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A CRITICAL ANALYSIS OF THE EFFECTIVENESS OF INDUSTRIAL

OUTPUT TO ECONOMIC GROWTH IN NIGERIA (1970-2016)

BY

OKPABI, ONETE BASSEY


MATRIC NO: 13/101144066

SUBMITTED TO

DEPARTMENT OF ECONOMICS
FACULTY OF SOCIAL SCIENCES
UNIVERSITY OF CALABAR
CALABAR

IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE


AWARD
OF BACHELOR OF SCIENCE (B. Sc.) DEGREE IN ECONOMICS

DECEMBER, 2017
CERTIFICATION

I hereby certify that this research project on: “A critical analysis of the

effectiveness of industrial output to economic growth in Nigeria from 1970-

2016 ” was carried out by Okpabi, Onete Bassey with Matriculation Number

13/101144066 under my supervision.

Opue, Job Agba Signature:_____________

(Project supervisor) Date:_________________

DEDICATION

This research work is dedicated to God Almighty for his grace and mercy

upon me. He remained faithful even in times of adversity. May all honor be

ascribed to him. Also, dedicated to Mrs. Ogama Egong Enang my beloved sister

and sponsor.

ACKNOWLEDGEMENTS
My utmost acknowledgement is to God almighty who made me to be focus

and patient not to drop out along the way irrespective of the stress, hardship and

making me to be relevant in the society, God I bless your name.

I am also grateful to my supervisor, my mentor, Mr. Job Opue and all my

lecturers in my Department who in one way or the other who encouraged me

throughout my study in the university of Calabar, Calabar. My profound gratitude

goes to my beloved academic sponsor Mrs. Ogama Egong Enang whose immense

effort have made this academic pursuit a reality. My gratitude goes to my parents,

late chief Okpabi, Bassey Ikwa and my mum (madam flora Ikwa Ikere). I also

appreciate the effort of my lovely brother, Roy Egong Enang who support me

morally and financially. Also, to my brothers and sisters too numerous to mention

for their love and special assistance, I say thank you.

I also appreciate my friends and family, Ekaette Bassey, Grace Basssey

Okpabi, Blessing Elemi Adaga, Ewum, Bassey Okpabi, Ukpor, Nwodo Kingsley,

Anyanwu Uzo, Inyang Ukpor, Righteous Ibete, Akiri Emmanuel, Precious Ibete

and the entire Ibete and Okpabis family.

Finally, may God bless abundantly all those I have pen down with those I

cannot at this moment remember their names, God will bless you all.

ABSTRACT
This study examined the impact of industrial sector output on economic growth in

Nigeria. Time series data for the period 1970 to 2016 was sourced from the Central

bank of nigeria statistical bulletin and the abstracts of the nigerian bureau of

statistics. The ordinary least squares (OLS) regression technique was employed for

analysis. The contributions of the various sub-sectors of the industry to real gross

domestic product was analyzed. Results obtained showed that manufacturing

subsector, and mining subsector had positive and significant impact on real gross

domestic product, while the building/construction sub-sector had a negetive and

insignificant impact on real gross domestic product. however, on the whole, the

overall ondustrial sector output had a positive and significant impact on real GDP

during the reviewed period. On the basis of this we recommended in chapter 4

amongst others that government should intensify efforts in the promotion of the

building /construction sector either through her award of soft loans or grants in

order to boost infrastructures and economic growth.

TABLE OF CONTENTS

CERTIFICATION - - - - - - - ii

DEDICATION - - - - - - - iii
ACKNOWLEDGEMENT - - - - - iv

ABSTRACT - - - - - - - v

TABLE OF CONTENTS - - - - - vi

CHAPTER ONE: INTRODUCTION

1.1 STATEMENT OF THE PROBLEM - - - 3

1.2 OBJECTIVE OF THE STUDY - - - 4

1.3 OPERATIONAL HYPOTHESIS - - - 5

1.4 RESEARCH METHODOLOGY - - - 7

1.5 SCOPE AND LIMITATIONS OF THE STUDY - 8

1.6 SIGNIFICANCE OF THE STUDY - - - 8

1.7 ORGANISAITON OF THE STUDY - - - 9

1.8 OVERVIEW OF THE NIGERIAN

INDUSTRIAL SECTOR - - - - 10

1.9 DEFINITION OF TERMS - - - - 12

CHAPTER TWO: LITERATURE REVIEW AND THEORETICAL


FRAMEWORK

2.0 INTRODUCTION - - - - - - 14

2.1 LITERATURE REVIEW - - - - 14

2.2 COMPONENTS OF ECONOMIC

GROWTH AND DEVELOPMENT - - - 18

2.3 THEORETICAL FRAMEWORK - - - 21


2.3.1 COBB-DOUGLAS (C-D) NEOCLASSICAL

PRODUCTION FUNCITON - - - 21

2.3.2 THE ROMER MODEL - - - - - 24

2.3.3 THE HARROD - DOMAR GROWTH MODEL - 26

2.3.4 THE SOLOW NEOCLASSICAL

GROWTH MODEL - - - - - 27

2.4 OVERVIEW OF NIGERIAN

INDUSTRIALIZATION EXPERIENCE - - 29

2.4.1 THE PRE-INDEPENDENCE ERA (1947 -1959)- 29

2.4.2 THE POST -INDEPENDENCE ERA (1962-1969)- 31

2.4.3 THE OIL - BOOM ERA (1970-1980) - - 32

2.4.4 THE IMMEDIATE PRE-SAP ERA (1981-1986) - 34

2.4.5 THE POST SAP ERA (MID 1986 TILL DATE) - 35

2.5 FACTORS AFFECTING INDUSTRIAL

DEVELOPMENT - - - - - 36

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 SOURCE OF DATA - - - - - 38

3.2 MODEL SPECIFICATION - - - - 39

3.3 METHOD OF ESTIMATION AND VALIDATION- 41

3.3.1 ECONOMIC "APRIORI" CRITERIA - - 42

3.3.2 STATISTICAL CRITERIA - - - - 42

3.3.3 ECONOMETRIC CRITERIA - - - - 45


CHPATER FOUR: DATA PRESENTATION, ANALYSIS

AND DISCUSSION OF FINDINGS

4.1 MODEL SPECIFICATION - - - - 47

4.2 PRESENTATION OF RESULT - - - 49

4.3 ANALYSIS OF RESULT - - - - 51

4.4 TEST OF HYPOTHESIS- - - - 59

4.5 ECONOMIC IMPLICAITON OF RESULT - 63

CHAPTER FIVE: SUMAMRY, RECOMMENDATIONS

AND CONCLUSION

5.1 SUMAMRY OF MAJOR FINDINGS - - 64

5.2 POLICY RECOMMENDATIONS - - - 65

5.3 CONCLUSION - - - - - - 67

REFERENCES - - - - - - 68

APPENDIX - - - - - - - 71

CHAPTER ONE

1.1 Introduction

The development of any nation is critical to economic survival and vibrancy

of that nation. Development crisis affection Africa as al whole and Nigeria in


particular is often anchored on poor industrial development and lack of

technological infrastructure. Technological infrastructure is a vital prerequisite for

economic, industrial and technological growth and development. It comprises

power supply, energy, transportation, communication, water supply, etc. Most of

which are lacking in Nigeria. According to World Bank (1991), industrial

development and high technological infrastructure drives productivity. Also

according to Herrick and Kindle Berger (1984), growth in per capita income

induced by growing productivity is the engine of development.

