Sources of Instability in Nigeria’s Manufacturing Performance: 1981–2018

The article investigates factors that may be responsible for observed instability in Nigeria’s manufacturing sector performance. Based on growing concerns regarding early deindustrialisation observed for many developing countries, the study examines how a menu of fiscal and monetary policies can be applied to revitalise the Nigerian manufacturing sector. Consequently, we construct an index of manufacturing sector instability and examine how it responds to a mixture of fiscal and monetary policy variables. We use annual time series data from 1981–2018 and apply the ARDL bounds test technique. Our findings show that budget deficits induce instability in the performance of the Nigerian manufacturing sector, while government infrastructural investments stabilise it. The monetary policy instruments were found to have inconsistent short-run and long-run influences but mostly conform with theory. JEL Codes: F63, L20, L25, L60, O10, O14