THE CHALLENGES AND PROSPECTS OF THE MANUFACTURING SECTOR OF

NIGERIAN ECONOMY
BY
DR.ADEGBIE, FOLAJIMI FESTUS, AND DR(MRS). ADENIJI, NIKE ANTHONIA ,
Bsc,MBA,MPhiL,PhD,FCA,ACIB,ACTI Bsc PGD,,MBA,MPhiL.PhD.
COVENANT UNIVERSITY, COVENANT UNIVERSITY,
DEPARTMENT OF ACCOUNTING, DEPARTMENT OF BUSINESS STUDIES,
OTA. OTA
folaadegbie@yahoo.com anthoniaadenike@yahoo.com

ABSTRACT
Industrialization involves extensive technological development of the production system
of an economy. Industrial development therefore represents a deliberate and sustained
application and combination of suitable technology, management techniques and other
resources to move an economy from the traditional low production to a more automated
and efficient system of mass production of goods and services. Nigerian economy which
was mainly agrarian pre-independence gained rapid industrialization priority after the
first national development plan of 1962 to 1969.The focus of this paper is to assess the
evolution of industrial development in Nigerian economy, its challenges and prospects.
The capacity utilization of the industry which fluctuated between 70 and 75 in the period
1970-1980 due to overvalued naira and substantial supply of imported raw materials,
dropped to 45% in 2005 and further dropped to 41.8% in 2006.The problems of weak
demand for local manufactured goods, high cost of production due to inflation, incessant
power outages which resulted into high cost of maintaining power generating sets,
Globalization and stiff competition from cheap imports, high bank rates and down turn
in Nigerian economy are the identified problems with banks regarding the sector as a
high risk area for lending. The methodology adopted is empirical and exploratory by
opinion survey. Five hypotheses stated in null forms were tested with analysis of variance
(ANOVA) statistical tool used to analyze the survey result. The result of the survey
shows that an economy can not develop if the real sector is not active. There is the need
for good and viable operating environment guided by policies that will enhance
development in the real sector and active participation by the banking industry to help
develop the sector.

Key words: Capacity, Globalization, Industrialization, Policy and Utilization

1
Introduction;
Rapid industrial development has been the main focus of economic development because
of its potential benefits. Industrialization tends to propel economic growth and quicken
the achievement of structural transformation and diversification of economies.
According to Central Bank of Nigeria-CBN (2000:61-95), before independence in 1960,
the Nigerian economy was mainly agrarian both in production for domestic consumption
and exports. Early manufacturing activities predating independence were limited to semi-
processing of primary agricultural products as adjuncts to the trading activities of foreign
companies. The Agro-based manufacturing units that were established included vegetable
oil extraction and refining plants, starch making, tobacco processing, pottery, raffia
crafts, mat making, saw milling. Then followed by textiles, breweries, cement, rubber
processing and plastic products.

Post independence Nigeria witnessed national development plans, which provided the
conceptual framework for the development objectives, strategies for industrialization,
government participation in the process of industrialization, and the fiscal and related
policies for influencing industrial development. Before 1972, as further analyzed by
Central Bank of Nigeria, Nigeria economy was dominated by direct foreign investment
capital. The second development plan of the Federal Government promoted Indigenous
participation in industrial activities which became one of the prominent policy
instruments designed to encourage industrial development. Nigeria’s manufacturing sub-
sector is composed of a wide range of industrial activities which include large to medium
and small scale manufacturing enterprises.

The factors that influenced the structural changes and performance of the manufacturing
sub sector since independence include government intervention, low technological
development, inward-looking strategy, and protectionism.The main objectives set by the
industrial planners in Nigeria include the desire to achieve increase in the share of
manufacturing, contribution to the Gross Domestic Product(GDP),replacement of imports
with locally produced goods,innovations,industrial disposal and employment generation.
The high import dependency was more pronounced in the heavy capital intensive
industrial sub-groups, Steady output growth average 11percent in the 1970’s,while its
share in GDP increased from 5.4percent in 1977/78 to a peak of 13percent in 1982.In
2000 the growth rate has declined to 0.6percent.The 2006 CBN report reflected a growth
rate of 1.8%

The overall manufacturing capacity utilization which fluctuated between 70 and 75

percent between 1975 to 1980 as a result of the over-valued naira and substantial supply
of imported raw material dropped to 37percent in 1985,recorded 45percent in 2005 and
declined by 3.3percentage point in 2006.The sectors’ share in the gross domestic product
fell persistently from 9.2 percent in 1981-85 to 8.3percent for period 1986-90,7.5percent
in 1991-95 and 6.3percent in 1996-98.2005. CBN report on sectoral share in GDP
recorded unimpressive growth in the industrial sector where manufacturing industry
belongs. Agriculture 42percent, services 15percent, wholesale trade and retail trade
14percent building and construction 1percent and industry 28percent.

