Benue State University, Makurdi

Macroeconomic Determinants of Manufacturing Investment in Nigeria, 1979 to 2000

Ugboma Ebele Patricia and Onochuku Okechuku Ph.d

Abstract

The crucial role of manufacturing towards the industrial development of an economy has motivated successive Nigerian governments to take various measures aimed at boosting manufacturing. However.; despite all this, the sector remained weak as exemplified by its meagre contribution to the GDP This raises serious questions as to what factors that account for the investment behaviour in the Nigerian economy. The purpose of this work is to empirically investigate the investment behaviour in the Nigerian manufacturing sub-sector and to identify some of the macroeconomic variables that influence investment demand in the economy.

Apriori knowledge shows that private investment is influence by such factor's interest rate, the level of income, inflation rate, the market size etc. in developing countries it is also believed that government expenditure, size of external debt, exchange rate and the availability of foreign exchange impinge on private investment demand. This is why economist believes that is a multivariate function. It is against this background that this study is undertaken to determine which of these factors adequately explain the private investment behaviour in the Nigerian economy.

Using the econometric tool of regression analysis the result revealed a strong correlation between the independent and dependent variables. With the exception of interest rate and public investment all the other variables conformed to economic theory On the whole 99.9% variation in manufacturing investment in Nigeria is explained by the model. However, the income variable peroxide by GDP accounts fiw. about 96% variation, the other regressors explain about 3.9% of the variation while the remaining 0.1% could be explained by other variables not included in the model. The study therefore concludes that the model developed provides a good understanding of investment behaviour in Nigeria's manufacturing sub-sector.

It is therefore recomineildecl that government should dinbark on policies that would reduce inflationary rate, external bormwing and attract more foreign direct investment into the domestic economy. Finally, the government should de-emphasize the rule interest rate as a source of engendering investment demand in the Nigerian economy.

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