THE IMPACT OF INDUSTRIAL SECTOR ON ECONOMIC GROWTH OF NIGERIA

CHAPTER TWO

LITERATURE REVIEW

2.1 Conceptual review

2.1.1 Industrialization

The industrial sector is known to be the strength of the value-added processed in many economies. Governments especially in developing countries, see industrialization as a weapon for increasing national output to minimize dependence on developed countries and minimize fluctuation in foreign exchange earnings (Ayodele and Falokun 2003). Industrialization has assumed super importance for accelerating economic development in both the developed and the developing nations. It reduces unemployment and poverty and is considered a pathway to prosperity. Industrialization is about the introduction and expansion of industries in a particular place, region or country (Obioma and Ozughalu 2005). It is a situation where many industries are established in different parts of the country. As many industries are established in a country different types of products are produced as well. Industrialization therefore, is a process of building up a country‟s capacity to produce varieties of products – extraction of raw materials and manufacturing of semi-finished and finished goods. Anyanwuet al (1997) describes industrialization as the process of building up a nation‟s capacity to convert raw materials and other inputs to finished goods and to manufacture goods for other production or for final consumption. Industrialization enhances the utilization of productive inputs (labour, capital and raw materials), given the country‟s technology, to produce non-durable and durable consumer goods, intermediate goods and capital goods for domestic consumption, export or further production. Thus industrialization could be described as the process of transforming raw materials, with the aid of human resources and capital goods into (a) consumers‟ goods, (b) new capital goods which allows more consumers goods (including food) to be produced with the same human resources, and (c) social overhead capital, which together with human resources provides new services to both individuals and business (Ekpo 2009).

2.1.2 Industrial policy

A country‟s industrial policy is the dynamic tool for stimulating and regulating its industrial development process. It is a blueprint detailing the objectives and strategies for optimally attaining the goals of non-primary production, particularly manufacturing, taking into consideration the resource endowment of the country in terms of labour, land, capital, entrepreneurship, international goodwill etc (Federal Ministry of Industry & Technology, 1992). The existing literature defines industrial policy in different ways, emphasizing various aspects of State intervention in support of industrialization. Reich (1982), who was a great defender of industrial policy in the United States, defined industrial policy as the set of governmental actions designed to support industries that have major export potential and job-creation capacity, as well as the potential to directly support the production of infrastructure.

Pack (2000) looks at industrial policy as actions designed to target specific sectors to increase their productivity and their relative importance within the manufacturing sector. In the same vein, Amsden (1989), Chang (2002), Lin and Chang (2009) defined industrial policy as a guide to government intervention to selectively promote certain manufacturing sectors with the aim of encouraging a country to defy its comparative advantage and develop its manufacturing sector. Johnson (1984) defines industrial policy in a narrow sense, as those “government activities that aim to support the development of certain industries in a national economy to maintain international competitiveness”. Chang (1994) describes industrial policies as governmental actions supporting the generation of production and technological capacity in industries considered strategic for national development. Landesmann (1992) makes an original contribution to the definition by underlining the selective component of industrial policy. The main criticism against industrial policy arises from the concept of government failure. Industrial policy is seen as harmful as governments lack the required information, capabilities and incentives to successfully determine whether the benefits of promoting certain sectors above others exceeds the costs and in turn implement the policies. The East Asian Tigers provided successful examples of heterodox interventions and protectionist industrial policies (Amsden 1992). Industrial policies such as Import-Substitution-Industrialization (ISI) have failed in many other regions such as Latin American and SubSaharan Africa. Governments in making decisions with regard to electoral or personal incentives can be captured by vested interests, leading to industrial policy that would only support rent-seeking, while distorting the efficient allocation of resources by market forces at the same time (Pack and Saggi 2006).

