IMPACT OF GOVERNMENT POLICIES ON MANUFACTURING SECTOR GROWTH

PERFORMANCE IN NIGERIA

BY

ABIOLA OLAWALE

A THESIS PROPOSAL FOR MASTER’S DEGREE

DECEMBER, 2023.
 TABLE OF CONTENTS

CONTENTS PAGE

Title page i
Table of contents ii
INTRODUCTION
1.1 Background of the study 1
1.2 Statement of the problem 2
1.3 Aim of the Research 3
1.4 Objective of the study 3
1.5 Research Questions 3

LITERATURE REVIEW
2.1 Conceptual Review / Frame work 6
2.2. Theoretical Review 8
2.2.1 Managerial Theory of Firms 8
2.3. Gap in the literature and contribution of the study 9

THEORETICAL FRAMEWORK AND METHODOLOGY

3.1 Introduction 10
3.2 Theoretical framework 10
3.2.1. Managerial Theory of Firms 10
3.2.2. Relevance of the theoretical Framework 11
3.3. Methodology 11
3.4. Research Design 11
3.5. Field of study 12
3.6. Population of the study 12
3.7. Sampling Technique 12
3.8. Sample size 13
3.9. Method of data Analysis 14
3.11. Limitation of the study 14
3.12. Research Plan 16
3.10. Ethical consideration 16
References 17
 Introduction

1.1. Background of the Study

Government policies do not succeed or fail on their merits; rather, their progress depends on the implementation process. The role of
government policies in stimulating the manufacturing sector output cannot be over-emphasized. As they are highly tailored and often
adjusted over time to achieve macroeconomic goals.

Industrial development is an important element of the macroeconomic policy objectives of the Nigerian Government. The importance
of the manufacturing sector to economic growth cannot be overstated. The sector plays a catalytic role in the modern economy and has
many dynamic benefits that are important for economic transformation, such as job creation and self-sufficiency. In many ways, these
factors have made the manufacturing sector a leading sub-sector. (Loto, 2005). Nowadays, manufacturing sector is regarded as one of
the benchmarks for measuring a nation’s economic efficiency (Amakom, 2012; Ibbih & Gaiya, 2013). Therefore, discussion on
economic growth and development in any country may be incomplete without focusing on government policy as it relates to the
manufacturing sector.

Nigeria has employed several strategies which were aimed at enhancing the productivity of the manufacturing sector in order to bring
about economic growth and development. Different policy measures had been adopted such as Import Substitution Industrialization
(ISI) strategy (1962-196), Structural Adjustment Programme (SAP) (1986), Export promotion policy in the mid-1980s, Liberalization
and Deregulation policies in 1990s, and Privatization and Commercialization in 2000s, Nigerian Industrial Revolution Plan (NIRP) in
2014 etc. But the contribution of the manufacturing sub-sector to GDP has declined steadily, due to a number of factors that have
prevented the policies from achieving their full potential.

This research project is justified on the grounds that manufacturing sector’s role in promoting growth and diversifying the productive
base of an economy have been affirmed by theory and practice in extant literature. Manufacturing is the key to economic growth. The
growth rate of an economy is positively related to the growth rate of its manufacturing sector. The more rapid the growth rate of the
sector, the faster the growth rate of GDP because manufacturing output constitutes the largest components of export-led growth and
induces productivity growth inside and outside the sector. Hence, the manufacturing sector has been described as the engine of growth
(Kaldor, 1967; Thirwall, 2015).

1.2. Statement of the problem

The pertinence and usefulness of any research are to a large extent determined by its ability to solve fundamental problems of society.
This research project is aimed at examining the influence of government policy on manufacturing sector output in Nigeria considering
its low contribution to the growth of the economy.

The fact that manufacturing sector is almost all things good makes it imperative to study how its growth performance is being
influenced by government policies. Hence, the research project seeks to fill this gap in the literature.

1.3. Aim of the Research

The aim of this research project is to examine the impact of government policies on manufacturing sector growth performance in

Nigeria. The study has these specific aims:

i. To find out how government policies affect manufacturing sector’s contribution to GDP.

ii. To find out reasons for the decline in manufacturing sector’s growth.

iii. To find out the strategies adopted by government in implementing industrial policies.
1.4. Research Questions
This research work will enable the researcher to come up with answers to the following research questions:

i. Do government policies affect manufacturing sector’s contribution to GDP?

ii. What are the reasons for the decline in manufacturing sector’s growth?

iii. What are the strategies adopted by government to implement industrial policy?

1.5. Objectives of the study

The broad objective of this study is the impact of government policies on manufacturing sector growth performance in Nigeria. The
study has the following specific objectives:
i. To determine the impact of government policy on manufacturing sector’s contribution to GDP.

ii. To examine the reason for manufacturing sector’s growth decline.

iii. To examine the strategies adopted by government to implement industrial policy.

.
 Literature Review

2.1. Conceptual Review / Framework

2.1.1. Policy and Government policies
Policy is a course or principle of action proposed by the government. The policy option that is made by the government is known as
public policy while that of the private individuals or groups is called private policy.

