Financial Market Funds in Nigeria’s Economic Progress: Evidence and Insights From the Manufacturing Sector

Abstract

Given the need for the financial markets to continuously provide both long and short-term funds required by the manufacturing sector in an economy, this study seeks to ascertain the extent to which Nigeria's manufacturing sector is influenced by the classified financial market funds over the period 1981 to 2015. Secondary data was sourced from the Statistical Bulletin of the Central Bank of Nigeria and processed through the employment of statistical techniques, which include Multiple Regression, Stationarity, Johansen Co-integration, Error Correction and Granger Causality. The results provide evidence of valuable short and long-run interrelationships between contributions of the manufacturing sector to Nigeria's gross domestic product and three out of the four components of capital and money market funds employed in the study. Further, the Granger Causality results indicate two (2 no) unidirectional causalities which flow from manufacturing sector's output to (i) bank credits to the private sector and (ii) government securities. The study concludes that (i) most of the financial market components largely operate independent of the Nigeria's manufacturing sector, and (ii) where there is any significant relationship at all, the financial market components largely tend to be dependent on the manufacturing sectors operations. On the whole, it is recommended that (i) deposit money banks should set aside a minimum of 20 percent of their loanable funds for on-lending to the manufacturing sector which scheme should be wholly guaranteed by the Central Bank of Nigeria in order to boost the operations of Nigeria’s manufacturing sector, (ii) the state should invest more in infrastructural facilities development in order to reduce cost of production in Nigeria’s manufacturing sector. These will hopefully enhance the contribution of the sector to Nigeria's GDP.

Keywords: Financial Market Funds, Manufacturing Output, Gross Domestic Product.