Scholars such as Anne-Kruger (1993) and Deepak (1983) argued that industrial policy had not worked and indeed could not work because government failures were always worse than market failures. This argument was certainly correct in pointing to some very unsuccessful instances of industrial policy in developing countries. However, it was rather selective in its focus. Moreover, the theoretical argument that government failures are always worse than market failures seems more ideological than based on either theory or evidence. Different regions have adopted different type of industrial policy and incentives with mixed outcomes. In Latin America and some Sub-Saharan African countries, for example, it came in the form of Import Substituting Industrialization (ISI) with the closure of domestic markets to international competition. In South Korea and Taiwan, the model was export based with incentives created to induce the development of export industries (the domestic market was also protected). The explanation for the adoption and success of different industrial policies may be due to the differences in the ideas and the ideologies of the different policy makers or their economists.

2.1.3 Industrialization and economic growth

Industrialization may refer to an increase in the share of manufacturing in the Gross Domestic Product (GDP), and in the occupations of the economically active population. It could also be used to describe the development of economic activity in relatively large units of production, making much use of machinery and other capital assets, with the tasks of labour finely divided and the relationships of employment formalized (Kirk-Greene 1981). In either case, industrialization is concerned with the expansion of a country‟s manufacturing activities, including the generation of electricity and the growth of its communications network. It is also a process of reducing the relative importance of extractive industries and of increasing that of secondary and the tertiary sectors (Adejugbe 2004).

There is evidence to suggest that industrialization and in particular manufacturing is the prime mover of economic growth. This is given that it creates employment, enables wealth creation and facilitates poverty alleviation. Former United Nations Secretary General, Kofi Anan in his message to Africa‟s Industrialization Day (2003), highlighted the relevance of industrialization, especially its varied and valuable contribution to the alleviation of poverty. Industrialization, he argued, raises productivity, creates employment, reduces exposure to risk, enhances income-generating assets of the poor and helps to diversify exports. It is in fact argued, that the transformation of Southeast Asia within a few years and the unprecedented pace of development of China and India. (Which has lifted millions from poverty), are examples of what sustained industrialization could do to any economy.

There is an intrinsic relationship between industrialization and economic growth. This is given that there is hardly any country that has developed without industrializing even as rapidly growing economies tend to have rapidly growing manufacturing sectors (UNIDO 2009). Similarly, virtually every country that experienced rapid growth of productivity and living standards over the last two hundred years has done so by industrializing (Murphy 1989). England, which is widely acclaimed as the first developed country, achieved this status using the Industrial Revolution, which enabled it, thanks to series of cost-reducing innovations, to increase its industrial output fourfold beginning from the first half of the eighteenth century.

Since then, the main criterion for growth has been an increase in per capita income resulting mainly from industrialization. The example of Southeast Asia, which we earlier alluded to, is self-evident. In these economies industrialization has proved to be the natural route to growth in an economy. Their spectacular rise, contrasts sharply with the continued industrial marginalization of sub-Saharan Africa as well as other least developed economies.

2.1.4 Government incentives/policy measures 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 government has drafted for the country an industrial policy document to guide its achievement. According to the Bureau of Public Enterprise (2005), Industrial policy can be defined as a systematic government involvement through specifically designed policies in industrial affairs, arising from the adequacy of macroeconomic policies in regulating the growth of the industry. It went further to say that the instrument of industrial policy includes; subsidies, tax incentives, export promotion, government procurement and import restrictions. Others include direct investment which formed the pivot of industrial policy from 1970s to 1980s. Foreign exchange rate policy, monetary policy and trade policy also help to shape investment decision.

The industrial policies of Nigeria intend to achieve the following objectives.

i. To generate and raise the production.

ii. Increase export of locally manufactured goods. iii. Create a wider geographical dispersal of industries. iv. To improve the technological skill and capabilities available in the country.

v. To increase local contest of industrial output by looking inwards for the basic and intermediate input.

vi. To affect foreign direct investment.

To achieve the above, the Nigerian government has put in place some policy measures or policies, these policy measures are looked at from three perspectives. Funding industrial development, incentives to industry and institutional frame work.

A. Funding Industrial Development

Improving industrial production in Nigeria requires high financial resources. The private sector is expected to play the leading role while the government focuses on the facilitators‟ role. To help the industrialist to obtain a cheap inventible fund, government adopted two major strategies.

a. The provision of credit facilities on concessionary economic development banks.

b. Provision of equity funds and long term loans by the banking sector for the promotion of small and medium enterprises.

