Revisiting the Nexus between Industrial Sector and Economic Growth in Nigeria: a Disaggregated Approach

Abstract

The essence of this study was to delve into the industrial sector's influence in driving Nigeria's economic growth from 1981 to 2019. In doing so, the industrial sector was disaggregated into the mining and quarrying industry, construction industry, and manufacturing industry. The study utilized the ordinary least squares (OLS) and autoregressive distributed lag (ARDL) approaches. The OLS result indicated that all the selected three components of the industrial sector (manufacturing, construction, mining and quarrying) exerted a positive and significant effect on economic growth in Nigeria. From the estimates, a unit per cent increase in construction industry output, manufacturing industry output, and mining and quarrying industry output increased economic growth by 0.2745%, 0.2930% and 0.4723%, respectively; pointing out the fact that the mining and quarrying industry has been the industrial sector component that mostly drives the growth of the Nigerian economy compared to the other two sub-components. With the unit root test reporting a mixed order of integration in the variables (at levels and first difference), we proceed to the test for cointegration. The ARDL bounds test reported evidence of a long-run equilibrium relationship, while the error correction model reflected that 20.88% of the short-run distortions in economic growth are corrected annually for the restoration of long-run equilibrium to be achieved. The paper recommended that harmonizing industrial policies cum adequate infrastructural development is desirable to drive the industrial sector, which is observed to be a driver of growth in Nigeria.