Nigeria contemporary economic history and socio political evolution since

independence provides on essential backdrop to the pervasive manifestation of the

features of her underdevelopment. Since 1963, revenue from crude oil sale has

deduced political integrity, destroyed the agricultural and non-oil economic base

and funded a succession of governance that has remained woefully out of touch

with the people. The period ranging from 1965 to early 1999 witnessed a

succession of military regimes. This brought with it the destruction of the civil

service and public institutions, the withholding of public goods and services,

unprecedented inflation, the deterioration of the agricultural sector as well as the

manufacturing sub-sector and indeed living standard and growing poverty.

The relatively high growth in industrial output in the 1970s was traceable to

the promotions of industries through high trade barriers and incentives which
offered protection and concession to the “infant industries”. However, in the early

1980s, when Nigeria’s economic crises deepened, the plight of the industrial

sector became more apparent. This is clearly shown by the large negative growth

of industrial output in 1985 till about 1995. Subsequently years brought about

fluctuations in the growth of industrial output. Based on this research, the

contributions of the industrial sector to economic development in Nigeria will be

critically examined.

1.2 Statement of the problem

Rapid growth and development cannot be achieved for any country that

gives no serious attention to industrial development. However there are various

challenges facing the Nigerian economy in terms of its development. One of the

greatest problems facing the Nigerian economy is the problem of capacity

utilization in the industrial sector, especially the manufacturing sub-sector.

The industrial sector is facing challenges such as low and declining

contribution to the national output, declining and negative real growth rates,

dominance of only light assembly types of consumer goods manufacture, low

value-added production due to high import dependence for inputs, accumulation of

large inventories of unsold finished product, dominance of substandard goods

which cannot compete internationally. This has led to loss of competitiveness, high
production cost, failure to utilize to advantage the strength of labour intensive

indigenous manufacturers coupled with outright neglect of manufactured exports

inspite of the incentives provided by the government.

The industrial sector is one of the major sectors of the Nigerian economy.

The industrial sector as a whole is made up of 5 sectors which are the

manufacturing, mining building and construction, electricity/energy, water and gas

sector (vide World Bank Development report, 1985). In government classification,

the industry is divided in three sectors which are the primary sector comprising

agricultural activities as whole, the secondary sector comprising manufacturing

utilities and construction activities, the tertiary sector comprising service activities

like banking, transportation, communication, real estates and other business

services. The industrial sector is represented in the secondary sector. The

manufacturing industry accounts for a significant share of the industrial sector in

the developed countries, this is however not so in Nigeria as the manufacturing

sector is seriously lagging behind in its contributions to the industrial sector output.

According to international standards, a country is said to be industrialized if her

industrial output is at least 25% of her GDP, 60% of the output is contributed by

the manufacturing sub-sector and of the population, at least 10% are engaged in

manufacturing. By all standards, Nigeria has fallen short of this requirement.

Industrial growth rate ranges between -9.2% which is far below standard, hence a
lot of attention needs to be put into this sector as it will contribute immensely to

the development of the Nigerian economy as a whole.

In terms of special pattern, establishment reports from various studies show

that industries in Nigeria are concentrated in some areas, especially in big cities

and state capitals (Ajayi 2009). There is a marked concentration of manufacturing

establishments in the southern part of the country especially Lagos, Ibadan, Benin.

Other locations of relatively highs concentration of industrial establishment are

Kano and Kaduna in the North, Enugu and Port Harcourt in the south east. The

Nigerian industrial sector has also tended to be characterized by routine production

activities, spatial pattern of distribution, inability to revolutionize production due to

mainly low technology, simple assembly processes, low wages, production of light

consumer goods and, resource and labour-intensive industries. It is in view of this

that we analyze the contributions of the industrial sector to economic growth and

the way forward.

Despite these challenges, the industrial sector is still in operation and as such

the achievement of industrial development by the Nigeria government will

translate into the development of the economy as a whole. It is on this note that we

decide to investigate the contributions of the industrial sector to economic

development in Nigeria.
1.3 Objective of the study

The general objective of this study is to examine the impact of industrial

sector contributions to economic growth in Nigeria.

The specific objectives are;

(1) to examine the impact of manufacturing sub-sector output on economic growth

in Nigeria.

(2) to examine the impact of mining sub-sector output on economic growth in

Nigeria.

(3) to examine the impact of building/construction sub-sector output on economic

growth in Nigeria.

1.4 Operational hypothesis

The general proposition of this research work is that:

H01: Overall industrial sector output has no significant impact on economic growth

in Nigeria.

Specifically, it is hypothesized that:

H02: Manufacturing output has no significant impact on economic growth in

Nigeria.
H03: Mining output has no significant impact on economic growth in Nigeria.

H04: Building/construction has no significant impact on economic growth in

Nigeria.

1.5 Scope and limitation of the study

This study spans between 1970 and 2016. This comprises of the immediate

pre-sap era (1981-1986) and the post structural adjustment (Post-SAP) era of 1986

till date when industrialization was targeted. This study however was limited by

time, money and source of data. The time frame for this research work was not

enough to make a comprehensive study of the subject. Also lack of adequate

finance was a major constraint. The paucity of data in the Nigerian public

institutions renders data not to be very reliable. Also being a secondary data

source, it poses limitations due to its inherent inaccuracy.

1.6 Significance of the study

The result and findings of this study will help to evaluate the role of the

industrial sector in economic growth. It will assist policy makers to articulate better

policies that will guide industrial sector development.


Also corporate organizations, individuals and government will be in a better

position to evaluate and respond to various policies which are believed to help in

the adequate utilization of the scarce resources at their disposal.

1.7 Organization of the study

The research work is divided into five chapters, chapter one is the

introductory part of the study, chapter two contains the literature review and

theoretical framework. Also economic and institutional framework of industrial

sector development process in Nigeria is examined.

Chapter three deals with research methodology under which we will look at

model specification, method of estimation and validation of results. Chapter four

highlights the data presentation and analysis of result while chapter five is devoted

to the summary of major findings, policy implication and recommendations, and

the conclusion of the study is also provided here.