Based on the above, government has allocated substantial resources for funding industrial growth through the Bank of Industry (BOI). The bank was created from the merge of National Economic Reconstruction Fund (NERFUND). The bank is expected to facilitate the production of primary industrial inputs by providing medium and long term loan for Agriculture and agro-allied industries. The banks emerge from the merge of people bank, Nigerian Agricultural and Corporation Bank and Family Economic Advancement Programme (FEAP). To make funds available to small and medium scale enterprises (SMES) which help Nigeria government to achieve its objectives of self-reliance enhances poverty reduction etc. Government through the Central Bank has encouraged banks to set aside 10% of their annual profit as equity funds and long term loans for the promotion of SMES. To attract foreign capital, the government has put in place structures that will encourage capital inflow to the economy. These measures include deregulation of the economic policy stability, reduction in number of regulatory agencies and establishing the Nigeria investment promotion commission (NIPC). It also embarked on port reforms and establishment of Export processing factories and improving the infrastructural facilities in the country.

B. Incentives to Industry

To achieve the industrial development of the nation and promote a dynamic efficient and sustainable manufacturing sector government has set up a package of incentives. The incentives geared towards encouraging the private sector to play a leading role, promote geographical dispersal of industries and increase industrial output and domestic resources utilization and industrial linkages. The incentives are divided into (i) fiscal measure and (ii) export promotion.

Fiscal Measures

i. Tax Holiday: This is exemption of some industries especially the infant ones from the payment of tax for the period of at least 5 years to enable them grow.

ii. Tariff Protection: This is imposition of a heavy import duty on foreign goods so as to protect local industries from international competition.

iii. Import Duty Relief: This is the granting of import duty relief to the importation of capital equipment by the government. This helps the newly established firm to be able to procure capital equipment cheaply, thereby increasing their productivity.

iv. Reduction of Excise Duty: This simply means reduction in the amount paid as taxes for goods and services produced in the country. This helps to reduce business cost of production.

Export Promotion

Export incentives came on board in the 1980s with the introduction of Structural Adjustment programme (SAP) through the promulgation of the export decree No.17 of 1986. It includes:

i. Export Development Fund: The government set up this scheme to assist financially the private sector exporting companies to cover part of their export promotion activities. These include training, seminars, advertising and publicity export research etc.

ii. Export Expansion Grant: The scheme provided inducement to exporters who have exported N500, 00. Worth of processed product its 20% grant on the total annual export and on receipt of confirmation of repatriation of export proceeds. It is administered by the Nigeria Export Promotion Council. Other policy measures includes; duty draw scheme, depreciation allowance, currency retention scheme etc

C. Institutional Framework

The institutions play advisory facilitators roles in the industrialization process of the country. They make the business environment conducive for successful take off. The institution includes individual training fund (ITF) for man power development, standard organization and quality for products, National Automative Council (NAC) to execute the automotive policy of government. Others include; Central Bank of Nigeria

(CBN), Industrial Data Bank (IDB), Industrial Inspectorate Department, Small and Medium Industries Development Agency (SMIDA), Raw Material Research and Development Council (RMRDC), National Agency for Food Drug Administration & Control (NAFDAC) etc.

2.2 Theoretical Framework

2.2.1 Gerschenkron theory

According to Gerschenkron, all nations were once backward hence to move from the traditional level of economic backwardness to modern industrial economy requires a sharp break with the pest or a “great spurt” of industrialization. Many Western countries like the United States, Germany, Great Britain and France experienced Changes at roughly the same time and achieved partly industrialization during the first half of the 19th Century”. Thus he noted that the advanced nations started their first stage of development with the factory/private firm. While (the great spurt) will be provided by banks in what he described as moderately backward states and government in extreme backward states.

