An empirical investigation on impact of industrialization on economic growth in Nigeria 1980 to 2018
1.1 Background of the Study
Industrialization is said to be the process of building up a nation’s capacity to convert raw materials and other inputs to finished goods for other production or for final consumption (Anyanwu, Oyefusi, Oaikhenan, and Dimowo 1997). Industrialization is the backbone of a country’s economic growth and development. It brings about an increased volume and varieties of manufactured goods resulting in increased employment and improved standard of living of the citizens. Industrialization is also regarded as a veritable channel of attaining the lofty and desirable national goals and quality of life for the citizenry (Adeoye 2005).It forms the central object of economic policy in most developing economies and is seen as a crucial and powerful integral part of overall development and structural process of an economy (Uniamikogpo 1996). Attaining and sustaining full industrialization is therefore the goal and aspiration of every sovereign nation or economy. Thus, history recorded that the industrial sector performance in Nigeria‟s economic growth is as old as the nation itself. It dates back to the amalgamation of the southern and northern parts of the country in 1914 to form the geographical land mass called Nigeria. In Nigeria as in many other developing countries, industries are attached to manufacturing as is considered the most dynamic component of industrial sector and a strong and thriving manufacturing sector usually precipitates industrialization. The manufacturing sector is widely considered to be the ideal industry to drive Africa‟s development. This is due to the labor-intensive, export-focused nature of the industry. There is a direct correlation between exportation levels and the economic success of a country. By increasingly adding value to products before they are sold, revenues are boosted, thereby raising average earnings per input (Bigsten,Gebreeyesus and Söderbom 2008).
Therefore, in recognition of this, successive governments in Nigeria have continued to articulate policy measures and programme to achieve industrial growth and development. This cannot be attained until manufacturing capacity is utilized to a reasonable extent. Industrialization has come to be regarded as a crucial and powerful engine in the overall development process. The growth of the Nigerian economy has not been stable over the years as the country‟s economy has witnessed so many shocks and disturbances both internally and externally over the decades. Internally, the unstable investment and consumption patterns as well as the improper implementation of public policies, changes in future expectations and the accelerator are some factors responsible for the instability. Similarly, some of the external factors identified include wars, revolutions, population growth rates and migration, technological transfer and changes as well as the openness of the country‟s economy. The cyclical fluctuations in the country‟s economic activities has led to the periodical increase in the country‟s unemployment and inflation rates as well as the external sector disequilibria (Gbosi 2001).
While desiring to use industrialization to tackle economic growth problems, many nations have neglected the need to establish industries that are necessary towards absorbing the abundant labour resource and other local inputs for breaking the vicious circle of poverty among the larger percentage of the citizenry and in achieving dynamic and self-reliant economies (Iwuagwu 2011). Hence a slow pace of industrialization in Nigeria in the last three decades have been recorded despite much effort put in place by successive administration to bring about revolution in the sector via various policies and programmes. This situation calls for an urgent concern because this is the time when the country is aspiring to be ranked among the top 20 economies in the world by the year 20-20. Although, there a lot of studies conducted to assess the impact of industrialization on economic growth such as Ndiyo and Obinysi (2003), Isiksal and Chimezie (2016), Sharma, Varlish and Nishue (2008), Ogunnirola and Nishu (2010), Okafor (2008), Eze and Okpala (2011). However, most of these studies rely on the use of ADF to ascertain the stationarity properties of the time series data in which to some extent has been empirically conducted that useful results cannot be obtained on non-stationarity time series using OLS as a technique of analysis. Furthermore, in most of their studies they have a maximum scope of 15-25 year. It is against this background that this study is different from the previous studies and attempts to fill in the existing gap.