Most often the executive arm of government could initiate public policies, but it has to be backed up with enabling laws by the
legislative arm of government in the federal, state and local governments, while their implementation lies with the public bureaucracy.

According to Okoro (2005), government policy refers to hard patterns of resource allocation represented by projects and programmes
that are designed to respond to perceived public problems or challenges requiring government action for their solution. Also, Ezeani,
(2006) Viewed public policy as the proposed course of action which government intends to implement in respect of a given problem
or situation confronting it. In the words of Ikelegbe (2006), public policy is seen as the integrated course and programmes of action
that government has set and the framework or guide it has designed to direct action and practices in certain problem areas.

Hence, government is always confronted with the responsibility of formulating policies that are aimed at achieving the desired growth
and national development for the wellbeing of her citizens. Consequent upon these, the importance of government policies, its scope
and level of influence is pervasive especially in Nigeria where the private sector is very weak.
2.1.2. Manufacturing and Manufacturing sector
Manufacturing is the process of converting raw materials or parts into finished goods through the use of tools, human labour,
machinery, and chemical processing. It is also the application of modern technology, equipment and machineries for the production of
goods and services to alleviate human suffering and ensure continuous improvement in people’s welfare.
Manufacturing is the main panacea for the economic prosperity of any nation. It is the means for the production of goods and services,
creation of employment opportunities and a major source of income. The manufacturing sector plays a significant role in economic
development. Industries act as catalyst to accelerates the pace of structural transformation and economic diversification to enable a
country to make the most of its factor endowment and become less dependent on foreign aid as well as the provision of finished
products or raw materials for growth, economic development and sustainability. The productivity of the non-manufacturing sector has
a positive relationship with growth of the manufacturing sector.

In Nigeria, manufacturing sector is a key sector that contributes significantly to the country's Gross Domestic Product (GDP) through
job creation, wealth and increased government tax revenue. As the sector grows, it absorbs more and more goods and services
produced outside its region: which may be agricultural, mining products (food and industrial raw materials), or products which it does
not provide itself, or not in sufficient quantities, and which have to be imported. Likewise, industrial sector growth create demand for
a wide range of services – banking, insurance and other types of professional services – and is thus partly responsible for the rapid
expansion of the tertiary sector.

2.1.2. Industrial policies in Nigeria

Industrial policy is the strategic effort by the state to encourage the development and growth of that sector of the economy. It covers
rules, regulations, principles, policies & procedures laid down by government for regulating industrial undertakings in a country.
According to UNCTAD (2009), Industrial policy is a concerted, focused, conscious effort on the part of government to encourage and
promote a specific industry or sector with an array of policy tools. It is any type of selective government intervention or policy that
attempts to alter the structure of production in favour of sectors that are expected to offer better prospects for economic growth in a
way that would not occur in the absence of such intervention in the market equilibrium.

Nigeria industrial policy is aimed at making a paradigm shift that will deliver real economic growth and economic transformation. The
main thrust of its agenda is enactment of policies and institutions to drive the course. Prominent among them are: Import Substitution
Industrialization (ISI) strategy (1962-196), Structural Adjustment Programme (SAP) (1986), Export Promotion policy in the mid-
1980s, Liberalization and Deregulation Policies in 1990s, Privatization and Commercialization in 2000s, Nigerian Industrial
Revolution Plan (NIRP) in 2014 etc. In the same vein, financial institutions were as well established to drive the course which are:
Bank of Industry (BOI) and Nigerian Industrial Development Bank (NIDB). These are deliberately put in place for industrialization to
flourish especially in the presence of chronic infrastructural deficits in the country.

2.2. Theoretical Review

2.2.1. Managerial theory of Firms

The theory states that the reason why managers are hired is for revenue maximization and not for profit maximization. This theory
believes that for the economy to grow faster through industrialization, the country needs to increase its public expenditure so as to
facilitate the developmental processes of the economy. The theory emphasizes that a firm’s decisions whether to grow or not depends
on the level of government policy because firms grow through government expenditure on industrialization.

2.3. The gaps in the literature and contribution of the study

Based on several literature that have been reviewed; emphasis is on impact of fiscal policy on the growth of manufacturing sector in.

The most recent work by (Dogara Egbiku Joshua 2018) was on the Impact of Manufacturing on Economic Growth in Nigeria while

little or no attention has been given to the impact of government policy on manufacturing growth performance. This research project

attempts to close the research gap by examining impact of government policy on manufacturing growth performance. The outcome of

which will be of immense benefit to researchers who will rely on its contributions to existing knowledge for further research.
 Theoretical Framework and Methodology
3.1. Introduction

Methodology of a research is the systematic approach that a researcher adopts to carry out his / her research endeavour right from the
problem statement to the conclusion. The essence of research methodology is to conduct the research scientifically. This method states
the tools and techniques that are used to answer the research questions.

In conducting research, the systematic procedures to be taken by the researcher are dictated by the nature of the problem that is to be
investigated and the research objectives. This chapter, therefore, describes the methodology of the research work, the economic theory
that is germane to the study, sources of data to be collected, procedures and method of gathering data.