There are several tensions between economic backwardness and the urgency of development in many directions. According to Geschenkron, for industrialization, as put forth by Rostow, he based his view on two empirical observations first, the preconditions for industrialization that existed in England were either absent in the backward countries of Europe or existed in a very small scale – second, a big spurt of industrialization occurred even in those countries where such preconditions were not present. Gershenkron supported his view by citing the example of England that capital was supplied to the early factories in England from previously accumulated wealth or from gradually plough back of profits – but extremely backwards states/countries which – could not have these preconditions of industrialization were compensated by the actions of bank and government. This great spurt could be provided by the World Bank which accumulated resources from the surplus units of the world for the world‟s deficit units.

2.2.2 The Case for Industrialization: Basic Theories and Economic Arguments

Economic theories have to some large extent agreed on the relationship between manufacturing and economic growth at least up to certain levels. Only three countries worldwide have become rich on agriculture alone and they include; Australia, New Zealand, Canada, (Ibbih and Gaiya, 2013). A slight movement from agricultural to industrial sector has however been a recurring decimal in all other developed countries, (Thirlwall, 1993). Based on these, this work will use Kaldorian framework in analysing the role of manufacturing on economic growth and also Lewis theory on dual economy and structural transformation which provides foundational background to Kaldor’s growth laws.

a. Dual economy model

This theory was propounded by a British citizen, Professor Arthur William Lewis in 1954 and it addressed the mechanisms of transferring surplus labour from the traditional activity to a modern capitalist sector under the conditions of unlimited labour. According to Lewis a country’s economy can be thought of as containing two sectors, a small “capitalist” (industry) sector and a very large “traditional” (agriculture) sector.

The Capitalist Sector

Lewis defined this sector as “that part of the economy which uses reproducible capital and pays capitalists thereof”. The use of capital is controlled by the capitalists, who hire the services of labour. The capitalist manufacturing sector is defined by higher wage rates as compared to the subsistence sector, higher marginal productivity, and a demand for more workers. Also, the capitalist sector is assumed to use a production process that is capital intensive, so investment and capital formation in the manufacturing sector are possible over time as capitalists’ profits are reinvested in the capital stock. Improvement in the marginal productivity of labour in the agricultural sector is assumed to be a low priority as the hypothetical developing nation’s investment is going towards the physical capital stock in the manufacturing sector.

The Agricultural Sector

This sector was defined by him as “that part of the economy which is not using reproducible capital”. Lewis posits that surplus labour from traditional agrarian sector is transferred to the modern or industrial sector whose growth over time absorbs the surplus labour, promotes industrialization and stimulates sustained growth. In the model, the traditional agrarian sector is typically characterized by low wages, an abundance of labour, and low productivity through a labor-intensive production process.

Relationship Between the two Sectors

The primary relationship between the two sectors is that when the capitalist sector expands, it extracts or draws labour from the agricultural or traditional sector. This causes the output per head of labourers who move from the agricultural (subsistence) sector to the capitalist sector to increase. Since Lewis in his model considers overpopulated labour surplus economies he assumes that the supply of unskilled labour to the capitalist sector is unlimited. This gives to the possibility of creating new industries and expanding existing ones at the existing wage rate. A large portion of the unlimited supply of labour consists of those who are in disguised unemployment in agriculture and in other over–manned occupations such as domestic services casual jobs, petty retail trading. Lewis also accounts for two other factors that cause an increase in the supply of unskilled labour, they are women in the household and population growth.

The agricultural sector has a limited amount of land to cultivate, the marginal product of an additional farmer is assumed to be zero as the law of diminishing marginal returns has run its course due to the fixed input, land. As a result, the agricultural sector has a quantity of farm workers that are not contributing to agricultural output since their marginal productivities are zero. This group of farmers that is not producing any output is termed surplus labour since this cohort could be moved to another sector with no effect on agricultural output. Therefore, due to the wage differential between the capitalist and agricultural sector, workers will tend to transition from the agricultural to manufacturing sector over time to reap the reward of higher wages. However even though the marginal product of labour is zero, it still shares a part in the total product and receives approximately the average product.