1.8 Definition of terms

(1) Economic Development: This is defined as a sustainable increase in living

standards that encompasses material consumption, education, health and

environmental protection (World Bank 1991).


(2) Industrial Development: This is the process by which a nation acquires a

competence in the manufacturing of equipment and products required for

sustainable development.

(3) Industrialization: This is defined as the process of developing the capacity

of a country to master and allocate within its border, the whole industrial

production processes, production of raw materials, fabrication of machines an tools

required for the manufacture of the desired products and of other machines, skills

to operate maintain and reconstruct the machines and tools; skills to manage

factories and to organize the production process (Abba et al 1985).

(4) Economic Growth: This refers to a long-term rise in the capacity of a nation

to supply increasingly diverse goods to its population, thus growing capacity based

on advancing technology and the institutional and ideological adjustment it

demands.

CHAPTER TWO

LITERATURE REVIEW AND THEORETICAL FRAMEWORK

2.1 Literature review


Several writers have contributed towards the development of the economy through

the industrial sector. According to the World Bank, industrial development and

technological infrastructure drives productivity. As indicated by Ayogu (2007),

Dowall (2001), World Bank (1994), infrastructure provides the environment for

productive activities to take place and facilitates the generation of economic

growth. Availability of an efficient infrastructural network can stimulate new

investment, increase productivity and enhance growth and development. At the

global level it will enhance competition.

Bolaky (2011) summarizes most of the empirical and theoretical arguments

in favour of industrialisation. He posits that there is a positive correlation

between the level of industrialisation and per capita income for developing

countries. Empirical evidences demonstrate that there is higher marginal product of

labour from industrial sector than in agricultural sector and so the transferring of

resources from agricultural sector to the industrial sector raises total productivity in

the economy.

There are studies relating to industrialisation and economic growth.

Blomstrom, Lipsey and Zegan (1994) posit that industrialisation through foreign

investors can exert a positive effect on economic growth rate. They argued that

industrialisation’s contribution to economic growth rate is dependent on the

threshold level of income. This means that, below the threshold level of
income, the contribution of industries to economic growth is not significant and

above the threshold, it is significant. The explanation is that, it is only countries

that have reached a certain income level that can benefit effectively from the

packages of those industries and foreign investors. Such packages are new

technologies, human capital development and managerial skills.

Borensztein, DeGregoria and Lee (1998) carry out a study using panel

data of 69 developing countries over a period of two decades 1970 – 1989,

investigating the impact of industrialisation on economic growth. They used a

basic estimating equation of growth with real GDP as a dependent variable and

foreign investment, measure of schooling and initial GDP as their independent

variables. They find that industrialisation has positive impact on growth but

this is only realised when their measure of schooling is above a certain critical

level, which is estimated at 0.52. Below this critical level or threshold,

industrialisation and foreign investment exert a negative impact on growth, thus

confirming the complementarily of industrialisation, foreign investment and human

capital development.

Shafaeddin (2005) analyses economic performance of a sample of

developing countries that have undertaken economic reforms since the early 1980s

with the objective of expanding exports and diversification in favour of

manufacturing sector. The results obtained were much varied. Forty per cent of the
sample economies experienced very rapid expansion of exports of manufactured

goods. In a minority of these countries, mostly East Asian, rapid export growth

was also accompanied with fast expansion of industrial supply capacity and

upgrading.

In contrast, the experience of the majority of the sample countries, most of

them in Africa and Latin America, has not been satisfactory. In fact, half of the

sample countries have faced de- industrialisation. Slow growth of exports and de-

industrialisation has also been accompanied by increased vulnerability of the

economy, particularly the manufacturing sector, to external factors

particularly as far as reliance on imports is concerned. A number of industries

which had been dynamic during the import substitution era continued, however, to

be dynamic in terms of production, exports and investment. The industries which

were near maturity when the reform started, such as aerospace in Brazil,

benefited from liberalisation as the competitive pressure that emerged made them

more efficient.

Shafaedddin argues that trade liberalisation is essential when an industry

reaches a certain level of maturity, as long as it is done selectively and

gradually. If it is done based on western world consensus, it is more likely to

lead to the destruction of the existing industries, particularly of those that are at

their early stages of infancy without necessarily leading to the emergence of new
ones. Furthermore, any new industry that comes up would be in line with

static, rather than dynamic, comparative advantage. The low income countries

will be locked in production and exports of primary products, simple processing

and at best assembly operation or other labour intensive ones with little prospect

for upgrading.

Dodzin and Vamvakidis (2004) examine the impact of international trade on

the allocation of production resources across sectors in developing economies.

Estimates from a panel of 92 developing countries in the period 1960–2000

suggest that an increase in openness to trade leads to an increase in the industrial

value added share of production, at the expense of the agricultural

share. Therefore, trade leads developing countries to industrialisation, in contrast

to what the infant industry argument would imply.

Abiola (2010) examines the relationship between saving and

investment and between investment and economic growths in Nigeria using time

series data for the period of 1975-2007. The method of analysis involved ordinary

regression analysis and the result demonstrates that saving stimulates investments

and that investment stimulates economic growth in Nigeria in the period of the

study.

Kaya (2010) investigates the effect of the latest wave of economic

globalisation on manufacturing employment in developing countries. The study is


concerned with classic debate on the benefits of industrialisation and how

this affects developing countries. The study uses a comprehensive dataset on 64

developing countries from 1980 - 2003. The results generally demonstrate that

manufacturing employment increased in most developing countries. First, this

study finds that the level of economic development measured by GDP per capita is

the most important factor influencing the size of manufacturing

employment. Second, economic globalisation also influences manufacturing

employment in developing countries, but mainly through trade. The sizes of

exports and low-technology exports have a significant positive effect on

manufacturing employment in developing countries. Finally, the analysis provides

limited argument for world systems/dependency theories. Raw materials exports

do not significantly increase manufacturing employment while foreign direct

investment has a negative impact in some models. This study concludes that the

latest wave of economic globalisation contributes to the increase in manufacturing

employment in developing countries, although it is not the most significant factor

shaping the size of manufacturing employment in these countries.

Nyong (2001) reveals that there is a strong interaction between

industrialization, exports and economic development. Sustained economic

development requires a transformation on the structure of production that is

consistent with the evolution of domestic demand and opportunities for


international trade. Thus transformation usually result in substantial increase in the

share of industrial exports and a shift away from dependency on primary

commodity exports towards semi-manufactured and processed commodities as an

important source of foreign exchange earnings.

