INVESTMENT CLIMATE AND MANUFACTURING FIRM’S PERFORMANCE IN NIGERIA

Abstract

This study examined the impact of investment climate on the performance of manufacturing firms in Nigeria. The theoretical and empirical information gathered from the study points to the fact that Performance of manufacturing firms is largely influenced by the investment climate of an economy. This study is motivated by the fact that manufacturing sector is the key to development and growth of every economy. However, one of the vital determinants of this sector is the investment climate and environment for doing business. The specific objectives of the study are: to ascertain the impact of infrastructure on the manufacturing firms’ performance in Nigeria, to analyze the extent to which governance and institutions affect manufacturing firms’ performance in Nigeria, to examine the impact of taxation on manufacturing firms’ performance in Nigeria and to examine the extent to which manufacturing firms’ access to credit and how it contributes to their performance in Nigeria. The objectives were examined with the aid of principal component analysis, instrumental variable estimation and the propensity score. The data employed were determined from the World Bank Investment Climate Survey in Nigeria in 2009. The results of this study suggest that infrastructure; governance/institutions and tax are significant deterrents to firm performance. Also, the average treatment effect of accessing credit on manufacturing output is significant. The study therefore recommends that more effort be made to minimize the effects of infrastructural deficiency, governance and institutional constraints and government ensuring that tax burden is not completely transferred to customers, as well as increasing access to credit in other to improve firm performance