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BY
AUGUST, 2013.
APPROVAL PAGE
This project has been supervised and approved as having satisfied
conditions for the award of Bachelor of Science Degree in the
Department of Economics, at Caritas University, Enugu.
BY
..
MR. R.O OJIKE
Project Supervisor
..
DATE
.
BARR. P.C ONWUDINJO
Head of Department
.
DATE
DATE
External Examiner
.
DATE
DEDICATION
This work is dedicated to Almighty God and also to my beloved
mother, Mrs. J.N Madueke and my lovely siblings Ijeoma and
Ebuka for their support throughout my years of study in this
university.
ACKNOWLEDGMENT
I wish to express my appreciation to God Almighty who
strengthened, inspired and guided me throughout the period I am
writing this project.
To my parents Mrs. Josephine Madueke for her support,
physically, spiritually, financially and otherwise, I say thanks a
millions to you for the comfort and advice to me throughout my
days in school.
My gratitude goes to my able supervisor Mr. R.O Ojike for
making this work a success. I extend my acknowledgment to my
lecturers, for impacting the knowledge they had immensely in me. I
am ever grateful to you all.
I acknowledge my friends and colleagues, all my relations and
well
wishers
whose
endless
love,
help
and
continuous
TABLE OF CONTENTS
Title Page -
Certification
ii
Dedication
iii
Acknowledgment
iv
Table of Contents
Abstract
vi
1.1
1.2
1.3
1.4
1.5
1.6
CHAPTER TWO
2.0
Literature Review
10
2.1
Theoretical Literature
10
15
19
21
26
Empirical Literature -
32
2.3
37
Methodology
39
3.1
Model Specification -
40
3.2
Method of Evaluation
42
3.3
Model Justification -
44
3.4
44
CHAPTER FOUR
4.0
45
4.1
Regression Result
45
4.2
Result Interpretation -
46
46
47
51
4.3
57
58
Policy Implications
CHAPTER FIVE
5.0
Summary -
5.1
Policy Recommendation
60
5.2
Conclusion
61
References
62
ABSTRACT
The industrial sector remains a strong sector of any economy, be it
developed or developing. The developed countries are noted for their
high industrial performance. The effect of the industrial activities on
the economy of underdeveloped or developing nation si still under
contention. Its a fact that the economy will not grow without its
industrial
activities.
manufacturing,
mining
These
and
activities
mineral
include:
processing
agriculture,
and
export
CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND OF THE STUDY
Industrialization is regarded as a central object of economic
policy in most developing economies. They see industrialization and
agriculture as an integral part of development and structural
change. Some economic analyst are of the view that industries play
a vital role in the economic growth and development of any country.
In this research work, effort is made to analyze the impact of the
industrial sector to the economic development of Nigeria.
Generally, the industrial revolution which took place in Britain
between the late 18th and 19th centuries has gotten much to do with
the present set back on industrial development led to the factory
process that metamorphosised into industrial production. Thus,
history recorded that the industrial sector performance in Nigerias
economic growth is as old as the nation itself. It dates back to the
amalgamation of the southern parts of the country in 1914 to for
fourth
national
industrialization
development
received
priority
plan
in
(1981-1985)
Nigerias
rapid
development
10
re-appraised
of
the
regulatory environment,
the
11
12
survey
those
problems
which
are
forming
obstacles
to
industrialization.
Industrial sector encountered the problem of low price
elasticity of export and lack of comparative advantage. This means
that Nigeria share of foreign exchange market cannot appreciate
despite the numerous incentives granted to the industrial sector.
The absence of an indigenous entrepreneurship class couple
with other problems of multinational corporation affect the
structure and influence the nature of utilization of scientific and
technological labour for national development.
Realizing that industrialization can indeed have some adverse
effect on the economic growth and development of the country, one
13
14
15
16
17
CHAPTER TWO
2.0 LITERATURE REVIEW
This chapter reviews the existing literature on industrialization
with special emphasis on the industrial sector and Nigerian
economy. It went further to cover roles/contributions of industrial
sector to Nigerian economics development, characteristics of
industries sector performance of industrial sector and policy
measures to the industrial sector.
