European Journal of Sustainable Development Research

European Journal of Sustainable Development Research, 2020 - Volume 4 Issue 4, Article No: em0140
https://doi.org/10.29333/ejosdr/8479

Published Online: 29 Aug 2020

Views: 358 | Downloads: 239

This study examined the impact of private domestic investment on manufacturing sector output in Nigeria from 1970 to 2017. The study specifically looked at the impact of private domestic investment on manufacturing sector’s output in a static and dynamic model. Six variables were employed in the study and were sourced from CBN statistical bulletin and World Development Indicators for the period covering from 1970 to 2017. The analysis of the variables undergoes three approaches, the pre-analysis of data, model estimation and the diagnostic analysis of the model. The first approach employed tables and graphs to explain the behaviour of the data, equally the univariate analysis of the data were examine with the Augmented Dickey-Fuller equations and the possibility of long-term relationship. The models were estimated with the ARDL estimator and model selected with the Akaike Information Criteria, and finally the models estimated were tested using the Jaque-Bera statistics, Ramsey RESET Test, Breusch-Godfrey and Harvey test for residual normality, specification bias, autocorrelation and heteroskedasticity respectively. The results from the analytical methods shows that there is over 82 percent increase in the output of Manufacturing sector in the late 1970s and early 1980s and over 98 percent increase the output of the manufacturing sector in the late within 2010 and 2015. Also, the study observed that the responses of output of the manufacturing sector to private domestic investment are positive and significant in the static and dynamic models. The study found that the impact of private domestic investment on manufacturing sector output were fairly elastic in the static model and fairly inelastic in the dynamic model. Finally, the study found that the model have a weak adjustment mechanism. The adjustment of disequilibrium between static and dynamic equilibrium is weak or just 24.9 percent. Since private domestic investment is significant and positively impacted on the performance of the manufacturing sector irrespective of the time zone, the study recommended for increase in the credit to private sector by the apex monetary authority.

