Governance Environment and Manufacturing Sector Performance in Nigeria

Abstract

A well-functioning Manufacturing sector is key to economic growth and development. Studies on the governance environment and  technical efficiency of the Manufacturing sector is crucial to achieving Nigeria’s industrialization objective. There are several studies on  innovation and efficiency of firms, but limited studies have examined the effect of the governance environment on technical efficiency of  firms in Nigeria’s Manufacturing sector. The latest available World Bank Enterprise Survey data (2014/2015) was used. Data was analysed  using descriptive statistics, composite score and stochastic frontier analysis. Empirical results revealed the low technical efficiency of  firms in the sector. The technical efficiency of firms decreases when they operate in poor governance environment. Specifically,  corruption and regulatory quality were positively related to technical inefficiency. The coefficient of the rule of law was also positive but  not statistically significant. Therefore, it concludes that policy reforms focused on industrial development are more likely to generate  efficiency gains if the governance environment is improved by fighting corruption and enhancing regulatory quality.