Governance, Institutions and Manufacturing Sector Performance in Nigeria

Abstract

This study focused on the effects of governance and institutions on manufacturing firm performance in Nigeria, using World Bank’s Nigeria investment survey data. The lack of progress on the manufacturing front despite decades of oft-renewed efforts of government to reduce hurdles posed by governance and institutions-related factors to ‘ease of doing business’, indicates that such challenges are far from settled. A vector of indicators to measure governance and institutions was developed and employed in the study as instrumental variable. The indicator was composed of procurement process, access to land, policy uncertainty, political instability, corruption and security. From the analysis, it was found that the governance and institutions indicator had a positive and significant effect on firm performance, confirming that those variables still constitute a significant shackle on the performance of manufacturing firms in Nigeria, and accordingly provide a window of opportunities, when addressed. Now that the prospects of export of industrial products have improved with the floating exchange rate, the weakening of the Naira and the consequent cheapening of exports emanating from the nation, the industrial export front should be vigorously pursued. To this end we recommend the revitalization of the clusters and export free zone concepts for industries.  Specifically, we recommend the creation of clusters and export free zones out of existing industrial facilities rather than along new or geographic lines.

Keywords: Governance, Institutions, Firm performance, Manufacturing sector

JEL Classification: L60, L78, N47, N67, O14, O17