MANUFACTURING SECTOR OUTPUT AND ECONOMIC GROWTH IN NIGERIA: AN AUTOREGRESSIVE DISTRIBUTIVE LAG AND ERROR CORRECTION MODEL APPROACH

Abstract

This study examines the relationship between manufacturing output and economic growth in Nigeria (1981-2023). Using ARDL and ECM techniques, we identify significant temporal dynamics, revealing a robust short-term positive correlation between manufacturing and GDP growth. The negative, statistically significant ECM coefficient confirms a stable long-term equilibrium relationship. Key findings show a 1% manufacturing increase contributes to long-run GDP growth, confirming the sector's developmental importance. Construction shows similar positive effects, while crude petroleum exhibits unexpected negative impacts, highlighting structural imbalances in Nigeria's resource-dependent economy. Contrary to expectations, inflation demonstrates a positive relationship, suggesting unique macroeconomic dynamics in developing contexts. The study makes three contributions: Firstly, providing updated empirical evidence using recent data, secondly, pioneering analysis of sectorial interdependencies, and thirdly, advancing methodology through ARDL-ECM techniques that capture both short-term dynamics and long-term equilibrium. Policy implications emphasize targeted interventions to enhance manufacturing's growth potential. Thus findings suggest that targeted government interventions in the manufacturing sector particularly in infrastructure development, access to credit, and technological upgrading could significantly enhance its growth-generating potential. The study recommends a three-pronged policy approach such as, implementation of sector-specific incentives to boost manufacturing productivity, development of integrated industrial policies that strengthen backward and forward linkages, and establishment of stable macroeconomic conditions to support sustained industrial growth.