2
The substantial devaluation of the naira during 1986-88 led to escalation of costs of
imported inputs. The restrictive monetary policies of 1986 and 1987 reduced credit to the
productive sector and seriously hampered growth in effective demand for finished
products. The rising costs of imports and private generation of electricity and other vital
infrastructures to sustain production processes resulted in high cost of production,
increase in product prices, and consequent low-consumer demand. The sector becomes a
high risk for lending to banks. Arising from these developments, the manufacturing sub-
sector which was expected to achieve 15percent value added contribution to GDP,
registered registered dismal percentage.
The table below shows banks sectoral allocation of credit to the economy:
Sector Allocation in %
Agriculture 2%
Solid minerals 9%
Exports 1%
Manufacturing 18%
Unclassified (others) 70%
Source: CBN 2005 Annual Report and Statement of Accounts.

Nigeria’s manufacturing sub-sector consists of wide range industrial activities which

include large to medium and small scale manufacturing enterprises as well as cottage and
hand-craft units in the informal sector, using simple technology. The ownership of
Nigeria’s manufacturing sub sector is shared between the public and private sectors of the
economy. The table below shows the structure of industrial establishments:
Table 1
NIGERIA: STRUCTURE OF INDUSTRIAL ESTABLISHMENT (1)
(Percentage)

Activity size composition ownership structure

Micro Medium Large sole
Proprietorship cooperative Partnership others
(2) (3) (4) (5)
i.. Agriculture, Forestry 43.4 53.8 2.8 - - - -
& Fishing

ii Mining &Quaring 29.9 55.2 14.9 40.3 47.0 6.0 6.7

iii.Manufacturing 65.2 31.3 3.5 81.7 11.6 6.0 0.7

iv.Electricity,Gas & . 25.0 51.0 24.0 15.3 29.6 4.1 51.0

Water
v.Consumption 41.7 47.7 10.6 49.7 40.7 8.5 1.1

vi. Wholesale & Retail 75.9 23.0 1.1 75.1 16.3 7.3 1.3

vii.Transportation,
Storage&
Communication 46.9 46.9 6.2 36.1 44.7 9.9 9.3

viii.Financing, insurance
& Real Estate 50.9 45.0 4.1 37.0 47.9 11.6 3.5

3
ix Community,social&
Personal services 68.2 30.9 0.9 81.1 9.2 7.9 1.8

65.5 32.0 2.5 74.5 16.6 7.3 1.6

Summary of Table 1
(1) Establishments in operation in with more than 5 persons employed
(2) Micro-enterprises with 5-9 workers employed
(3) Medium-scale enterprises with 10-99 workers employed
(4) Large-scale enterprises with greater than 100 workers
(5) Others include government corporation and incorporated units
Adapted from CBN (2000)-The Changing structure of the Nigerian Economy and
Implications for Development page 65.

The table shows that in relative sizes, the bulk of about 65.2percent are small scale and
micro-industries while the medium and large scale industries represent 31.3 percent and
3.5percent of total manufacturing units respectively. The cottage and handicrafts
enterprises engage largely in the production of wearing apparel, light processing of food
stuffs and pottery making. The large scale capital intensive manufacturing enterprise
include the publicly owned core industrial projects which produce basic inputs for the
down-stream industries. The capital goods industries consisting of machinery and
electrical equipment are few. The ownership of Nigeria’s manufacturing sub- sector is
shared between the public and private sectors of the economy. In terms of number, the
private sector owned manufacturing units are predominant, while aggregate public sector
investments dominate in the capital intensive heavy industries.(UNDP,1993) as cited in
CBN,(2000) analyzed that publicly owned heavy industries accounted for 66.7percent of
total investments in intermediate and capital goods industries.
The present state of Nigerian manufacturing sector calls for a restructuring so that the
capital intensive sector of the industry can be developed to tap into the potentials of the
national economy.

Focus
The manufacturing sector which is expected to contribute an average of 15percent added
contribution to the Gross Domestic Product (GDP), thus serving as the major source of
growth registered dismal performance. Capacity utilization has fallen grammatically
which is currently at 45percent average. These negative trends in the performance of
manufacturing production indicate falling productivity . Its stunted growth constrained
the capacity of the reform process to pull the economy out of recession. In addition,
capacity utilization low rate makes it difficult for profitable operations. It is not
encouraging when it is recognized that over 48% of the nation’s foreign exchange
earning is allocated to a sub-sector that contributes only about 6percent of the GDP.
This paper is focused to address the following problems:
a. Low Computer-integrated manufacturing system: This is a great obstacle
constraining productivity in Nigeria as developments in technology and
innovations are the primary forces propelling industrialization today. New
processes and procedures of doing old things, and automation have revolutionized
the manufacturing industry and multiplied productivity in the industrial nations.

