Infrastructure Investment and Industrial Development in Nigeria: The Critical Nexus

  • Simon-Oke O. Olayemi The Federal University of Technology, Akure, Nigeria
Keywords: ECM, Industry, Development, Government Expenditure, Infrastructure, Nigeria

Abstract

Many studies have established the critical role played by infrastructure in economic growth and development of nations globally, but relatively few studies have considered the relationship between infrastructure and industrial development. The few studies done in this area especially in Nigeria emphasized the hard core infrastructure-industry relationship. This justifies the study of relationship of both soft and hard core infrastructure with industrial development in Nigeria, using co-integration and error correction mechanism (ECM); with data spanning 1985 and 2015. Findings indicated that all the variables employed in the study contained unit root properties; and were stationary at level. A long run equilibrium relationship was established between infrastructure investment and the index of industrial production in the country. The study also revealed that 12.9% speed of adjustment is required to adjust towards equilibrium in the long run. The study therefore concluded that in the long run investment in both hard and soft core infrastructure would contribute significantly to the level of industrial development in the country, through high quality work force and improvement in life expectancy of average Nigerians.

Author Biography

Simon-Oke O. Olayemi, The Federal University of Technology, Akure, Nigeria

Department of Economics, School of Management Technology,

The Federal University of Technology, Akure, Nigeria

References

Acemoglu, D. and Simon, J. [2005]: Unbundling Institutions. Journal of Political Economy, Vol.133 (5): 949-995.

Adamu P.A. [2002]: The Impact of Human Capital on Economic Growth in Nigeria: An Error Correction Approach. Selected Paper for Nigeria Economic Society Conference, 2002.

African Development Bank (ADB), [1999]: Infrastructural Development in Africa. African Development Report 1999, New York: Oxford University Press. http//:www.adb/oup.com, accessed on 20th November, 2017.

Akinwale, A.A. [2010]: The Menace of Inadequate Infrastructure in Nigeria: African Journal of Science, Technology, Innovation and Development, Vol 2, No.3, 207-229.

Anyanwu, J.C., Oyefusi, A., Oaikhenan, H. and Dimowo, F.A. [1997]: The Structure of the Nigerian Economy, 1960-1997. ISBN: 978-2784-11-7, p. 379-401. Onitsha: Joanee Education Publishers.

Ascauers, D.A. [1989]: Is Public Expenditure Productive? Journal of Monetary Economy, Vol. 23, 177-200.

Ayodele, A.I. and Falokun, G. [2003]: The Nigerian Economy: Structure and Pattern of Development. JODAD Publishers.

Babatunde, M.A. and Adefabi, R.A. [2005]: Long-run Relationship between Education and Economic Growth in Nigeria: Evidence from Johansen Co-integration Approach. Unpublished M.sc thesis, Department of Economics, University of Ibadan, Ibadan, Nigeria.

Barro, R.J. [1990]: “Government Spending in a simple Model of Endogenous Growth”. Journal of Political Economy, Vol.98 (5), 103-25.

Basu, S. and David, W. [1998]: Appropriate Technology and Growth. The Quarterly Journal of Economics, Vol. 113, No. 4, 1025-1054.

11. Bird, R. [1994]: Decentralizing Infrastructure: For Good or for Iii? World Bank Policy Research Working Paper, No. 1258. http/:www.world/wbpr.com; Accessed on 20th November, 2017.

Central Bank of Nigeria (CBN), [2015]: Statistical Bulletin, Abuja, Nigeria, pp. 215-225

Canning, D. [1999]: Infrastructure’s Contribution to Aggregate Output. World Bank Policy Research Working Paper No. 2246. http/:www.world/wbpr.com; Accessed on 20th November, 2017.

14. Canning, D. and Bennathan, E. [2000]: The Social Rate of Return on Infrastructure Investments. World Bank Policy Research Paper, No.2390.http//:www.world/wbpr.com; Accessed on 20th November, 2017.

Carbajo, J. and Steven, F. [1997]: Restructuring Infrastructure in Transition Economies. European Bank for Reconstruction and Department (EBRD) Working Paper, No. 24, http//:www.ebrd.com; Accessed on 20th November, 2017.

