Statistical modeling of industrial policies and their impact on the manufacturing sector in Nigeria

Abstract

Using annual time series data, this empirical study examines how industrial policies affected Nigeria's manufacturing industry between 1981 and 2021. Value addition of the manufacturing sector (MVA) represents the manufacturing sector performance (MAN), while trade openness (OPN), import substitution industrialization strategy (ISIS), export promotion strategy (EPS), and exchange rate of the dollar to the naira (EXR). We used error correction model (ECM) modelling approaches as its main estimation method. The results of the ECM indicate that the exchange rate of the dollar to the naira (EXR) has a favourable effect on MAN, and trade openness (OPN) increases manufacturing sector performance (MAN). In Nigeria, the Export Promotion Strategy (EPS) increases MAN whereas the Import Substitution Industrialization Strategy (ISIS) decreases MAN. As a result, the study period passed without any appreciable improvement in Nigeria's manufacturing sector performance (MAN) due to the implementation of the imports substitution industrialization strategy (ISIS) and trade openness (OPN). Thus, the study concludes that a thorough approach to trade promotion is needed, with the export of produced goods and services serving as the main goal. The study recommends that efforts should be made to reduce trade restrictions to increase manufacturing exports which tends to stimulate the economy in Nigeria.