4
 Industries in Nigeria cannot acquire modern machines to monitor and control
operations; it is now possible to track products continuously as they move through
the factory and to report on a real-time basis, such information regarding
production. Low technology is responsible for the inability of local industry to
produce capital goods such as raw materials, spare parts and machines, the bulk of
which are imported.
b. Low level of capacity utilization rate: The capacity utilization rate in the
manufacturing sector of between 40 and 45 percent indicates gross
underutilization of resources. This can be attributed to power outages which
resulted into using alternative power generating system which attracts high cost,
lack of funds to produce inputs, fallen demand for locally manufactured goods
and industrial unrest.
c. Classification of manufacturing industry as high risk area for bank lending: Lack
of access to funds has limited the capability of companies to make investments in
modern machines, information technology and human resources development,
which are very crucial to reducing production costs, raising productivity, improve
competitiveness, and expand operations. Low investment have discourage banks
to invest very largely in this sector, owing partly to the mis-match between short-
term nature of banks funds and the medium to long-term nature of funds needed
by industries. Also because of the risky nature of this sector, banks intend to lend
to low-risk ventures such as commerce which records high returns. Lending to the
manufacturing sectors attracts a high rate of interest which is not profitable for the
industry.
d. High cost of production: Increasing high cost of production is being recorded by
most business organizations in the sector due largely to poor performing
infrastructural facilities, high bank interest rate, and high foreign exchange rate,
low effective demand for goods, liquidity squeezes and fallen capacity utilization
rates. Inflation has contributed in no small measure to high cost of production. It
constitutes a disincentive to saving for future use and retards investment and
growth.
e. Concept of globalization: One of the greatest problems facing the Nigerian
economy is the problem of capacity utilization. The problem became more
pronounced recently by globalization and all that accompanied it. Globalization as
referring to the global economy, the international division of labour,the new
information technology revolution, and global capitalization. The manufacturing
sector is at the verge of collapse with thousands of workers being thrown out of
jobs. Nigerian has become a dumping ground for all kinds of foreign products.
Under globalization, the products of the Nigerian manufacturing sector cannot
compete with goods from the advanced countries of the world most especially
Europe and America.

The broad objective of this study is to evaluate the need to give priority finance to the
manufacturing sector which is the real productive sector of the economy, so as to
overcome the various problems confronting the sector, and take its position as a major
contributor to the Gross Domestic Product, and also produce for the economic needs of
the nation.

5
The following other objectives will however be concentrated on to accomplish the task:
i. To assess the relationship between computer-integrated manufacture and productivity
in a fully developed technological and innovative environment.
ii .Find out if full capacity utilization in a manufacturing industry can enhanced
productivity increase and create availability of goods for meeting local needs and export.
iii .To evaluate the relationship between availability of finance from banks and
investment in modern technology to meet market demand and gain competitive
advantage.
iv. To assess if good fiscal and monetary policies will have positive impact on
infrastructural development, low interest rate, low and stable foreign exchange and other
performance indices that will reduce operating cost in the industry.
v. To examine the impact of globalization on the manufacturing sector in Nigeria with a
view to get appropriate socio-economic reform measures that will enable Nigeria benefit
maximally from the current globalization trend in the world economy.

The following research questions therefore become pertinent in view of the analyzed
problems and objectives.
a. What impact does computer-integrated manufacturing system has on producing capital
goods for consumption in the economy?
b. How will full capacity utilization affect full utilization of resources?
c .Will availability of borrowed funds from banks encourage investment in modern
machines, information technology and human resources with a view to raising
productivity, improve competitiveness and expand operations?
d. Will introduction of good fiscal monetary policies have positive impact on
infrastructure, exchange rate, interest rate, and inflation that will reduce the high cost of
production?
e. How can Nigeria benefit from socio-economic reform in the current globalization trend
in the world economy?

Hypotheses
The following hypotheses stated in null forms were tested to show the accuracy of the
discoveries of the research:
1. Computer-integrated manufacturing system has no impact on productivity and market
penetration.
2. Full capacity utilization does not enhance full utilization of resources and productivity.
3. Availability of bank finance has no relationship with investment in modern machines,
information technology, human resources for productivity and competitive enhancement.
4. Sound fiscal and monetary policies do not have relationship with high cost of
production.
5. Globalization of the world economy accrues no benefit to Nigerian manufacturing
industry.

