bonus. We have examined
sectoral productivity levels in 19 Latin American and Asian economies
and found that between 1950 and 2005, value added in manufacturing was
consistently much higher than in agriculture (Szirmai, 2008). A puzzling
finding was that in postwar Latin America, value added per worker in
services was higher than in manufacturing. This suggests that the
structural change bonus for services might have been even higher than
that manufacturing exceeded those in services. The structural change
bonus argument focuses on the dynamics of sectors. Manufacturing is
assumed to be more dynamic than other sectors. A transfer of productive
resources to more dynamic sectors contributes to growth. Here the
evidence turned out to be somewhat mixed (Szirmai, 2008). Between 1950
and 1973, productivity growth in manufacturing was indeed much higher
than in agriculture. But after 1973, this was reversed. As in the
advanced economies, productivity growth in agriculture in developing
countries tends to be higher than in manufacturing. In terms of output
growth, manufacturing continues to outperform agriculture in both
advanced and developing economies, because the share of manufacturing in
the total economy is shrinking everywhere. The macro and micro studies
on manufacturing enterprises were carried out to establish the
consequences of trade liberalization for the industrial sector in
African countries. Contemporary economies are largely characterized by
inter—border trade. This is made possible by differences in the factor
endowment of each economy as postulated by the popular theories of
comparative analysis and absolute advantages. When industrialization is
compared to agriculture, the argument runs that the manufacturing sector
offered special opportunities for capital accumulation. Capital
accumulation can be more easily realized in spatially concentrated
manufacturing than in spatially dispersed agriculture. This is one of
the reasons why the emergence of manufacturing has been so important in
growth and development. Sectoral capital stock estimates for developing
countries are still scarce, but what data there are indicate that after
1950 manufacturing is indeed far more capital intensive than other
sectors (Szirmai, 2008).
1.2 Statement of the Problem
The Nigerian manufacturing sector is
sick. The productive sector is in a crisis as its average contribution
to the nation’s Gross Domestic Product over the past few years has not
gone beyond 5%. Many years of neglect and maladministration on the part
of successive military and civilian governments, coupled with corruption
and indiscriminate policy reversals have all conspired to render the
manufacturing sector ineffective in terms of productivity. Governments
after governments have failed to pursue policies that could create a
vibrant real sector with the result that the impact of the manufacturing
sector has steadily declined over the years and its contribution to
national growth and development has been disappointingly low (Banmijoko,
2001).
Some of the factors that exert profound
negative influence on manufacturing sector include; institutional
framework and management strategies; inflation rate, trends and outcomes
of exchange rate management strategies, poor or inadequate
infrastructural facilities especially electricity power supply and thus
have significant effect on the growth and development of Nigeria, which
led to problem of economic diversification to other sector of the
economy.
1.3 The Objectives of the Study
The major objective of this study is to examine the role of manufacturing sector on economic growth and development in Nigeria.
Other objectives of the study include:
1) To investigate the impact of the manufacturing sector on the economic growth and development of Nigeria.
2) To assess the level of productivity in the Nigerian manufacturing sector.
3) To identify the major constraints confronting the Nigerian Manufacturing sector.
4) To find out the various policy
measures available to the government that can be used to redress the
persistent decline in the manufacturing production.