2.1 THEORETICAL LITERATURE
Prior to Nigeria independence in 1960, the predominant
economic activity were agricultural production and marketing of
imported
goods.
Under
colonial
rule,
Nigeria
remained
an
of
Nigeria
economy
on
commodity
market
of
18
products,
bricks
making
and
pre-stressed
concrete
19
20
first
National
Development
plans
(1962-1986)
was
of
large
scale
capital
intensive
and
import
21
22
23
into
modern
industrial
structure
through
public
nations
are
characterize
by
their
inability
to
24
privatization
and
commercialization
of
public
25
26
60% Ailing
10% operating at sustaining level.
The cause of the poor performance of the sector may e
summarized in the view of Ewakhids et al (2001) that on the whole,
the Nigerian industrial sector of the late 190s, and even up to the
early 2000s, captured by the manufacturing sub sector appears to
have evolved from a combination of pre-independence neglect and
later, the overprotection of the import substitution industries.
27
With increase
reducing
the
heavy
depending
on
imported
28
infrastructure
development,
sustainable
economic
29
keeping
management
incompetence
and
financial
30
31
32
33
f. Militancy
This is one of the major problem against industrial development
of Nigerian Delta/region, these militants has vandalized people
line given or supplying gas to these industries, kidnapping of
their workers thereby requesting a lot of money from these
industries in that region.
2.1.4 GOVERNMENT INCENTIVES/POLICY MEAUSRES TO
THE INDUSTRIAL SECTOR
Government has since independence in 1968 made conscious
effort to reduce dependence on foreign manufacturers through
supportive program aimed at making the local manufacturers meet
local demand along the line of import substitution.
In
order
to
achieve
the
above
objective,
the
Nigerian
34
tax
and
incentives,
import
export
promotion,
restrictions.
Others
government
include
direct
35
36
make
funds available
to small and
medium
scale
of
self-reliance
enhances
poverty
reduction
etc.
and
establishing
the
Nigeria
investment
promotion
INCENTIVES TO INDUSTRY
To achieve the industrial development of the nation and promote
dynamic
efficient
and
sustainable
manufacturing
sector,
37
incentives
are
divided
into
fiscal
measure
and
export
promotion.
1.
FISCAL MEASURE
i.
ii.
goods
international
iii.
so
as
to
protect
local
industries
from
competition.
equipment
productivity.
cheaply,
thereby
increasing
their
38
iv.
2.
EXPORT PROMOTION
Export incentives came on board in the 1980s with the
exporters
who
have
exported
N500,00.
Worth
of
It
is
administered
by
the
Nigeria
Export
39
institutions
play
advisory
facilitatory
roles
in
the
organization
and
quality
for
products.
National
plays
significant
role
in
economic
40
41
to
national
growth
and
development
has
been
42
sectors
includes;
institutional
framework
and
rate
management
strategies,
poor
or
inadequate
the
palm
oil,
cocoa
and
rubber
sectors.
In
the
importance
43
between
electricity
consumption
and
economic
44
service
improvement,
ensuring
value
for
money.
The
45
46
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 METHODOLOGY
The methodology that shall be adopted in this study is the
ordinary regression, applying ordinary least square (OLS). The
reasons for choosing this method are as follows:
i.
ii.
with
other
econometric
techniques
and
data
iv.
47
empirically
(Koutsayians
1977).
It
involves
the
(industrial
output),
interest
rate
and
foreign
direct
48
INDO
Industrial Output
FDI
INT
Interest Rate
Error Term
49
F - RATIO
This is used to test for the overall significant of the regression
T - STATISTICS
This is used to test the statistical significance of the
line.
50
DECISION RULE:
F - RATIO
If the probability at which the calculated F-ratio (Fcal) is less
than the critical or chosen level of significant (0.05), the null
hypothesis (Ho) is rejected which shows that the regression is
significant.
T - STATISTICS
If the probability at which the calculated T-value (Tcal) is
significant in the regression for any independent variable is less or
equal to the chosen level of significant, the null hypothesis (Ho) is
rejected, which shows that the independent variable is significant in
the model.