Literature Review

6
It becomes imperative for us to discuss the concept of manufacturing in Nigeria and
challenges and prospects facing the sector before the raised questions are addressed.
Relevant literature of some researchers are reviewed to give insight into the work.
Productivity in the Nigerian Manufacturing Industry:
Anyanwu,(2001:124-135) commented “Prolonged economic recession occasioned by the
collapse of the world oil market from the early 1980 and the attendant sharp fall in
foreign exchange earnings have adversely affected economic growth and development in
Nigeria. Other problems of the economy include excessive dependence on imports for
consumption and capital goods, dysfunctional social and economic infrastructure,
unprecedented fall in capital utilization rate in industry and neglect of the agricultural
sector among others” Most importantly, the researcher analyzed that putting the country
back on the path of recovery and growth will require urgently rebuilding deteriorated
infrastructure and making more goods and services available to the citizenry at affordable
prices. Increasing productivity should be the focus because many other countries that
have forced themselves in the same predicaments have resolved them through
productivity enhancement schemes. He proposes further that given the importance of
high productivity in boosting economic growth and the standards of the people,
productivity measurement cannot but be of importance to both policy makers and
researchers. Productivity measurement can be used to evaluate the efficient of an
economy in relations to others.Anyanwu proposes high productivity in the Nigerian
manufacturing industry as a necessary condition for the sectors’ recovery, achieving
competitiveness ,boosting the Gross Domestic Product(GDP) and uplifting the standards
of living of the people. Achieving high productivity will require a frontal attack on the
problems confronting the sector which are low technological development, High cost of
productivity, lack of access to finance. This paper is well focused to address the issues
raised by this researcher.

Globalization and the manufacturing sector:

Aluko, Akinola and Fatokun,(2004:119-130) commented that one of the greatest
problems of the Nigerian economy is the problem of capacity utilization in the
manufacturing sector. This problem became more pronounced and aggravated by the
structural adjustment programme and recently by globalization and all that accompanied
it. In their study of the economy, their evaluation was characterized by the following
indices: low capacity utilization which averaged 30 percent in the last decade, low and
declining contribution to national output, which averaged 6percent, declining and
negative real growth rates, low valued-added production due to high import dependence
for inputs, accumulation of large inventories of unsold finished products, dominance of
sub-standard goods, which cannot compete internationally. They further attributed the
deplorable conditions of the manufacturing sector to a horde of factors like lack of an
enabling environment, which included policy and polity instability, poor macro-economic
environment, poor legal environment which could not guarantee property right and
safety, and lack of good governance. others are poor and inadequate infrastructure, poor
implementation of incentives to manufacturing, including export incentives, low access to
investible funds due to underdeveloped long-term capital market that match industrial
projects needs.

7
They averred that under globalization, the products of the Nigerian manufacturing sector
cannot compete with goods from the advanced countries of the world most especially
Europe and America. In their field survey which centered on three textile industries, and
using statistical package for social sciences (SPSS), they stated that Nigeria should
review their membership of World Trade Organization (WTO) as the impact of trade
liberation on domestic firms in Nigeria has been overwhelming, disastrous and killing.
That Nigeria and her firms were not prepared for the challenges of globalization. This
paper focused on the review of these researchers opinion regarding the benefits of
globalization and the review of Nigeria’s membership of World Trade Organization
(WTO). Manufacturing sector can be adequately financed putting everything into
consideration so that Nigeria economy can be fully integrated into the global economy.
The performance of Nigerian manufacturing firms:
Malik,Teal and Baptist,(2004:2-33) analyzed that manufacturing activity can only
flourish in a good investment climate with the following features in place :physical
infrastructure ,financial markets and creation of the enabling environment for investment
and determine the opportunities and incentives for firms to invest productively, create job
and expand business. They identified three problems as major constraints to the
development of the manufacturing industry: Infrastructural constraints, access to credit,
and the broader macroeconomic conditions affecting the demand for goods produced by
the manufacturing sector.