3.2. Theoretical Framework

The underpinning theory underlying this study is the managerial theory of firms. This theory is based on justifiable reasoning of

rationality.

3.2.1. Managerial Theory of Firms

The theory states that the reason why managers are hired is for revenue maximization and not for profit maximization. This theory
believes that for the economy to grow faster through industrialization, the country needs to increase its public expenditure so as to
facilitate the developmental processes of the economy. The theory emphasizes that a firm’s decisions whether to grow or not depends
on the level of government policy because firms grow through government expenditure on industrialization.
3.2.2. Relevance of the theoretical Framework

Managerial theory of firms agrees that manufacturing sector grows faster with the implementation of government policy, which will
aid the growth rate of the sector in Nigerian. In this situation, the limit on a manufacturing sector growth is determined by the rate of
government expenditure and policy implementation. This implies that a permanent increase in government expenditures can lead to a
more than one-to- one increase in manufacturing output.

3.3. Methodology
The quantitative technique that I propose for analyzing the collected data is chi-square method using Statistical Package for Social
Scientist (SPSS) to analyze the impact of government policies on manufacturing sector growth performance in Nigeria. Descriptive
analysis would also be used.

3.4. Research Design

This research project would uncover the impact of government policies on manufacturing sector growth performance by collecting

information from manufacturing companies in Lagos and Ogun states. This research is a combination of both quantitative and

qualitative research design so as to obtain detailed information that would help to investigate impact of government policies on

manufacturing sector growth performance.

3.5. Field of study

This research will be carried out in the Federal Republic of Nigeria. The country is located on the Western coast of Africa on the Gulf

of Guinea with an area of 923, 768 km2 making it the world's 31st largest country. It is divided into regions off the river Niger and

Benue with six geopolitical Zones, thirty-six states, and federal capital territory, Abuja. The study would be carried out in Lagos and

Ogun states. These are the states that have cluster of manufacturing companies in Nigeria and accounted for more than sixty-five

percent (65%) of the country’s industrial base.

3.6. Population of the Study

A population is made up of all conceivable elements or subjects relating to the particular phenomenon of interest to a researcher. In
order words, population refers to people, objects, etc. which are within the targeted area of studies. The manufacturing companies that
cut across Food & Beverage, Textile Apparel & Footwear, Wood & Wood Products, Paper, Printing & Publishing, Chemical &
Pharmaceutical, Non-Metallic Products, Domestic/Industrial Plastic &Rubber, Electrical & Electronics, Basic Metal & Steel, and
Motor Vehicle & Misc. Assembly would constitute the population of the study from Lagos and Ogun states. The population of the
companies is over 3,000 (MAN).

3.7. Sampling Technique

A stratified sampling technique will be used for selecting sample for this study in which all companies would be stratified according
their industry classification. This will remove the heterogeneity in the sample and turns it into homogeneous sub-group then simple
random sample technique would be applied.
3.8. Sample Size
The sample size is precisely a part of the population that is selected for investigation. The sample saves time, money and may be more
accurate and enable the researcher to obtain quicker results than when covering the whole population. However, for this study, the
sample size would be determined thus:
n = N / 1 + Ne2

Where:
n = sample size
N = population size
e = approximated error (0.05) i.e., 5%
1 = constant.
The population size is the whole of the manufacturing companies in the study area. Therefore, the sample size (n) of the population
size (N) of companies is hereby calculated thus:
If e = 0.05, N = 3,000
Hence, n = 3,000/ 1 + 3,000 (0.05)2
3,000/ 1 + 3,000 (0.0025)
= 3,000/ 1 + 7. 5
= 3,000/ 8. 5 = 353
= 360 companies approximately
3.9. Estimation Technique
The collected data would be analyzed using Statistical Package for Social Scientist (SPSS) and these include;
• Simple percentage
• Chi- square at 0.05 level of significance
• The validity of the research instrument would be determined by my supervisor. His advice and constructive criticisms will be
very useful in the final draft of the instrument before administration. Over the years, the reliability of the questionnaire has been
extensively tested and examined by various scholars.

3.10. Limitations of the study

Without mincing words, typical research of this nature would be limited by time, cost, unwillingness on the part of companies’ staff to
reveal information that pertain to the case study, the rigour of traveling from the UK to Nigeria, insecurity in Nigeria, inadequate or
non-availability of literature that are relevant to the subject matter, spending much on the internet to get information, etc. Despite these
limitations, efforts shall be exerted on the pertinent areas that would lead to achieving the objectives of this study.
 4.1. Research Plan

Year 2024

S/N Project (activities) Jan Feb March Apr May June July August Sept. Oct. Nov. Dec.

1 Research Planning

2 Literature Review

3 Finalizing on Sampling Plan

4 Development of Data Collection Instruments

5 Data Collection

6 Data Analysis

7 Drafting of Report

8 Printing, Binding, and Presentation

5.1. Ethical Considerations

All participants will be treated with respect and courtesy. A strategy of informed consent will be adopted, with the aim and method of
the research been made clear to all participants.
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