Ndebbio (1989a; 1991c and 2002) suggests that Nigeria should put together

a package of dynamic industrialization policy that has the capacity to positively

transform small businesses in terms of finding, of providing adequate

infrastructural facilities and of protecting. Egwaikhide (1997) observed that

“effective rates of protection have not favoured the capital goods subsector, a

factor responsible for the gross under development of the intermediate and capital

goods manufacturing sub-sector that constitutes the engine of industrial expansion

in the long run”.

Asiodu (1967), and Philips (1967, 1968) conducted a critical examination of

the effect of fiscal incentives on industrial growth focusing on Nigeria’s company

income tax, import duty, relief and the approval user scheme. Philips noted that

there was substantial loss of revenue arising from the approved user scheme was

too cumbersome due to bureaucratic tapism and bottle necks. Far more startling is

the revelation that “tax incentives had not remarkable effects on the growth of

industries, since about 60 of the manufacturing enterprises that benefited from

these measures would still have established without the measures”. The findings
by Philips stand in contrast to those of Kilby (1967) who attributed rapid

industrialization in other parts of the world to government policies. The difference

between the Nigerian experience and else where, according to previous studies, is

that fiscal incentives granted to industries together with macro economic policies

were formulated with little or no internal logic as there were not sufficiently

discriminatory an selective (Aboyade 1986). The failure of Nigeria’s import –

substitution industrialization strategy could be ascribed to the absence of internal

dynamism for the anticipated self sustained growth and development.

Nigerian government intervention in industrial activities partly reflected in

the establishment of commercial, merchant and development banks held little

sway. Some reasons being that there were lots of government bureaucracy,

regulatory and fiscal policy. Also there was problem of a hostile or unconducive

operating environment that created uncertainties and unmanageable unknowns for

entrepreneurs, industrialist, innovators and serious business people. By and large

big business and industries are necessary to preserve and maintain the structure

within the economy.

A country is said to be industrialized if her industrial output is at least 25%

of her GDP, 60% of the output is contributed by the manufacturing sub-sector and

of the population at least 10% are engaged in manufacturing. By implication,

policies should be focused on how to revolutionize production and as such create


employment, create wealth for the nation, facilitate alleviation of poverty, material

consumption etc. which are features of a developed economy.

2.2 Components of economic growth and development

Three components of prime importance area;

(i) Capital accumulation, including all new investments in land, physical

equipment, and human resources through improvement in health, education and

job skills.

(ii) Technological progress

(iii) Growth in population and hence eventual growth in the labour force.

2.2.1 Capital accumulation

Capital accumulation results when some proportion of present income is

saved and invested in order to augment future output and income. New factories,

machinery, equipment and materials increase the physical capital stock of a nation

(the total net real value of all physically productive capital goods) and make it

possible for expanded output levels to be achieved. These directly productive

investments are supplemented by investment in social and economic infrastructure

like road, electricity, water, sanitation, communication and the like, which

facilitates and integrates economic activities.


2.2.2 Technological progress

Technological progress is considered by many economist to be the most

important source of economic growth and development. Technological progress

results from new and improved ways of accomplishing traditional tasks such as

textile making, electricity generation, or building of a house. There are three basic

classification of technological progress which are neutral, labour saving and capital

saving technological progress. Capital saving technological progress is needed

most in developing countries and this applies best to our research work. It ensures

a more efficient (low cost) labour intensive method of production. The indigenous

LDC development of low cost, efficient, labour – intensive (capital saving)

techniques of production is one of the essential ingredient in any long-run

employment oriented development strategy.

2.2.3 Population and labour force growth

Population growth and the associated eventual increase in the labour force

has traditionally been considered as a positive factor in stimulating economic

growth. A larger labour force means more productive workers and a large overall

population increases the potential size of domestic markers. However it is

questionable whether rapidly growing supplies of workers in developing countries


with a surplus of labour exert a positive or negative influence in economic

progress.

Obviously it will depend on the ability of the economic system to absorb and

productively employ these added workers, on ability largely associated with the

rate and kind of capital accumulation and the availability of related factors such as

managerial and administrative skills.

2.3 Theoretical framework

2.3.1 Cobb-Douglas (C-D) neoclassical production function

By using basic cobb-douglas production function, it is possible to

demonstrate how the formal neoclassical production function can be unrestricted.

Given its formula

Q = AK aLc ……….

To linearize the output function, both sides of equation (1), are logged thus:

Log Q = Log A + B Log K + C Log K ----------------2.2

Where:

Q = Output (could be GDP or industrial output)

A = State of technology or efficiency parameter


K = Capital employed

L = Labour employed

b and c are weights such that b + c = 1

(displaying constant returns to scale)

Equation 2.1, can be written in a standard form to accommodate other variable like

human capital (H) considered as a unique factor different from labour force (L) in

some literature (Mathew 1975).

Q = F (C,K,L,A,H) ……………………2.3

It is important to point out that the cob-douglas function shown in equation

2.3, above is usually criticised for being unsatisfactory. Both the restrictive and

unrestrictive assumptions on which the function is based tells the basis of the

criticism. These assumptions are:

(i) That the labour and production assets are the only factors that affect

output or national income.

(ii) That the function is homogeneous of degree one however by taking

account of the fact that some production processes are characterized by increasing

returns to scale, the usual C-D function can be modified to give:


Qt = AK bLc + ----------------------------------------- 2.4

Where b + c > 1. Indicating increasing returns to scale. By introducing an

exponential component into the function it becomes

Q = AKn + L1-n + ev+s + vt ------------------------------- 2.5

Where:

Vt = the average annual increase in a nations income due to efficiency in

the use of factor inputs n + 1 – n = 1, the same as equation 2.1 where b + c = 1, a

situation of constant returns to scale.

The above modification which is quite ideal can be extended to take account

of other functions that affect output such as quality of natural resources, the

organization of production and influence of the unspecified factors. Such changes

are taken care of by using a time variable. This makes the function become:

Qt = f(k,L,t) ------------------------------------- 2.7

2.3.2 The Romer model

The Romer model addresses technological spill over that may be present in

the process of industrialization. The model begins by assuming that growth process

is derived from the firm or industry level. Each industry individually produces with

constant returns to scale, so the model is consistent with perfect competition. In


this simplification, we abstract from the household sector, on important feature of

the original model, in order to concentrate on issues of the industrial sector.

Formally, we have

Y = AK∞ L1-∞ K-β ------------------------------ 2.8

We assume symmetry across industries for simplicity, so each industry will sue the

same level of capital and labour. Then we have the aggregate production function:

V = AK∞ + βL1-∞ ---------------------------------2.9

To make endogenous growth stand out clearly, we assume that A is constant rather

than rising overtime i.e. we assume that there is no technological progress. This

results to:

g-n = β -------------------------------------------------------2.10

(1 - ∞ + β)

Where:

g = output growth

n = population growth rate

Romer assumes that taking the three factors together, including the capital

externality, β > 0, thus g – n > 0 and Y/L is grown up. Now we have endogenous
growth depending on the level of savings and investment undertaken in the model

not driven exogenously by increase in productivity. The place of interest in Romer

model is that with an investment spillover, the model avoids diminishing returns of

capital.