Chanclavarkar, A. [1994]: Infrastructure Finance: Issues, Institutions and Policies. World Bank Policy Research Working Paper, No.1370.http//:www.imf/wbpr.com;Accessed on 20th November, 2017.

Devarajan S., Swaroop, V and Zhou, H. [1996]: The Composition of Public Expenditure and Economic Growth. Journal of Monetary Economics, Vol.37, 313-344.

Destefanis, S. and Sena, V. [2005]: Public Capital and Total Factor Productivity: New Evidence from the Italian Regions, 1970-1998. Regional Studies, Vol. 39 (5), 603-617.

Dickey, D. A, and Fuller, W.A, [1981]: “Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root”. Econometrica, 49: 1057-1072.

Engle, R.F, and Granger, C.N.J. [1987]: Co-integration and Error Correction Representation, Estimation and Testing. Econometrica, 55(2): 252-276.

Fasoranti, M.M. [2012]: The Effect of Government Expenditure Infrastructure on the Growth of the Nigerian Economy, 1977-2009. International Journal of Economics and Financial Issues, Vol.2, No. , 513-518.

22. Fedderke, J.W.and Bogetic, Z. [2009]: Infrastructure and Growth in South Africa: Direct and Indirect Productivity Impacts of 19 Infrastructure Measures. World Development, Vol.37 (9), 1522-1539.

Fingleton, B.and Gomez-Antonio. [2009]: Analyzing the Impact of Public Capital Stock using the NEG 8age equation: A Panel Data Approach”. Strathclyde Discussion Paper in Economics, No.09-12, Department of Economics, University of Strathclyde, Glasgow, U.K.

Fox, W.F. [1994]: Strategic Options for Urban Infrastructure Management, UNDP/UNCHS/World Bank Urban Management Programme.No.6.http//:www.undp/unchs/world/bump.com; Accessed on 20th November, 2017.

Harrod, R.F.and Domar, E. [1946]: Capital Expansion, Rate of Growth and Employment. Econometrica, 14 (2), 137-147.

Hulten, C.R., Bennathan, E. and Srinivasan, S. [2006]: Infrastructure, Externalities and Economic Development: A Study of the Indian Manufacturing Industry. The World Bank Economic Review, 20(2):291-308.

Ijaiya, G.T. and Akanbi, S.B. [2009]: An Empirical Analysis of the Long-run Effect of Infrastructure on Industrialization in Nigeria. Journal of International Economic Review, 2:1-2,135-149.

Isaksson, A. [2009a]: Telecommunications and Industrial Development. Staff Working Paper, 14/2009, Vienna: UNIDO.http/:/www.unido/world.com; Accessed on 20th November, 2017.

Jacobson, C.A. and Tarr, J.A. [1995]: Ownership and Financing of Infrastructure: Historical Perspectives. World Bank Policy Research Working Paper, No.1466.http//:www.world/dr.com, Accessed on 20th November, 2017.

Josaphat, P.K. and Oliver, M. [2000]: Public Expenditure and Economic Performance in Tanzania. IMF Working Paper, No.89/45, Washington D.C., IMF. http//:www.imf/world.com; Accessed on 20th November, 2017.

Kayode, M.O. [2012]: Infrastructure Development: Catalyst for Economic Growth, Business Day Newspapers, Lagos: April, 2012.

Lawason, O.and Marimathu, L. [2009]: Human Capital and Economic Development in Nigeria: The Role of Education and Health. Research Paper, University of Lagos, Akoka, Nigeria.

Lucas, R.E. [1998]: The Mechanics of Economic Development .Journal of Monetary Economics, Vol.4, 43-53.

Mamatzakis, E.C. [2007]: E.U. Infrastructure Investment and Productivity in Greek Manufacturing. Journal of Policy Modeling, Vol.29, 335-344.

Murphy, K.M., Schleifer, A.and Vishny, R. [1989]: Industrialization and the Big Push. Journal of Political Economy, Vol.97 (5), 1003-1026.

National Bureau of Statistics,[2016]:Nigeria Public Capital Expenditure,1980-2015,p.20-26

Oladunjoye, P. [2016]: Infrastructure: Bane of Industrial Development. Daily Independent Newspapers. Lagos: January, 2016.

