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Ethiopian Journal of Business and Economics (The)

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Infrastructural Investment and Industrial growth: A Private Investment Led Approach

Shobande Olatunji, Etukomeni Charles

Abstract


Industrial development has been upheld as a catalyst for quick recovery of lost fortune in a relegated economy. Spurring industrial development is a function of wide range of actions and activities that must be coordinated within the socio-political and economic enclaves towards the achievement of effective industrialization of the system. Part of the activities required spurring industrialization and economic recovery include conscious investment in infrastructural development. This study examines the impact of infrastructural investment on industrial growth in Nigeria, using the annual time series data sourced from the Central Bank of Nigeria’s (CBN)
statistical bulletin between 1960 and 2015. The study adopts Autoregressive Distributed Lag (ARDL) bound testing approach developed by Pesaran, Shin and Smith (2001) in estimating the relevant relationships. The result of the long run estimates indicates that the variables are mutually co-integarted, suggesting that a long run relationship exists. The result of the short run dynamics shows that changes in the previous one lag period of infrastructural growth, industrial growth, labor growth, will trigger a 1% increase in the current industrial output growth. The lag of the error
Correction Term which indicates the speed of adjustment of these variables to equilibrium was found to be statistically significant at 1% with the coefficient value (-0.3902). This implies that 39% of the distortion in the short run is correct on yearly basis. We therefore submit that infrastructural investment in the industrial sector is a necessary but not sufficient condition for economic recovery if structural transformation does not consider the interlink among other important sectors of the economy that would facilitate growth recovery and speed up the rate of industrialization in Nigeria.



http://dx.doi.org/10.4314/ejbe.v6i2.2
AJOL African Journals Online