Long-run Inter-sectoral Dynamics and Economic Growth in Nigeria

Abstract

This paper examines the long-run intersectoral dynamics and effect of externalities from sectoral expansion on growth in Nigeria using time series data from 1981 to 2014. The real value added of the agriculture, manufacturing, minerals and services sectors was regressed against the real gross domestic product (GDP). We use the bounds testing approach to check the long-run interdependence of sectors while impulse response functions and variance decompositions test the direction and strength of linkages among the sectors. Our tests confirm the sectors evolve interdependently over the study period. The minerals sector is the most linked sector with two-way linkages to other sectors. The services sector shows the strongest backward linkage. However, both the minerals and services sectors are not significant in explaining variations in the GDP. The strength and extent of agriculture and manufacturing linkages are much less compare to minerals. Nevertheless, they are positive and significant in explaining long-run growth.

Keyword: Dynamics; economic growth; intersectoral; linkages; long-run; Nigeria