2.3.3 The Harrod – Domar growth model

Harrod – Domar theory of economic growth states that the rate of growth of

GDP is determined jointly by the net national savings ratio, s, and the national

capital – output, k. More specifically, it says that in the absence of government,

the growth rate of national income will ne directly or positively related to the

savings ratio and inversely related to the economy’s capital – output ratio.

∆Y = S------------------------------------------------2.11

Y K

Expressing this in term of gross savings SG,

We have:

∆Y = SG - S---------------------------------------2.12

Y K

Where S is the rate of capital depreciation equation 2.11 and 2.12 can be

explained thus.
To grow, economics must save and invest a certain proportion of their GDP.

The more they can save and invest, the faster they can grow. But the actual rate at

which they can grow for any level of saving and investment can be measured by

the inverse of the capital. Output ratio, k, because this inverse, 1/K, is simply the

output – capital or output – investment ratio. It follows that multiplying the rate of

new investment, S = 1/Y, by its productivity, 1/K, will give the rate by which

national income or GDP will increase. The main obstacle to or constraint on

development according to this theory is the relatively low level of new capital

formation in less developed countries.

2.3.4 The Solow neoclassical growth model

This model implies that economies will conditionally converge to the same

level income given that they have the same rates of savings, depreciation, labour

force and productivity growth. Thus the model is the basis for the study of

convergence across countries. The key modification from the Harrod – Domar

Model is that the solow model allows that substitution between capital and labour.

Solows growth model exhibits diminishing returns to labour and capital

separately and constant returns to both factors jointly. Technological progress thus

becomes the residual factor explaining long-term growth, which is determined

exogenously i.e. independent of all other factors.


More formally, the standard exposition of the solow neoclassical growth

model uses an aggregate production function in which:

Y = K∞ (AL)1-∞ --------------------------------- 2.13

Where:

Y = is gross domestic product

K = is the stock of capital (human and physical)

L = is labour

A = represents productivity of labour which grows at an exogenous rate.

∞ = represent the elasticity of output with respect to capital

1-∞ = is assume to be less than 1 and private capital is assumed to be paid its

marginal product, thus there are no external economies. This formulation of

neoclassical growth theory yields diminishing returns to both capital and labour.

2.4 Overview of Nigerian industrialization experience

This overview is categorised into the following eras;

(i) The pre - independence era (1947 – 1959)

(ii) The post – independence era (1962 – 1969)


(iii) The oil boom era (1970 – 1980)

(iv) The immediate pre-SAP era (1981 – mid 1986)

(v) The post – SAP era (mid 1986 till date).

2.4.1 The pre-independence era (1947 – 1959)

In this phase, Nigeria made efforts towards industrial development activities

as well as the drive towards deliberately wooing foreign investors into Nigeria. The

inflow of foreign capital was encouraged by liberal industrial legislations, the

relative backwardness of the country at the time being acknowledged. Tools like

tariffs, subsidies, various taxes and licensing were freely deployed. The colonial

government did not show a committed interest in the development of the country.

According to Bexkman (1985), apart from basic investments in ports, roads an

drails, and the enforcement of law and order, there was little investment in public

services economic of social. During this period, manufacturing was limited top

primary processing of raw materials for export an the production of simple

consumer items by foreign multinational corporations anxious to gain a foothold in

a growing market. During this period, manufacturing was mostly resource – based,

but some elements of import – substitution and imported raw materials base was

already present.
2.4.2 The post – independence era (1962 – 1969)

At independence, the state of the industrial sector was poor. Nigeria lack

sufficient capital, technology, managerial skills and entrepreneurial initiative to

function effectively in a dominated modern sector. Hence policies enacted were

dominated by the deliberate design and application of diverse incentives aimed

directly at attracting foreign capital, technology and skills. Company income tax

act of 1961 was thus enacted to provide liberal tax rates for companies, profits as

well as liberals depreciation allowances for capital expenditures as high as 73%;

the establishment of the Nigerian Industrial Development Bank (NIDB) in 1964,

aimed at stimulating industries by giving out loans at low interest rate to

entrepreneurs (Ndebbio, 1994).

The 1960s era was characterised by more vigorous import substitution and

the beginning of decline in the export – oriented processing of raw materials.

Economic diversification was promoted as a means of reducing the economy’s

dependence on the agricultural sector as the principle earners of foreign exchange.

In terms of its contributions, the industrials sector accounted for mere 7.7% of

output while the manufacturing sector contributed 3.8% of output.

2.4.3 The oil – boom era (1970 – 1980)

In this era, two phases of industrial development stand out:


(i) The transition phase (1970 – 1974)

(ii) The commanding heights phase (1975 – 1980)

A. The transition phase (1970 – 1974)

This phase coincided with the second national development plan (1970 –

1974). At this phase, it was vital for government to acquire and control, on behalf

of the Nigerian society, the greater proportion of the productive assets of the

economy. This largely informed the promulgation of the Nigeria Enterprises

promotion Decree (NEPD) in 1972 (FRN) and the subsequent indigenization

programme in the country, still within the context of an import substitution

industrialization strategy.

The indigenization policy was to give Nigerians the opportunity to

demonstrate their ability to assume ownership, control and management of a great

part of the nations economy. It was the benchmark of all industrial policies and

incentives in the 19070s. the goals of industrial policies were largely to promote

even development, fair geographical industrial distribution, rapid expansion and

diversification of the economy’s industrial base, promote export – oriented

industries to create forward and backward linkages in the economy, and liberalize
entry into the industrial sector inorder to attract both indigenous and foreign

investors.

B. The commanding heights (1975 – 1980)

During this period, the Nigerian Enterprises Promotion Decree (NEPD)

enacted in 1972 was amended in 1977. This sought to involve more Nigerians in

the ownership, control and management of certain enterprises through creating

opportunities for indigenous businessmen by raising the proportion of industrial

ownership of investments in industries, and by increasing the participation of

Nigerians in decision making in the management of larger commercial and

industrial concerns. The contribution of petroleum to the Nigerian economy

became quite pronounced in the 1970s. During this decade the contribution of the

industrial sector to GDP rose from 13.76% in 1970 t0 37.8% in 1979. This period

witnessed very rapid growth in industrial investment, output and the number of

industrial establishment.