COEFFICIENT OF MULTIPLE DETERMINATION (R2)
The value of R2 lies between O and 1. Thus, the higher the
percentage variation of the dependent variable that is explained by
the regression plane. That is, the closer the value 1, the better the
fit, and the closer to zero, the worse the fit.
51
52
CHAPTER FOUR
4.0 PRESENTATION AND ANALYSIS OF RESULT.
4.1 REGRESSION RESULT:
Standard
t-
t-prob. PartyR
error
statistics
4.0261
-0.896
0.3799
0.0352
2.630
0.0153
0.2392
Constant
-3.6077
FDI
53.456
INT
96162
1.9581
0.491
0.6282
0.0108
INDO
-0.19603
0.95520
-0.205
0.8393
0.0019
R2 = 0.769942
DW = 1.98
20.323
F{3,
53
54
Variables
Expected
Estimate
Remark
signs
FDI
>0
Conform
INT
>0
Not Conform
INDO
<0
Not Conform
4.2.2
a.
55
56
t-tab
Remark
FDI {2.630}
2.074
Significant
INT {0.491}
2.074
Insignificant
INDO {-0.205}
2.074
Insignificant
57
On the other hand, the intercept {-0.896}, INT {0.491} and INDO
{-0.205} are less than the t-tabulated {2.074} signifying that
the intercept, INT and INDO are statistically insignificant.
C.
F-Statistics:
The
F-statistics
is
used
to
test
for
simultaneous
hypothesis {H0} that the overall estimate has a good fit which
implies that our independent variables are simultaneously
signify
cant.
58
4.2.3
a.
Econometric Criteria.
and
accept
that
there
is
positive
59
dL = Lower limit
DU = Upper limit
D* = Durbin Watson.
60
Conclusion:
Since If dU {1.652} < d* {1.98} < {4-dU} {2.348}, we accept the null
hypothesis of no autocorrelation.
b.
normally distributed.
H1: X1 0
61
Conclusion:
Since 16.077 > 5.99147 at 5% level of significance, we
reject the null hypothesis and conclude that the error term do
not follow a normal distribution.
test
heteroscedasticity
is
carried
test
{with
out
using
cross
Whites
terms}.
general
The
test
62
we
63
FDI
GDP
1.000
FDI
0.8756
1.000
INT
0.08024
INT
INDO
REMARK
M
1.000
Nm,Nm
0.1519
M, M, Nm
64
the
above
table,
we
can
conclude
that
multicollinearity does not exists in INT and GDP, INT and FDI,
INDO and INT variables.
4.3 POLICY IMPLICATION
So far, we have critically analyzed the research findings.
However, it is important at this point to state the implication of our
findings.
An examination of model indicated that changes in industrial
output exerted a significant influence on the countrys Gross
Domestic Product in the study period (1985-2010). And also
interest rate influences insignificantly on the GDP. The negative
impact is due to misuse of public funding by public office holders,
high rate of interest and lack of deregulation of interest rate in the
economy.
Foreign direct investment was found to be significant during the
study period.
65
CHAPTER FIVE
SUMMARY, POLICY RECOMMENDATIONS AND CONCLUSION
5.0 SUMMARY
This research work is an econometric study of the impact of
industrialization to economic development of Nigeria (1985-2011).
The research employed the ordinary least square regression
method.
The explanatory data employed to analyze the impact of
industrialization to economic development include: Industrial
output, foreign investment and interest rate.
The regression result shows that, the estimate coefficient of
foreign direct investment have a positive relationship with economic
development in Nigeria.
The regression result shows that the estimate coefficient of
interest rate and industrial output are inversely related to economic
development in Nigeria. The coefficient of interest rate and
industrial output was not statistically significant at 5% level of
significance. Industrial output which is the measure of output of
66
R2
reveals
that
77%
variation
of
economic
67
conducive
environment
to
achieve
strong
profitable
investment
particularly
for
export
oriented industries.
4. The deregulation of interest rate should be pursued to a local
conclusion. This is because the problem of high interest rate
has actually frustrates the efforts of prospective investors from
acquiring loan for investment which has in turn affected and
has negative implications for the economy.
68
69
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