They averred that well-functioning financial markets are an important ingredient for
promoting economic growth. Developed financial markets allow access of firms to new
markets, and help to promote greater competition, innovation and productivity in the
economy. Even when faced with profitable investment opportunities, many firms lack the
resources to exploit these. With financial markets unwilling to lend, investment decisions
of firms become more dependent on internally generated cash flow or resources from
family, friends and the informal sector. The costs of an inadequate financial infrastructure
are demonstrably higher for small and medium size firms because they are not well
connected to lenders and often lack the necessary credit history and collateral required for
accessing bank finance. They further analyzed that weak financial markets are an
important constraint for the average Nigerian manufacturer. The result of their survey
revealed that large majority of firms in their work witnessed cash flow problems in
2003.Only a minority of firms sought loans from formal financial institutions, and these
appear to be firms that have a promising chance of loan applications being accepted. A
majority of firms (31%) were deterred from applying for bank loans due to high interest
rates. The survey revealed the following on why manufacturing firms are not applying for
a bank loan:
Interest rate too high 31%
Already heavily indebted 1%
Inadequate collateral 16%
Don’t want to incur debt 22%
Process too difficult 11%
Didn’t need one 11%
Didn’t think I would get one 8%

8
From their report, many firms have entered into an arrangement whereby banks provide
an overdraft facility that is renewed on annual basis with interest rates ranging from 21%
to 25%.The weight of evidence points towards important deficiencies in the country’s
financial systems, particularly in its ability to meet the financial needs of smaller and
medium-sized firms. Improving the operations of financial markets in Nigeria remains a
high priority. Quoting from World Development Report 2005, new and innovative
strategies need to be designed for a stronger financial sector such as promoting greater
banking competition, facilitating information flows, preventing excessive risk taking and
promoting macroeconomic stability. There is no doubt that access to funds in the
financial institutions will create investment opportunities that will develop the sector.
This area is one of the important areas that this paper addressed. However the idle
capacity of the industry gives room for concern as their results indicate the following
reasons for under capacity utilization:
Foreign competition 2%
Telephone problems 2%
Problems of IT 4%
Lack of worker 3%
Lack of water supply 7%
Lack of domestic raw materials 15%
Lack of Imported raw materials 15%
Lack of demand 62%
Power shortages 69%
Capacity utilization is one of the areas the researchers of this paper focused attention on.

Scanning the environment for bank lending:

Dikko, (2005:16-23) commented that the financial system as wide, complex and
regulated as it appears is saddled with enormous tasks and the success of economic,
social and political system of the nation hinges on how these are managed. The financial
institutions by providing the much needed capital for output and growth fill an important
gap in the development process. That the financial system does matter in facilitating
economic development under a liberalized and reformed environment. He opined that
efficiency of the financial intermediation process can be assessed through determination
of the level of allocative efficiency, cost efficiency and price efficiency. The boldest
socio-economic contribution of banks is the emergence of the small and medium
industries equity investment scheme (SMIES) can be viewed as economic contribution
since the banks expect returns overtime only if the project operates profitably. This paper
x-rayed the need for banks to expand their financial support to the real productive sector
so as to enhance development of the sector.

Onwumere and Ugbam,(2008:27-31) explained the need for banks to do environmental

scanning of the environment of an organization with a view to gathering information
about its activities which will be useful to such an organization. Environmental factors
must be analyzed because of their capability to impede the borrower’s ability to repay the
debts. Some of these are economic variables (inflation, deflation, demand for the
borrower’s products, foreign exchange rate, fluctuations, fiscal policy etc); political

9
factors; legal factors (industry and firm risk).They are only deductible through
environmental scanning. Other conditions are type or nature of business requesting the
loan, the composition of the lending bank’s loan portfolio, one obligor credit ceiling or
limit, bureaucratic considerations, geographical limitations, sectoral constraints or pricing
consideration. Environmental scanning in lending cannot be overemphasized. Without
environmental scanning, credit analysis, credit administration/monitoring and recovery
are bound to fail. Lending is an important banking activity significantly underlining its
intermediation function .The key factors for proper scanning according to Onwumere and
Ugbam are:
Character: This is the most important of all considerations and is defined as qualities that
make someone or something special and interesting by looking at his past records, his
present activities and current relationships.
Capacity: This is the borrower’s financial ability to determine whether its expected future
income stream can cover its current and maturing obligations.
Cash flow: This is what eventually repays the debts as they mature; hence its projections
against repayment schedules are critical.
Capital: This is equity capital available to the firm whether it is enough to cover debt
repayment in the event of failure of all other means of debt collection.
Collateral: Collateral is a security by way of cash, near cash assets (share certificates) and
fixed or floating assets (land, building, plant and machinery, automobiles etc) which a
prospective borrower offers to the lending bank in order to get credit facility of its request
secured.
The researchers of this paper believe that rather than turning down request from the
manufacturing sector and regard it as a high risk sector, the financial sector should carry
critical scanning of the business environment so as to have safe lending. The
administration of such lending should assist the borrower in effective utilization and
repayment of the facility. The lending culture of Nigerian financial system need to be
developed to incorporate every productive sector of the economy in their portfolio. This
paper has critically examined the relationship of banks with the manufacturing sector
with a conclusive view that the banking sector should play more active role in helping to
develop the sector.

