Manufacturing Output Growth and Employment in Nigeria

Adetunji Adeniyi

doi:10.20525/ijfbs.v10i2.1274

Abstract

The Manufacturing sector of the Nigerian economy can perform better in job creation, particularly during the period of economic expansion, which did not happen in the last period of economic growth between 1981 and 2014. Consequently, it is important to understand the real relationship between growth and job creation in the sector during the period. Therefore, this study investigated the employment intensity of gross value added growth in the sector during the period of growth, using Vector Error Correction Model (VECM) with a view to providing useful statistics to facilitate policies for the development of sectoral employment strategy during the next cycle of economic growth. Previous studies have either used descriptive statistics or less robust econometric models applied to aggregate data of shorter series and did not explore the inter-sectoral relationship effect. The estimated employment elasticity of gross value added in the sector was not significant at 95 per cent confidence level, and can, therefore, not be relied upon for pin-point policy. However, the inter-sectoral and inter-temporal relationships provided significant estimates, indicating that such relationships should be taken into account in designing and developing sectoral employment strategy for the manufacturing sector. There is future scope for the extension of research to cover periods of recession, as well, for example, post COVID-19.

Highlights

In the growth period between 1981 and 2014, the contribution of the manufacturing sector to aggregate employment in Nigeria declined by 42.9 per cent from 2.1 per cent to 1.2 per cent
The estimated employment elasticity of gross value added in the sector was not significant at 95 per cent confidence level, and can, not be relied upon for pin-point policy
From the Vector Error Correction Model (VECM) estimates of equation 6 presented in table 2 below, the employment intensity of manufacturing gross value added is 0.04

Summary

Introduction

In the growth period between 1981 and 2014, the contribution of the manufacturing sector to aggregate employment in Nigeria declined by 42.9 per cent from 2.1 per cent to 1.2 per cent. The contribution to Gross Domestic Product (GDP) fell marginally by 1 per cent from 10.1 per cent to 10.0 per cent (NBS, 2015, and 2020; and, Adeniyi, 2019). With the growth in population at an annual rate of about 3.5 per cent to an estimated current population of about 200 million, and unemployment rate of about 33.3 per cent, the manufacturing sector should play more eminent roles in GDP and employment generation, in times of economic growth. It is apparent that gross value added in the manufacturing sector during the last period of economic growth was “jobless” or not job-intensive. This research will fill methodological gap by using a multivariate analytical technique of VECM

Objectives

Results

Conclusion