If a quantity of workers moves from the subsistence or agricultural sector to the capitalist or industrial sector equal to the quantity of surplus labour in the agricultural sector, regardless of who actually transfers, general welfare and productivity will improve. Total agricultural product will remain unchanged while total industrial product increases due to the addition of labour, but the additional labour also drives down marginal productivity and wages in the manufacturing sector. Over time as this transition continues to take place and investment result in increases in the capital stock, the marginal productivity of workers in the manufacturing will be driven up by capital formation and driven down by additional workers entering the manufacturing sector. Eventually, the wage rates of the agricultural sector for the manufacturing sector will equalize as workers leave the agricultural sector for the manufacturing sector, increasing marginal productivity and wages in agriculture whilst driving down productivity and wages in manufacturing.

b. Nicholas Kaldor Growth Model

This theory was propounded by Professor Nicholas Kaldor in 1957 and his analysis of growth captured the relationship between manufacturing sector and economic growth. Kaldor, writing in the post-war period, noted that the link between manufacturing growth and the performance of the economy as a whole was imperative for the growth trajectory of developed economies then, (Ibbih and Gaiya, 2013). Kaldor growth theory have three basic laws which are as follows;

The First Law: Increasing Returns in Manufacturing

This first law is that there exist a strong positive relationship between the growth of manufacturing output and the growth of the GDP. Kaldor found evidence that the manufacturing is the engine of growth for every country at every stage of growth. He tested this proposition using regression qi = ai+ bimi …… (i). Where q and m refers to growth of total output and manufacturing output. Kaldor also argues that the growth in non-manufacturing output also responds to the growth of manufacturing output. Two reasons have been deducted for this;

1. This reason is in line with Lewis model of a dualistic economy, which means that the expansion of manufacturing leads to the transfer of labour from the low productivity areas to the industrial activities. This invariably has little or no negative impact on the traditional sector given surplus labour.

2. This reason has to do with the existence of static and dynamic returns to scale interval to the firm as well as increasing productivity that arises as a result of technology and on the job training (Libiano, 2006).

Second Law: Effective Demand – Constrained Growth;

The second law, also known as Kaldor –Verdoorn’s law, is that there exist a strong positive correlation between the growth of manufacturing output and the growth of labour productivity in manufacturing. This law provides an explanation of the first law: the more the output of manufacturing sector grows the greater is the increase of productivity gain in the system as a whole which allows for a reduction of unit labour costs and consequently a fall in prices. This increases the competitiveness of the country and allows for further output expansion through increased exports which reinitiate the cycle, (Libiano, 2006).

The first two laws imply that capital accumulation is self-generating as output increases. The limit on growth of the capital good sector (the manufacturing sector) has consequently not to be found in some supply constraint, not even in the shortage of labour (which was his original idea in 1966), but in some demand constraint. In other words, the growth of industrial output must be induced by autonomous demand, which derives from outside the sector, either from the agriculture sector or from the rest of the world.

Third law: The agricultural – Industrial relation and the two sector model;

The third law is that there exist a strong positive relationship between the growth of manufacturing output and the growth of productivity outside manufacturing sector. This law refers to the assumption of disguised unemployment in the economy (at the early stages in agriculture and subsequently in services),which together with the hypothesis of rigid wages in the industrial sector exceeding agriculture wages leads to an elastic supply of labour for industry. The basic argument of this law is that the non-industrial sector has diminishing returns to scale and as such when resources moves to the industrial sector, average productivity of those that remain will rise (Ibbih et al, 2013).

The World Economy

The two-sector model describes the case of a single developing country, but Kaldor used it to describe the trade between less-developed countries exporting agricultural products and more developed countries exporting manufactured goods. He could not envisage, but would have welcomed, a third wave of globalization during which countries with nearly half of the planet’s population would enter into world trade by exporting industrial goods and then growing at a pace previously unknown. Furthermore, he was writing at the time of the two oil shocks and hence in a period of stagflation of the world economy; in Kaldor’s view (1975), international trade relations give the world economy a deflationary bias, because when there is a surplus in primary production, the fall in these prices leads to a reduction in the purchasing power of these countries which, as we have seen, is a demand constraint on the output of advanced countries. By contrast, if there is a shortage of primary products, their prices increase, money wages increase, inflation increases and anti-inflationary policies will reduce output and employment on a world scale. This is the reason why Kaldor (1966) called for reform in the international monetary system that would offset this bias. He argued for the issuance of a new international reserve currency, similar to Keynes’s bancor that would be backed by a great deal of major commodities and would operate as a buffer stock. A boom in the output of primary commodities would increase the creation of this international money, which would then be spent on buying industrial output.