2.4.4 The immediate pre-SAP era (1981 – 1986)

The period between 1980 and 1986 saw a mix success in the growth of the

industrial sector because of the global economic crisis of 1980s, the negative effect

of austerity measures and structural adjustment programme introduced in 1982 and


1986 respectively. Also during this period GDP growths rate was 2.9% while the

manufacturing sector recorded an average growth rate of 2.5%. The economy was

saddled with the problems of unemployment, inflation, high level of external and

internal debt and unproductive capacity of the economy. Thus the SAP of 1986

was introduced to revert the poor performance of the economy.

2.4.5 The post – SAP era (mid 1986 till date)

With respect to industrialization strategy the relevant dimensions of SAP

were the devaluation of the naira exchange rate in terms of foreign currencies, the

design of appropriate tariff structure to serve the dual purpose of ensuring a more

efficient import substitution and promoting manufactured exports, and the

privatization/commercialization of public enterprises. Exchange rate and tariff

policies were relatively liberalized.

The structural adjustment programme adopted has had both negative and

positive effects on the Nigerian economy. According to Iyoba and Oriakhi (2002),

the structural adjustment programme adopt to battle the economic crises and bring

about a restructuring of the economy had a favourable effect on agriculture but a

negative effect on manufacturing. According to reports from international labour

organization (ILO 1996), the structural adjustment programme led to a process of

industrialization and rising unemployment.


2.5 Factors affecting industrial development

Having looked at an overview of industrialization in Nigeria, the following

have been highlighted as factors affecting industrial development in Nigeria.

(i) Policy errors of the past

(ii) Inefficient institutional framework

(iii) Poor and inadequate infrastructure

(iv) Lack of an enabling environment

(v) Low access to investible funds due to underdeveloped long-term capital

market that match industrial project needs.

If these problems are properly looked into, the contributions of the Nigerian

industrial sector will be greatly increased.

CHAPTER THREE

RESEARCH METHODOLOGY

This chapter on research methodology is comprised of the sources of data,

model specification and method of estimation and validation.


3.1 Source of data

This research work relied solely on secondary sources of data. These were

sourced from various publications of the National Bureau of Statistics (NBS) and

the Central Bank of Nigeria (CBN) annual reports and statistical bulletin for

various years. Data used for the study is time series within the period 1970 – 2016.

3.2 Model specification

We propose the use of two empirical models. The first model has total

output (RGDP) as a measure of productivity being the dependent variable while

output in the industrial sector as a whole being the independent variable.

Symbolically we propose that:

RGDP = f(INDOPT; U) ----------------------------------3.1

Where:

RGDP = total output or real gross domestic product

INDOPT = Overall industrial sector output

U = stochastic error term

The above model will be estimated using the ordinary least square (OLS)

method as:
RGDP = bo + b1 INDOPT+ U

Where: b0, b1 > 0

For effective result, the logarithm form will be used. It is given as:

Log(RGDP) = bo + b1 Log (INDOPT) + U --------------------3.3

The second model has totals output (RGDP) as a measure of productivity

being the dependent variable while output in the various sectors of the industry

constituting the independent variables. Symbolically, we propose that

RGDP = f(MANOPT, MINOPT, BCOPT; U) ------------3.4

Where: RGDP = Total output

MANOPT = Output in the manufacturing sub sector

MINOPT = Output in the mining sub sector

BCOPT = Output in the building/construction sub sector

U = Stochastic error term

In linear form we have,

RGDP = bo + b1 MANOPT + b2 MINOPT + b3 BCOPT + U --------------3.5

Where bo,…, b3 = estimated parameters.


For effective result, the logarithm form could be expressed as follows:

Log(RGDP) = bo + b1 Log(MANOPT) + b2 Log(MINOPT) + b3 Log(BCOPT) + U

------------3.6

3.3 Method of estimation and validation

The ordinary least square (OLS) method would be employed since it

satisfies the Gauss – Markov theorem. The OLS is given as the best option due to

the following;

(i) It is the best linear unbiased estimator (BLUE)

(ii) Data requirement are not excessive

The result will be analyzed using Economic “apriori” criteria, Statistical criteria,

and Econometric criteria.

3.3.1 Economic "apriori" criteria

An economic apriori criteria is determined by economic theory and refers to

the sign and the size of the parameters or economic relationship. Generally, if the

apriori criteria are not satisfied the estimated result should be considered

unsatisfactory (Ksoutsoyiannis 2003; 26).


3.3.2 Statistical criteria

This include the following:

a. the student t – statistics: The student t - statistics is most appropriate because

the sample size is 32. It judges the reliability of the regression coefficient. Also,

it measures the degree of coefficient and helps the researcher to determine the

significance of the given estimates.

The formula is given by:

t = b1

S(b1)

b1 = the estimated parameter

S(b1) = The standard Error

The decision rules

If t > tt; we accept the alternate hypothesis (H1) that the estimate is significant.

b. Coefficient of multiple Determination (R2): R2 is used in multiple

regressions to show the explanatory power of the independent variable. The


greater the R2 the greater the percentage of variable of the

dependent variable explained by the independent variables.

c. Adjusted coefficient of multiple Regression (R2) since additional

variables to the function increases the numerator, the

denominator remaining the same, R2 is adjusted taking account of the degree of

freedom which goes a long way in decreasing as the new regressions are

introduced into the function.

Adjusted R2 = 1-(1- R2) N + 1

N-K

Where:

M = Number of Samples

K = Number of parameters

R2 = Multiple regression coefficient

d. F – statistic: This is used to determine if the R2 is statistically

significant. It is given by;

F = R2/K-1

(1 - R2)/N-K
Acceptance criteria:

If F > Ft at a level of significance of 5%, we accept that R2 is statistically

significant at that level.

3.3.3 Econometric criteria

This states the existence or other wise of autocorrelation

between the explanatory variables and the error term. However, the test is

appropriate for only the first order auto-regression scheme.

DW is given by

Where:

et = present error

et-1 = Previous Error

DECISION RULE;

Reject the null hypothesis: Ho: bi = 0


If d, du or d > 4 - du

Accept the null hypothesis: if du < f (4-du) when dL, d < du and 4-du <d <4-

dL. We conclude that we cannot say whether auto correlation exist.

CHAPTER FOUR

PRESENTATION AND ANALYSIS OF RESULT

4.1 Presentation of result

Table 4.1: Presentation of result for overall industrial sector

Dependent variable: LRGDP

Independent variables Coefficients Probability values


LINDOPT 0.7493* 0.0000
Constant 2.1922* 0.0000
2
Adj. R = 0.9949
F-Stat = 3002.16
DW Stat = 1.6788
* = 1% level of significance; ** = 5% level of significance

Table 4.2: presentation of result for the industrial sub-sectors

Dependent variable: LRGDP

Independent variables Coefficients Probability values


LMINOPT 0.00062** 0.0474
LMANOPT 1.3625* 0.0000
LBCOPT -0.1460 0.4949
Constant 0.7459* 0.0485
Adj. R2 = 0.9431
F-Stat = 249.76
DW Stat = 1.5408
* = 1% level of significance; ** = 5% level of significance

4.2 Analysis of results

4.2.1 Analysis of result for overall industrial sector

The empirical result of table 4.1 shows that the coefficient of 2.1922

for the constant term is consistent with economic apriori expectation. The estimate

has a positive sign which means that if no production activity takes place

in the industrial sector, RGDP will increase by 2.1922 per cent.

