Effect of Economic Liberalization on the Performance of the Industrial Sector in Nigeria

Abstract

This study seeks to·identify the effect of the economic liberalization policy of the government (introduced in 1986 under the structural adjustment programme) on the performance of the industrial sector in Nigeria. Specifically, the study examines the extent to which changes in some key economic indicators like exchange rate, financial depth, trade openness and inflation rate account for the trend in output performance of Nigeria's industrial sector. Annual data on the variables, sourced from the publications of the Central Bank of Nigeria, were analysed using the technique of the Vector Error Correction Model. The study shows that exchange rate volatility and trade opetmess exert a significant positive impact on industrial output performo.nce. The study however shows that financial depth and inflation exert insignificant negative impact Oil industrial output growth. To enhance the performance of the sector, government should seek to diversifY sources of foreign exelrangeinjlow to support her import-dependent industrial sector as well as develop the infrastructure base of the economy. Properly functioning infrastructure will, among other things, greatly enhance the realization of low price levels and hence low liNe/ ofinflatimt required to boost domestic production capacity