Industrialization and Trade Globalization: What Hope for Nigeria?

Abstract

Industrialization is said to be a hallmark for modern economic growth and development but the Nigerian industrial sector has suffered from decades of low productivity and currently in state of coma. This study therefore examines the impact of globalization on the Nigerian industrial sector. We adopted the index of industrial production as performance indicator of the Nigerian industrial sector and external debt, foreign direct investment, nominal exchange rate, and degree of openness as proxy variables for globalization while gross fixed capital formation was used as a measure of domestic investment. Annual data from the Central Bank of Nigeria (CBN) covering 1970-2008 was utilized. We applied the unit root test for the stationarity of the data. Apart from the gross fixed capital formation that was stationary at levels I(0) the other variables were stationary at first difference I(1). Johansen’s co-integration test revealed four (4) co-integrating equations, indicating the existence of a long-run relationship between the variables. The ordinary least square statistical technique was adopted for the estimation of our model. The results showed that gross fixed capital formation and degree of openness negates our a priori expectations. The Nigerian industrial sector has a weak base and cannot compete favourably with her foreign counterparts. Also, domestic investment is weak and unreliable. Nigeria should encourage the production of non-primary export commodities and formulate policies that would attract foreign direct investment. External debt should be sourced for productive projects only and also as means of maintaining stable exchange rate.