The Impact of Industrialization on Economic Growth in Nigeria
Year: 2026
Type: article
Abstract: This study empirically examines the impact of industrialisation on economic growth in Nigeria using annual time-series data spanning a 27-year observation period (1999–2025). The investigation is anchored on Kaldor's First Growth Law, Endogenous Growth Theory, and Schumpeterian financial intermediation mechanics. Economic growth is proxied by Real Gross Domestic Product, while industrialisation is captured through three complementary indicators: Manufacturing Value Added as a share of GDP, Manufacturing Capacity Utilisation Rate, and Commercial Bank Credit to the Industrial Sector, transformed into natural logarithms. The Augmented Dickey-Fuller unit root test revealed a mixed order of integration. Based on the Akaike Information Criterion, the optimal specification chosen was ARDL(1, 2, 1, 0). The F-bounds test confirmed the existence of a stable long-run cointegrating relationship among the variables. Empirical findings from the long-run levels equation demonstrated that all three industrialisation indicators exert a statistically significant positive impact on economic growth at the 1% level. Specifically, a unit increase in Manufacturing Value Added expands long-run real GDP by 2.496 units, a 1% improvement in Manufacturing Capacity Utilisation increases long-run growth by 0.455 units, and a 1% increase in credit to the industrial sector Commercial Bank Credit to the Industrial Sector yields a substantial 5.126% long-run expansion in real GD. In the short-run Error Correction Model, contemporary manufacturing value added, lagged manufacturing value added, and capacity utilisation significantly stimulate short-run output growth. The Error Correction Term satisfied theoretical expectations, indicating a statistically significant speed of adjustment of6.28\% per annum back toward long-run equilibrium following short-run macroeconomic shocks. Post-estimation diagnostic tests confirmed that the estimated model is correctly specified, homoskedastic, free from serial correlation, normally distributed, and structurally stable over time. The study recommends that Nigerian monetary and economic planning authorities prioritise targeted, low-interest credit expansion to real-sector enterprises, address acute electric power and infrastructural deficits to elevate manufacturing capacity utilisation, and implement deliberate industrial promotion policies to accelerate manufacturing value addition.
Institution: Nigeria Police Academy
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7225623293
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