Oshikoya, T. W., Jerome, A., Hussein, M.N. and Mlambo , K. [1999]:Closing the Infrastructure Deficit: In Proceedings of the African Development Bank Conference on; Can Africa claim the 21st century?. Abidjan: 6th – 9th July, 1999.

Pineda, J.and Rodriguez, F. [2006] Public Investment in Infrastructure and Productivity Growth: Evidence from the Venezuelan Manufacturing Sector. Wesleyan Economics Working Paper, No.2006-2010.Department of Economics, Wesleyan University.

Ram, R. [1986]. Government Size and Economic Growth. A New Framework and Some Evidence from Cross Section and Time Series Data. American Economic Review, Vol.76, 191-203.

Reinikka, R.and Svensson, J. [1999]: How Inadequate Provision of Public Infrastructure and Services affect Private Investment? World Bank Policy Research Working Paper, No.2262,http//www.wbpr.com;Accessed on 20th November, 2018

Romer, P.M. [1986]: Increasing Returns and Long-run Growth. Journal of Political Economy, 94 (5), 1002-1037.

Sawada, Y. [2015]: Impacts of Infrastructure on Development: A Selective Survey. ADBI Working Paper 511, Tokyo: Asian Development Bank Institute (ADBI). Available: http://www.adbi.org/working-paper/2015/01/20/6526.impacts.infrastructure.in.dev/.Accessed on 20th November, 2017.

Simon-Oke, O.O. [2012a]: Human Capital Investment and Industrial Productivity in Nigeria. International Journal of Humanities and Social Science, Vol.2, No.16, 298-307.

Simon-Oke, O.O. [2012b] Electricity Crisis and Manufacturing Productivity in Nigeria (1980-2008). Developing Country Studies, Vol.2, No.4, 16-21.

Solow, R.M. [1956]: A Contribution to the Theory of Economic Growth. Quarterly Journal of

Economics, 70:65-94.

Swaroop, V. [1994]: The Public Finance of Infrastructure: Issues and Options. World Bank Policy Research Working Paper, No.1288.http/:www.world/wbpr.com, Accessed on 20th November, 2017.

Tanzi, V. And Howell, H.Z. [1997]: Fiscal Policy and Long run Growth. IMF Staff Papers, Vol.44, No.2, 180.http/:www.imf.com, Accessed on 20th November, 2017.

Uchendu, O.A. [1993]: The Economic Cost of Electricity Outages: Evidence from a Sample Study of Industrial and Commercial Firms in Lagos, Nigeria. The Nigerian Journal of Economics and Social Studies, Vol.1, 50-81.

Ukpong, I.I. [1973]: The Economic Consequences of Electric Power Failures. The Nigerian Journal of Economics and Social Studies, Vol.2, 90-120.

United Nations Committee on Trade and Development (UNCTAD), [2006]: The Least Developed Countries Reports, 2006.New York and Geneva: United Nations http//:www.world/unctad.com; Accessed on 5th December, 2017.

World Bank, [1993b]: Energy Sector Management: Assistance Programme Report on Nigeria (APR).World Bank Working Paper.http//:www.world/arp.com, Accessed on 5th December, 2017.

World Bank, [1994]: World Development Report 2014: Infrastructure for Development. Washington D.C., World Bank. http/:www.wbdr.com, Accessed on 5th December, 2017.

World Bank, [2008]: The Growth Report: Strategies for Sustained Growth and Inclusive Development. Washington D.C., World Bank. http//:www.world/arp.com; Accessed on 5th December, 2017.

World Bank, [2009]: World Development Indicators, 2009 CD-ROM. Washington D.C., World Bank. http/:www.world/wdh.com, Accessed on 5th December, 2017.

Published
2018-11-08
How to Cite
O. Olayemi, S.-O. (2018). Infrastructure Investment and Industrial Development in Nigeria: The Critical Nexus. JOURNAL OF SOCIAL SCIENCE RESEARCH, 13, 2828-2841. Retrieved from https://cirworld.com/index.php/jssr/article/view/7821
Issue
Section
Articles