Methodology:

The work is empirical and exploratory. Two sets of questionnaires were administered to
collect data for the study to enable researchers to evaluate the manufacturing industry and
the need for adequate financing for economic development of the nation. A set of
questionnaire was sent to the sample representatives in the manufacturing sector while
the other was sent to the sample selected from the banking sector. Open ended questions
were structured with options of five variables: Strongly Agree (SA), Agree (A), Disagree
(D) Strongly Disagree (DA) and Undecided (UD).
Using Nigerian economy as the study population, five manufacturing companies were
sampled using stratified sampling technique in order to cover some segment in the
industry viz: Chemical and paints-Berger paints Nigeria plc; Conglomerates-PZ Cussors
Nigeria plc and Unilever Nigeria plc; Food and Beverages-Nestles Nigeria plc and
Cadbury Nigeria plc.

10
For banks, judgemental approach was used to pick two banks: First bank plc from the old
generation bank, and Intercontinental bank plc from the new generation.
Data analysis was both descriptive and inferential. Questionnaires were administered to
each manufacturing organization while questionnaires were administered to each bank.
Analysis of variance (ANOVA) statistical method was used to analyze the results from
the respondents.

Data Analysis and Discussion of findings

The analysis of data is presented below. it is segmented into five sections with each
section analyzed to take care of each hypothesis. The paper is to determine the financing
of the manufacturing sector for economic development, the prospects and the challenges
facing this concept.
Hypothesis 1 Computer-integrated manufacturing system has no impact on productivity
and market penetration.
Frequency percent valid percent cumulative
Valid percent
SA 5 5.8 6 6
A 6 7.0 7.1 13.1
U 16 18.6 19.1 32.1
D 41 47.7 48.8 81.0
SD 16 18.6 19.0 100.0
Total 84 97.7 100.0
Missing 2 2.3
Total 100 100.0

Sum of
Squares df Mean Square F sig

Between Groups 514,809 4 73,544 25.846 .000

Within Groups 187,241 80 11.440E-02
Total 702,050 84

From the test statistic above by SPSS,the calculated result for F=25.846 .While the
critical /tabulated value at alpha is 0.05 at degree of freedom within,df w =80 and the
degree of freedom between,dfb =2.48 and 6.39 respectively. Since the calculated is
higher, the null hypothesis is rejected.At ά 0.01 degree of freedom within df w 80 =3.56
and dfb =15.98 Therefore computer integrated manufacturing system has a significant
impact on productivity and market penetration in the manufacturing industry.
Hypothesis 2:Full capacity utilization does not enhance full utilization of resources for
high productivity
Below show the statistical result of survey.
Frequency Percent Valid Percent cumulative
Valid percent
SA 2 2.3 2.4 2.4

11
 A 1 1.2 1.2 3.6
U 4 4.6 4.7 8.3
D 47 54.6 55.3 63.6
SD 31 36.1 36.4 100
Total 85 98.8 100
Missing system 1 1.2
Total 86 100

Sum df mean square F sig

Of squares
Between Groups 508,374 4 72,625 16.130 .000
Within Groups 184,901 79 3,557
Total 693,275 83

From the statistical result, the calculated result for F is 16.130.While the critical value at
for F4 at the degree of freedom between df4 at ά 0.05 is 6.39 and for within group dfw 79
is 2.52.At ά 0.01 df4 =15.98 and for df79=3.62.Therefore the null hypothesis must be
rejected and the alternative accepted which means that Full capacity utilization enhances
full utilization of resources and ensure high productivity.
Hypothesis 3: Availability of bank finance has no relationship with investment in modern
machines, information and resources for productivity and competitive enhancement.
Frequency Percent Valid percent cumulative
Percent
Valid SA 2 2.3 2.4 2.4
A 5 5.8 5.9 8.3
U 12 14 14.1 22.4
D 35 40.7 41.1 63.5
SD 31 36 36.5 100
Total 85 98.8 100.0
Missing system 1 1.2
Total 86 100

Sum of Squares df Mean square F sig.