Conversely, a shortage of agricultural output would reduce the creation of this international money, which would reduce demand from the industrial sector instead of creating inflation.

2.3 Empirical Review

Several empirical studies have supported the assertion of the existence of a relation between industrialization and economic growth in several economies of the world. For instance, Ebong, Udoh and Obafemi 2014 using time series for five decades (1960-2010) based on the Eagle-Granger two steps and Johansen co integration test, and the vector auto regression technique studied globalization and industrial development in Nigeria. Findings clearly showed that globalization had significant impact on industrial development. They suggested that increasing the level of trade with the rest of the world would create opportunities to export local raw materials and import necessary input into the industrial process and that financial liberalization enhances industrial development. Hence, recommended that policies are required to reserve the tide of capital flight from the country and channel resources toward the industrial sector.

Likewise,Ogunrinola and Osabuohien (2010) examined the impact of globalization on employment generation in Nigeria‟s manufacturing sector using ordinary least square technique of analysis on a time series data for the period of 1990-2006 and discovered that globalization has a positive impact on employment level in the Nigerian manufacturing sector. Hence implying that countries who trade with other parts of the world generate employment into their economy which leads to economic growth.

On another study that relates to the developing economies conducted by Kaya (2010) which investigated the effect of the latest wave of economic globalization on manufacturing employment in developing countries with the use of a comprehensive dataset on 64 developing countries from 1980 – 2003. The study is concerned with classic debate on the benefits of industrialization and how this affects developing countries. The results generally demonstrate that manufacturing employment increased in most developing countries. First, this study finds that the level of economic development measured by GDP per capita is the most important factor influencing the size of manufacturing employment. Second, economic globalization also influences manufacturing employment in developing countries, but mainly through trade.

From another line of thinking, Ndiyo and Obongi 2003 with the use of the vector autoregressive technique of analysis examined the challenges of openness in developing countries for lessons to be drawn using Nigeria from (1970 – 2000). Empirical result from this study shows that globalization has had both positive and negative effect on the Nigerian economy. The negative effect according to Mike (2012) includes the challenges for industrial policies in Nigeria which are powerful tools to promote rapid economic growth and development. He observed that Nigeria has not been able to make appreciable progress in industrial development due mainly to policy failure. He stated that different government since independence have been trying out different approaches based on the dictates of those in power and those who advise them, stressing that the result has been policy summersault and inconsistency favouring rent seeking.

Also Gylych and Enwerem (2016) in their study the impact of industrialization on economic growth: experience of ten countries in ECOWAS between the periods of (2000-2013), revealed that industrialization has had a negative impact on economic growth in Nigeria in the long run. The methodology adopted was the use of Ordinary least square (OLS) technique. The study recommended that government should redirect its industrial and investment policy so as to increase output of the domestic production (RGDP), flexible exchange rate and control inflation rate since that showed that increase in exchange and inflation rate, decreased output. Also industrial and investment policy should be flexible on infant industries so as to encourage productivity and improve GDP.

A study by Isiksal and Chimezie (2016) indicated that no country particularly the developing ones has attained a level of economic growth without sub-sector linkage. They evaluated the Impact of Industrialization in Nigeria from 1997-2012 using the Johansen co-integration testing approach which demonstrated a significant long-run relationship between the three variables used. The results reveal that agriculture, industry and services have a significant positive relationship with GDP.