The empirical result further indicates that the coefficient of

0.7493 for industrial outputis consistent with economic apriori

expectation. This shows that there is a positive relationship between industrial

sector output and RGDP. Thus, a one percent increase in industrial output will

result in 0.7493 per cent increase in RGDP all things being equal.
Statistically, the empirical result shows that industrial sector output and the

constant term are significant at 1 per cent level, given their probability values of

0.0000.

The adjusted R2 of 0.99 indicates that 99 per cent of total variation in real

GDP is accounted for by the variations in the independent variable, while only

about 1 per cent is unaccounted for by the independent variable. It can

therefore be said that the model has a good fit and a high predictability power.

The F - statistics shows the overall significance of the explanatory variables.

The F-calculated of 3002.16 has a probability value of 0.0000 indicating

that the overall model is highly significant.

On econometric criteria, the calculated DW statistic is 1.6788 indicating that

there is no autocorrelation in the model.

4.2.2 Analysis of result for the industrial sub-sectors

The empirical result of table 4.2 shows that the value of 0.7459 for

the constant term is consistent with economic apriori expectation. The estimate has

a positive sign which means that if no production activity takes place in the

various sectors of the industry, RGDP will increase by 0.7459 per cent.
The empirical result also indicates that the coefficient of 1.3625 for

manufacturing is consistent with economic apriori expectation. This

shows that there is a positive relationship between manufacturing sector

output and RGDP. Thus a one percent increase in manufacturing output will result

in an increase in RGDP by 1.3625 percent all things being equal.

The result further shows that the coefficient of 0.00062 for

mining is consistent with economic apriori expectation. This is

because there is a positive relationship between mining and RGDP. Thus a one

percent increase in mining will result in an increase in RGDP by 0.00062 percent

all things being equal.

Furthermore, the result shows that the coefficient of -0.4160 for

building/construction output is not consistent with economic apriori

expectation. There is a negative relationship between

building/construction output and RGDP.

Thus, a one percent increase in building/construction

output will result in 0.4160 per cent decrease in RGDP all things being equal.

Statistically, the probability values for the coefficients of the independent

variables reveals that only building/construction output is insignificant. Mining


output and the constant term are 5 per cent significant, while manufacturing output

is 1 per cent significant.

The adjusted R2 is given as 0.9431. This indicates that 94.31 percent of total

variation in real GDP is accounted for by the variations in the independent

variables, only about 5.69 per cent is unaccounted for by the independent

variables. It can therefore be said that the model has a good fit on the data and also

has a high predictability power.

The F-statistics shows the overall significance of the explanatory variables.

The calculated F-value of 249.76 indicates that the model is highly significant

given its probability value of 0.0000.

The DW statistic of 1.5408 indicates that there is no autocorrelation at 5 per

cent level of significance.

4.3 Test of hypothesis

4.3.1 Test of hypothesis for Model 4.1

We propose that:

H01: Overall industrial sector output has no significant impact on RGDP.

However, from the empirical result, the probability - value for Overall

Industrial sector output is 0.0000 which indicates that its coefficient is significant
at 1 per cent level. We therefore reject the null hypothesis and accept the

alternative hypothesis that industrial sector output has a significant impact on the

RGDP.

4.3.2 Test of hypothesis for Model 4.2

We propose that:

H02: Manufacturing output has no significant impact on RGDP

H03: Mining output has no significant impact on RGDP

H04: Building/construction has no significant impact on RGDP

From the empirical result, the probability - value for manufacturing sector

output is 0.0000 which indicates that its coefficient is significant at 1 per cent

level. We therefore reject the null hypothesis and accept the alternative hypothesis

that manufacturing sector output has a significant impact on the RGDP.

Likewise, from the empirical result, the probability - value for mining sector

output is 0.0474 which indicates that its coefficient is significant at 5 per cent

level. We therefore reject the null hypothesis and accept the alternative hypothesis

that mining sector output has a significant impact on the RGDP.

Alternatively, from the empirical result, the probability - value for

building/construction sector output is 0.4949 which indicates that its coefficient is


insignificant at 5 per cent level. We therefore reject the alternative hypothesis and

accept the null hypothesis that building/construction sector output has no

significant impact on the RGDP.

4.4 Economic implication of result

The implications of the empirical results are summarized as

follows:

(1) The result show a positive relationship between overall output in the industrial

sector and real gross domestic product. This means that a rise in output of the

industrial sector due to its development will lead to an increase in real GDP which

is our measure of productivity.

(2) Government polices are relevant both in the short -run and long-run hence

policies aimed at developing the industrial sector should be targeted.

CHAPTER FIVE

SUMMARY, RECOMMENDATION AND CONCLUSION


5.1 Summary of major findings

From the analysis carried out, a positive relationship exists between

industrial output and real gross domestic product (RGDP). This means that

industrial output in the economy stimulates and enhances economic growth.

However the Nigerian industrial sector is unable to maximally utilize its available

resources to ensure optimum output. Thus is as a result of high cost of production

due mainly to obsolete machinery and equipment, the unavailability of social and

economic infrastructure which facilitates and integrates industrial activities. The

importation of raw materials and machineries is also a major setback.

Industries have mainly been sited in urban areas and this has led to

lopsided development. Infrastructural facilities are made available majorly in

areas where industries are sited, lacks of good financial Institutional framework,

limited employment opportunities due to the capital intensive nature of their

operations, reduction in government revenue through excessive tax concession

granted them by the government.

5.2 Policy recommendations

In view of the foregoing analysis of the contributions of the industrial sector

to the development of Nigeria, the following recommendations are put forth:


(1) Government should promote and encourage small scale industries, thereby

enhancing and increasing output in order to stimulate economics growth in

Nigeria.

(2) Financial institutions should extend credit facilities to the infant industries.

(3) The manufacturing industry should be encouraged to produce and utilize local

inputs. Also low cost, efficient, labour intensive technique of

production should be adopted.

(4) government should intensify efforts in the promotion of the building

/construction sector either through her award of soft loans or grants in order to

boost infrastructures and economic growth.

