DETERMINANTS OF CAPACITY UTILIZATION IN THE NIGERIA MANUFACTURING SECTOR

Abstract

The study investigated determinants of capacity utilization in Nigeria’s manufacturing sector. The objectives of the study were to determine effect of the determinants such as Consumer Price Index, Fixed Capital Formation, Electricity Generation Rate, and Real Fixed Capital Formation on the manufacturing utilization rate in Nigeria. The study utilized annual time series data for the period 1981 – 2019 which were obtained from the World Development Indicators (WDI) with the help of the Auto Regressive Distributive Lag (ARDL) model for analysis and estimation. The study key findings revealed that electricity power consumption had a positive significant relationship with average manufacturing capacity utilization rate in the current year and 1st year lag, but was insignificant on the long run at 5% level of significance; total labour force had a negative relationship with average manufacturing capacity utilization rate in the current year but was positive on the long run and significant at 5%; while lending interest rate had a positive significant relationship with average manufacturing capacity utilization rate in the current year but was insignificant in the long run at 5% level of significance. Based on these findings, the study recommended among others that stable electricity supply should be a policy focus if the manufacturing sector's desired output is to be achieved. Also, making low-interest credit available to manufacturers will go a long way to stimulate domestic production