Awad (2010), examined the role of increased manufacturing share of non-oil GDP in Gulf cooperation council economies (they include: Bahrain, Kuwait, Qatar, Saudi Arabia, Oman, and United Arab Emirate). The study used panel data spanning from 1997 – 2007. The study employed share of manufacturing in GDP (MAN) as the dependent variable and population (POP); growth of manufacturing share in GDP (MSG); labour force (LF); investment as a share of GDP (INV); government expenditure as a share of GDP (EXP); and world GDP growth rate (WG) as independent variables. The data obtained were analysed using Ordinary Least Square (OLS) Method and two-stage least squares (G2SLS). The study shows that manufacturing is strongly linked to GCC non-oil economic growth over the long run but however, results for the short run demonstrates that manufacturing efforts in the GCC countries have no significant effects on stimulating the growth levels of non-oil GDP.

Obasan et al (2010), examined the role of industrial sector in the economic development of Nigeria. The study used time series data covering the period of 1980 – 2008. The study employed Real Gross Domestic Product (RGDP) as the dependent variable and Manufacturing output (MOT); Exchange rate (EXR); Inflation Rate (INFR); Interest Rate (IR); Government Expenditure (GEXP) as independent variables. The data obtained were analysed using Ordinary Least Square Method. The study found that there is an empirical correction between the degree of industrialisation and economic growth in Nigeria. If one plots the share of industrial sector in commodity production against per capita incomes, there is a positive relationship between the two. The study investigates the Nigeria economy as one that is developing and changing due to rapid changes in the world economy. Also the study found that the country exhibits a high level of economic openness that is not industrial sector, increase in exchange rate movement, particularly foreign direct investment do not seem to provide the necessary stimuli for industrialisation in the country. The study recommended that economic openness and interest rate must be combined with other vital factors to give the desired boost to industrial development and if Nigeria industrial sector is to benefit maximally from globalisation, emphasis should first be placed on deregulation at the sub-sector level to form a formidable block for effective and efficient linkage with the economic growth.

Elhiraika (2008), examined the key determinant of manufacturing share in aggregate output and its relationship with real GDP growth and growth volatility of 36 African countries. The study used cross-section with panel data covering 1980 – 2007. The study employed GDP growth (g) as the dependent variable and investment rate (GDIGDP); labour force (LF); official development assistance relative to GDP (ODAGDP); the share of manufacturing value added in GDP (MFGGDP); and public expenditure as percentage of GDP (GEGDP) as the independent variables. The data obtained were analysed using ordinary least square and two-stage least squares. The study found a positive relationship between share of manufacturing in aggregate output and real GDP and a negative relationship between share of manufacturing in aggregate output and growth volatility. This is so, because an increase in the share of manufacturing in total output has the potential to raise GDP growth and reduce growth volatility.

Mahdavi et al (2007), investigated the impact of non-exports on the economic growth in Iran. The study utilized a time series data covering the period of 1959 – 2003. The study employed annual growth rate of non-oil GDP (RGDP) as the dependent variable and share of investment in non-oil sector in non-oil GDP (I/GDP); annual growth rate of labour force in non-oil sectors (RL); annual growth rate of non-oil exports (RNX); weighted non-oil exports growth (dNX/NX.NX/GDP)as the independent variables. The data obtained was analysed using Ordinary Least Square Method. The study found that non-oil exports exert a positive and significant effect on economic growth of Iran during the period of the research but also in absence of fundamental changes in export composition, the also find that there is low, or no, potential for positive effect of non-oil exports on economic growth through external economies and productivity increase.

Libanio (2006), analysed the relationship between manufacturing output growth and economic performance from a Kaldorian perspective in seven Latin American economies (they include: Brazil, Argentina, Chile, Colombia, Mexico, Peru, and Venezuela). The study utilized panel data covering the period of 1985 – 2001. The study employed growth of total output (q) as the dependent variable and manufacturing output (m); growth rate of employment (e); growth of capital stock (k); growth of total factor input (tf); and the degree of return to scale(1-Φ)/γas the independent variables. The data obtained was analysed using feasible generalized least square method. The study found that increasing returns to scale in manufacturing sector, and the possibility of cumulative growth cycle in the region is based on the expansion of industrial activities; this means that there is a positive relationship between manufacturing output growth and the overall performance of the economy.