Vol. 6, Issue 1 (2020)
Capital goods import and manufacturing sector’s output in Nigeria: Evidence from ARDL bounds testing procedure
Author(s): Leonard Nosa Aisien, Ihensekhien Orobosa Abraham
Abstract: The study examined the impact of capital goods import on manufacturing sector output in Nigeria using annual time series data for the period 1981 – 2017. The Autoregressive Distributed Lag (ARDL) modelling procedure and the bounds testing approach to co-integration were adopted to examine the short run and the long run relationship between the manufacturing sector output and its selected determinants. The empirical results revealed that importation of capital goods has a positive impact on the manufacturing sector output in Nigeria. However, the impact was statistically significant only in the long run. In the short run, though the impact of importation of capital goods was positive, it was not statistically different from zero. Also, devaluation / depreciation of the naira was found to have a significant but negative impact on manufacturing sector output in Nigeria, both in the short run and long run. It was therefore recommended that the Nigerian authorities should relax import restrictions on capital goods imported into the country to enable the manufacturing sector have easy access to the needed capital inputs for their operations. The paper also called on the monetary authorities in Nigeria to initiate deliberate policies to stabilize the exchange rate of the naira.