Fiscal Policy, Private Investment and Manufacturing Sector Performance: Empirical Evidence from Nigeria with ARDL Technique

Abstract

One of the greatest challenges of the Sub-Saharan African economies today is how to develop the appropriate model that will propel development in the continent. The manufacturing sector instances in China, Malaysia, Taiwan, Korea and Japan are clear models to adopt for Nigeria. The question now is, what has Nigeria been doing to develop the manufacturing sector? To this end, this study set out to examine the effect of fiscal policy and private investment on the performance of the manufacturing sector in Nigeria from 1981 to 2021. The study is time series in nature and made use of the autoregressive distributed lag (ARDL) modelling technique. It was found that domestic private investment and aggregate government spending exert a significant positive influence on the manufacturing sector performance in the long run, while the influence from tax and government revenue was significantly negative. It was then recommended that government should improve on the factors that attract more FDI inflows into the country; boosts requisite educational training skills and financial market depth to drive the influence of domestic private investment on the manufacturing sector; increase government spending on the manufacturing sector development; and that tax revenues be judiciously utilized in the long-run so that they can positively impact the manufacturing sector.