private domestic investment manufacturing sector output ARDL

• Ade-Agoye, I. (2011). Man Ikeja holds AGM and expresses worry over poor contribution of manufacturing sector to GDP. Manufacturing Association of Nigeria News. p8.
• Aftalian, A. (1911). “Les Trois Notions de la Productivit・et les Revenues”, 1911, Revue d’Economie Politique.
• Agu, O. C. (2015). Determinants of private investment in Nigeria: An econometric analysis. International Journal of Economics, Commerce and Management, III(4), 2-14.
• Ahiawodzi, A. K. and Adade. T. C. (2012). Access to credit and growth of small and medium scale enterprsie in the Ho municpality of Ghana. British Journal of Economics, Finance and Management Sciences, 6(2), 34-51.
• Ajose, K. and Oyedokun, G. E. (2018). Capital formation and economic growth in Nigeria. International Journal of Finance and Banking Studies, 7, 2147-4486. https://doi.org/10.20525/ijfbs.v7i3.37
• Ajudua, E. I. and Ojima, D. (2016). Modelling the determinants of output in the Nigerian manufacturing sector. International Journal of Innovative Finance and Economics Reseaerch, 4(1), 1-12.
• Akpansung, A. O. and Babalola, S. J. (2011). Banking sector cresit and economic grwoth in Nigeria: AN emprical investigation. CBN Journal of Applied Statistics, 2(2), 51-62.
• Anetor, F., Ogebchie, C., Kelikume, I. and Ikesu, F. (2016). Credit supply and agriacultyural production in Nigeria: A vector autoregressive (VAR) approach. Journal of Economics and Sustainable Development, 7(2), 131-140.
• Anthony, O. (2012). Banking savings and bank credits in Nigeria: Determinants and impact on economic growth: International Journal of Economics and Financial Issues, 2(3), 357-372.
• Anyanwu, J. C. (1997). The structure of the Nigerian economy (1960-1997). Joanee educational Publishers.
• Ashraf, A. and Herzer, D. (2014). The effects of Greenfield investment, competition and industrial development in developing countries. Applied Economics Letters, 21(14), 997-1000. https://doi.org/10.1080/13504851.2014.904482
• Bader, M. and Ibrahim, M. A. (2010). The impact of interest rate on investment in Jordan: a cointegration Analysis. Journal of King Abdul Aziz University, Economics and Administration, 24(1), 199-209. https://doi.org/10.4197/Eco.24-1.6
• Bakari, S. (2017). The impact of domestic investment on economic growth: New evidence from Malaysia. MPRA_paper_79436.pdf
• Bakari, S. (2017). The Nexus between Export, Import, Domestic Investment and Economic Growth in Japan. MPRA Paper. 76110, University Library of Munich, Germany.
• Chen, G. S., Yao, Y. and Malizard, J. (2017). Does foreign direct investment crowd in or crowd out private domestic investment in China? The effect of entry mode. Economic Modelling, 61, 409-419. https://doi.org/10.1016/j.econmod.2016.11.005
• Chinweoke, N., Egwu, C. C. and Nwabeka, C. E. (2015). Impact of commercials banks’ loans and advances to agriculture and manufactruing sector on economic grwoth of Nigeria (1994-2013). International Journal of Arts and Science, 08(05), 29-36.
• Clark, J. M. (1917). Business Acceleration and the Law of Demand. 1917, JPE.
• Cristina. J. (2018). Does FDI crowd out domestic investment in transition countries?. Economics of Transition, 27(1), 163-200. https://doi.org/10.1111/ecot.12184
• Ekanem, I. U. (2002). The investment decision-making process in small manufacturing enterprise: With particular reference to printing and clothing industries (PhD thesis), Middlesex University Research Repository.
• Engel, R. F. and Granger, C. W. J. (1987). Co-integration and Error correction: Representation, Estimation, and Testing. Econometrica: Journal of the Econometric Society, 55, 251-276. https://doi.org/10.2307/1913236
• Ghazali, A. (2010). Analyzing the relationship between foreign direct investment domestic investment and economic growth for Pakistan. International Research Journal of Finance and Economics, 47(47), 124-131.
• Granger, C. W. J (1981). Some properties of the time series data and their use in econometric model specification. Journal of Econometrics, 16, 121-130. https://doi.org/10.1016/0304-4076(81)90079-8
• Jhingan, M. L. (2008). The Economics of Development and Planning (39^th ed.), Delhi, Vrinda Publications (P) Ltd, p. 439.
• John E. E. and Terhemba, I. P. (2016). Commerial bank credit and manufacturing sector output in Nigeria. Journal of Economics and Sustainable Development, 7(16).
• Kalu, C. U. and Mgbemena, O. O. (2015). Domestic private investment and economic growth in Nigeria: Issues and further consideration. International Journal Academic Research in Business and Social Sciences, 5(10), 79-88. https://doi.org/10.6007/IJARBSS/v5-i2/1489
• Kehinde, A. O., Felix, A., Kayode, K. and Adedamola, F. A. (2012). The determinants of domestic private investment in Nigeria. IOSR Journal of Humanities and Social Sciences, 2(6), 46-54. https://doi.org/10.9790/0837-0264654
• Korkmaz, S. (2015). Impact of bank credits on Economic grwith and Inflation. Journal of Applied Finance and Banking, 5(1), 57-69.
• Mamman, A. and Hashim, Y. A. (2013). Impact of Private Sector Credit on the Real Sector of Nigeria. International Journal of Business and Social Research, 3(5), 105-116.
• Nwakanma, P. C., Nnamdi, I. S. and Omojefe, G. O. (2014). Bank credits to the private sector: potency and relevance in Nigeria’s economic growth process. Sciedu Press Research Accounting and Finance, 3(2), 23-35. https://doi.org/10.5430/afr.v3n2p23
• Obamuyi, M. T., Edun, A. T. and Kayode, O. F. (2012). Bank lending, economic grwoth and the performance of the manufacturing sector in Nigeria. European Scientific Journal, 8(3).
• Obilor, S. I. (2013). The impact of commercial Banks’ credit to agricultural on agricultural development in Nigeria: An econometric analysis. International Journal of Business, Humanities, and Technology, 3(1), 85-94.
• Odufuye, B. M. (2017). Bank credits and its impact on Nigerian economy growth. International Journal of Development Strategies in Humanities, Management and Social Sciences, 7(3), 39-52.
• Ogar, A., Nkamare, S. E. and Effiong, C. (2014). Commercial banks credit and its contribution on maufacturing sector in Nigeria. Research Journal of Finance and Accounting, 5(22).
• Okoye, N. (2017). Investment in entrepreneurship: Investment mobilization as a solution to capital raising and industrial capacity. Available at: https://www.nickyokoye.com/articles/78/investment-in-entrepreneurship-investment-mobilization-as-a-solution-to-capital-raising-and-industrial-capacity
• Oluitan, R. (2012). Financial development and economic grwoth in Africa: lessons and prospects. Business and Economic Research, Macrothink Insitute, 2(2), 54-67. https://doi.org/10.5296/ber.v2i2.2205
• Omankhanlen, O. and Owonibi, A. (2012). Manufacturers and burden of high interest rates. July, 29, 2012.
• Oni, I. O., Akinlo, A. E. and Oladepo, E. D. (2014). Impact of bank credit on the real sector: Evidence from Nigeria. Global Journal of Business Research, 8(3), 39-47.
• Pesaran, M. H., Shin, Y. and Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-329. https://doi.org/10.1002/jae.616
• Qin, D., Cagas, M. A., Quising, P. and He, X.-H. (2006). How much does investment drive economic growth in China? Journal of Policy Modeling, 28(7), 751-774. https://doi.org/10.1016/j.jpolmod.2006.02.004
• Sogules, I. W. and Nkoro, E. (2016). Bank credits and performance of agricultural and manufacuring sector, 1970-2013. Business, Management and Economics Research, Academic Research Publising Group, 2(5), 90-95.
• Ume, K. E., Obasikene, A. C., Oleka, D. C., Nwadike, A. O. and Okoyeuzu, C. (2017). The relative impact of bank credit on manufacturing sector in Nigeria. International Journal of Economics and Financial Issues, 7(2), 196-201.

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.