5.3 Conclusion

This study examined the impact of the contributions of the industrial sector to

economic growth within 1970-2016. It is acknowledged that industrial sector

output enhances economic growth and productivity. Findings however indicate

that not all sub-sectors of the industry significantly contribute to real gross

domestic product (RGDP). Since an increase in industrial output will lead to

an Increase in real gross domestic product, strategies aimed at improving on

industrial production, most especially the building/construction sector should be


developed for possible implementation. This will ensure increased output in

both the overall industrial sector and the economy at large in order to

promote economic growth in Nigeria.

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Appendix A: Data

YEAR INDOPT RGDP MANOPT MINOPT BCOPT WATER ELECT


1970 301.1 10,377.76 103.9 187 0 93.73
1971 333.12 10,482.00 499.24 111 197.74 0 94
1972 392.42 10,932.28 509.86 142.73 1,089.60 0 96.83
1973 441.51 11,800.25 1,298.92 149.44 1,229.09 0 99.74
1974 435.63 13,824.92 2,384.00 259.44 1,300.11 0 102.93
1975 490 14,714.00 2,449.93 379.59 2,378.45 0 103.09
1976 501.03 16,444.24 2,674.00 499 2,779.26 0 109.73
1977 573.11 26,818.63 2,840.92 500.11 2,987.91 0 110.73
1978 677.32 27,813.11 3,000.00 529.17 2,999.00 0 130.92
1979 712 29,902.00 3,285.26 623.88 3,000.05 0 139.8
1980 736.3 31,546.76 3,485.86 682.72 3,056.00 0 143.72
1981 25561.32 205,222.06 13,837.92 2,215.19 8,377.00 329.28 801.93
1982 25726.63 199,685.25 15,633.54 2,245.22 6,681.45 278.71 887.71
1983 19676.53 185,598.14 10,797.42 1,712.37 5,890.35 422.76 853.63
1984 17042.03 183,562.95 9,532.75 1,471.76 4,801.97 333.2 902.35
1985 17478.98 201,036.27 12,032.40 913.02 3,307.97 206.37 1,019.22
1986 16265.03 205,971.44 11,582.62 487.29 3,302.93 226.26 665.93
1987 17132.87 204,806.54 12,014.61 540.05 3,610.30 244.34 696.57
1988 19271.53 219,875.63 13,713.89 595.01 3,978.13 282.37 702.13
1989 19860.23 236,729.58 14,011.49 638.24 4,143.58 307.5 759.42
1990 20896.75 267,549.99 14,702.40 665.61 4,350.75 350.03 827.96
1991 22484.57 265,379.14 16,078.45 688.64 4,524.79 364.73 827.96
1992 22079.64 271,365.52 15,357.18 711.13 4,701.25 386.62 923.46
1993 21825.39 274,833.29 14,788.13 745.99 4,936.31 417.55 937.41
1994 21878.55 275,450.56 14,591.36 768.86 5,084.40 427.14 1,006.79
1995 21269.72 281,407.40 13,836.14 789.8 5,221.68 431.42 990.68
1996 21485.3 293,745.38 13,953.42 799.78 5,284.34 435.29 1,012.47
1997 21900.62 302,022.48 14,009.95 849.94 5,622.54 441.82 1,006.37
1998 21294.15 310,890.05 13,046.30 900.57 5,959.89 446.45 940.94
1999 22029.39 312,183.48 13,494.64 934.71 6,186.36 460.51 953.17
2000 22811.69 329,178.74 13,958.82 970.2 6,433.81 476.62 972.24
2001 35379.98 356,994.26 14,935.10 1,066.08 7,205.88 488.07 11,684.85
2002 38913.04 433,203.51 16,439.36 1,112.07 7,518.87 524.67 13,318.07
2003 42885.44 477,532.98 17,369.63 1,172.48 8,176.77 567.75 15,598.81
2004 47320.48 527,576.04 19,436.78 1,379.34 7,622.47 629.35 18,252.54
2005 51495.66 561,931.39 21,305.05 1,510.84 8,544.48 695.43 19,439.86
2006 55742.52 595,931.39 23,305.87 1,666.09 9,654.79 771.33 20,344.44
2007 60483.16 634,251.14 25,535.50 1,878.47 10,912.56 855.59 21,301.04
2008 65248.54 672,202.55 27,806.76 2,118.26 12,338.83 948.76 22,035.93
2009 69909.64 718,977.33 29,990.92 2,374.20 13,816.34 1,045.41 22,682.77
2010 74881.37 776,332.21 32,260.63 2,660.94 15,454.02 1,152.07 23,353.71
2011 80362.72 834,161.83 34,711.31 2,966.52 17,348.90 1,269.33 24,066.66
2012 91223.8 891,674.96 37,041.34 3,259.54 19,072.31 1,379.52 24,751.60
2013 98498.39333 949,267.21 39,401.54 3,555.70 20,838.59 1,491.48 25,443.55
2014 106669.6083 1,006,859.46 41,761.73 3,851.86 22,604.87 1,603.44 26,135.49
2015 114840.8233 1,064,451.71 44,121.93 4,148.02 24,371.15 1,715.40 26,827.44
2016 123012.0383 1,122,043.96 46,482.12 4,444.18 26,137.43 1,827.36 27,519.38

Appendix B: Regression result

Dependent Variable: LRGDP


Method: Least Squares
Date: 12/15/17 Time: 09:56
Sample (adjusted): 1971 2016
Included observations: 46 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.

LMINOPT 0.000623 0.187695 0.003318 0.0474


LMANOPT 1.362518 0.118318 11.51571 0.0000
LBCOPT -0.146006 0.212060 -0.688513 0.4949
C 0.745884 0.506748 1.471904 0.0485

R-squared 0.946921 Mean dependent var 12.20267


Adjusted R-squared 0.943130 S.D. dependent var 1.399466
S.E. of regression 0.333738 Akaike info criterion 0.726019
Sum squared resid 4.677999 Schwarz criterion 0.885031
Log likelihood -12.69844 Hannan-Quinn criter. 0.785586
F-statistic 249.7577 Durbin-Watson stat 1.540832
Prob(F-statistic) 0.000000

Dependent Variable: LRGDP


Method: Least Squares
Date: 12/15/17 Time: 10:24
Sample: 1970 2016
Included observations: 47
Variable Coefficient Std. Error t-Statistic Prob.

LINDOPT 0.749392 0.013677 54.79195 0.0000


C 2.192203 0.057335 38.23520 0.0000

R-squared 0.985232 Mean dependent var 5.272243


Adjusted R-squared 0.984904 S.D. dependent var 0.629614
S.E. of regression 0.077358 Akaike info criterion -2.239121
Sum squared resid 0.269293 Schwarz criterion -2.160391
Log likelihood 54.61934 Hannan-Quinn criter. -2.209494
F-statistic 3002.158 Durbin-Watson stat 1.678830
Prob(F-statistic) 0.000000