Between Groups 521,244 4 74,463 26.134 .000

Within groups 189,582 81 11.583E-02
Total 710,826 85

From the statistical computation, the calculated result for F= 26.134.The critical value at
alpha 0.05 and 0.01 at the degree of freedom df4 for between group is 6.39 and at the
degree of freedom df81 is 2.48.At critical value at alpha 0.01, the degree of freedom df4 for
between group df4 is 15.98 and for within group df81 is 3.57.With this result the null
hypothesis should be nullified and accept the alternative which indicates that Availability
of bank finance has strong relationship to acquiring new machines, production of timely

12
and accurate information and utilization of human resources for productivity and
competitive enhancement

Hypothesis 4 Sound fiscal and monetary policies do not have relationship with high cost
of production.
Survey results are analyzed thus:

Frequency percent valid percent cumulative percent

Valid AS 4 4.7 4.7 4.7
A 3 3.5 3.5 8.2
U 8 9.3 9.3 17.5
D 42 48.8 48.8 66.3
SD 29 33.7 33.7 100
Total 86 100 100

Sum of
Squares df Mean Square F sig
Between Groups 527,679 4 75,383 26.458 .001
Within groups 191,922 82 3.691
Total 719,601 86

Research survey result computation shows that F is 26.458.The critical value at alpha
0.05 for degree of freedom within dfw =82 is 2.48 while at alpha 0.01 it is 3.51.The
critical value of freedom of degree between df4 0.05 is 6.39 and at alpha 0.01 is
6.39.Since the computed result of the survey reflects a higher result than the critical value
,the null hypothesis must be ignored and accept the alternate. In conclusion therefore,
sound fiscal and monetary policies will create good operating environment that some cost
elements will be controlled like inflation, rate of exchange and protection of the local
manufacturing industries.
Hypothesis 5 Globalization of the world economy accrues no benefit to Nigerian
manufacturing industry.
The survey results are analyzed thus;

Frequency percent valid percent cumulative percent

Valid SA 8 9.3 9.6 9.6
A 7 8.1 8.4 18
U 5 5.8 6.0 24
D 35 40.7 42.2 66.2
SD 28 32.6 33.8 100
Total 83 96.5 100

13
 Missing System 3 3.5
Total 86 100

Sum Squares df Mean Square F Sig

Between Groups 501,999 4 71,804 30.636 .000
Within Groups 182,707 78 3.341
Total 684,706
The survey results show a computed for F which is 30.636.The critical value at alpha
0.05 for degree of freedom df b 4 equals 6.39 and at alpha 0.01 it is 15.98.At df w 78
equals 2.74 at alpha 0.05 and at alpha 0.01 , it is 3.60 .With the result which reflects
that the computed for F at 30.636 is higher that the critical values at alpha 0.05 and
0.01,the null hypothesis should be ignored and accept the alternate which says that
Globalization of the world economy accrues benefits to Nigeria manufacturing industry.
The benefits will expose the industry to the world market which in effect will aid
development.
Conclusion
It is very clear that the present position of the productive sector is marred with the
problems analyzed. However the sector will be transformed into a developed productive
industry if the recommendations are strictly implemented. The world economy is fully
globalized and the fact cannot be erased from our planning process. The fear that Nigeria
will not benefit should be forgotten in our business thinking. Any industrialized nation
that wants its economy to grow and maintain stability belong to World Trade
Organization.(WTO).The government has a great role to play in infrastructural
development, stable policies,security,enabling environment and develop the money and
capital markets for the availability of medium and long term funds. There is the need to
ensure adequate finance of the sector, though with challenges already highlighted, but the
prospect for the economy is a better tomorrow. Global Competition as one of the major
challenges will however lead a nation to create a competitive advantage, and capture its
own market. The financial institutions should wake up for their responsibilities as the
bedrock of a national development. The downward trend in the productive sector of any
nation is the beginning of business doom for such nation.
Recommendations

Having analyzed the results of the findings, the following recommendations are necessary
for the industry, the government, and the financial institutions so that the productive
sector of the economy can take its rightful position in the development of Nigerian
economy.
1. The financial institutions should have confidence in the manufacturing industry; invest
more in this sector so that they can have enough availability of funds to invest in modern
technologies, and computer-integrated manufacturing system. As per CBN 2005 Annual
report, the contribution of the financial sector to GDP is low as analyzed below:

2001 2002 2003 2004 2005

Financial sector 4.15% 5.13% 4.23% 4.08% 3.95%

Manufacturing sector 3.52% 3.70% 5.57% 3.68% 3.68%

14
The two industries will contribute more if there services are fully integrated into each
other. The banks should create specialized medium/long term funds for the industry to
solve the problem of asset matching. The productive sector with adequate financing from
the financial sector will have access to modern machines for active competition in the
global market. The finance sector will enhance their earnings potentials and increase their
contribution to the Gross Domestic Product.
2. With easy access to funds in the financial institutions, the manufacturing industry
should invest in modern computer integrated manufacturing system that will aid the
production of quality products, on line production information for planning and decision
making, waste in production will be avoided, full capacity utilization will be achieved,
resources employed will be adequately and efficiently utilized Foreign direct investment
will be attracted to the economy, and this will promote the nation to the rank of
developed industrialized nations.
3. The government of the nation has a role to play in the areas of regulations and
protectioninsm.The government should create a Monetary and Fiscal policies that are
stable for the growth of the industry. The government should encourage the availability
of medium and long term funds in the capital and money markets to complement the
financial institutions type of lending. This will encourage development in the industry,
and they will easily integrate into global economy for competition, access to markets and
benefits of international trade. Nigerian Industrial Development capability to grant long
term finance should be enhanced by raising the capital to a minimum of three trillion
naira. In addition, another development bank should be established to take care of the
agricultural sector of the economy, so that the Industrial Development bank would cater
for the manufacturing sector.
4. Globalization has connected the whole global village into a single market. Nigeria
economy can not exclude itself from the interconnectivity of markets, foreign exchange
and training, human development and technology. Nigeria should strengthen its
membership of World Trade Organization (WTO) in order to gain from numerous
benefits accrued from globalization. With complete l computer integrated production
system, Nigeria should ensure to gain competitive advantage in its products. All
agricultural products should be converted into finished products, open markets for the
products and ensure constant supply into the global markets. The flow of foreign earnings
into the sector will boost its development. The operating environment in Nigeria should
be well guided with adequate security over production, and welfare of the workforce. The
fact is that Nigeria can not isolate its systems from WTO,otherwise our economy will be
at the receiving end.

References
Aluko, M.O., Akinola,G.O.,and Fatokun,S.(2004) “Globalization and the Manufacturing
Sector: A study of selected textile firms”. Journal of Social Sciences,9(2)
Pps119 -130.

Anyanwu, C.M.,(2001)”Productivity in the Nigerian Manufacturing Industry”

Research Department, Central Bank of Nigeria pps124-135

15
Central Bank of Nigeria (2006) Economic Report for the first half of 2006

Central Bank of Nigeria (2005) Annual Report and Statement of Accounts

Central Bank of Nigeria (2000) “The Changing Structure of the Nigerian Economy and
Implications for Development “Realm Communications limited, Lagos.
ISBN 978-047-126-X

Dikko, L.M.,(2005) “The Role of Banks in Improving Socio-Economic Growth” The

Nigerian Banker April-June 2005 pps 10-23

Malik,A.,Teal,F.,and Baptist,S.(2004) “The Performance of Nigeria Manufacturing

Firms: Report on the Nigerian Manufacturing Enterprise Survey” United
Nations Industrial Development Organization, Centre for the Study of African
Economic, Department of Economics, University of Oxford pps 2-33

Onwumere, J.U.J., and Ugbam, O.C.,(2008) Environmental Scanning and Lending

Considerations in the Banking Industry” The Nigeria Banker April-June 2008
Pps 27-31

16
 BRIEF NOTE ON THE ACADEMIC BACKGROUNG

DR.ADEGBIE, FOLAJIMI FESTUS

Dr.Adegbie, Folajimi Festus graduated from Rivers State University of Science and
Technology, Portharcourt. Rivers State, Nigeria with a Bsc Second Class Upper Division
in Business Administration. Obtained his Master of Business AdministrationMBA
(Accounting and Finance) from the University of Ado-Ekiti, Ekiti State, Nigeria.
Obtained Master of Philosophy (MPhil) in Accounting and PhD in Accounting from
Covenant University, Ota, Ogun State, Nigeria. He is a qualified Chartered Accountant
and a fellow of The Institute of Chartered Accountants of Nigeria. He is a qualified
Chartered Banker and an Associate of the Chartered Institute of Bankers of Nigeria. He is
a tax practitioner and an Associate of The Chartered Institute of Taxation of Nigeria.

DR.ADENIJI ADENIKE ANTHONIA

Dr.Adeniji,Adenike Anthonia graduated from Olabisi Onabanjo University,Ago-

Iwoye,Abeokuta,Ogun State,Nigeria with a Barchelor of Science degree in Business
Administration.Obtained her Post-Graduate Diploma and an MBA degree respectively in
Business Administration from Obafemi Awolowo University,Ile-Ife,Osun
State,Nigeria.She obtained Master of Philosophy in Industrial Management(MPhiL) and
PhD in Insustrial Relations from Covenant University,Ota,Ogun State,Nigeria

17