Economic Globalization and Manufacturing Sector Performance in Nigeria

Abstract

This study examines the impact of economic globalization on the performance of Nigeria’s manufacturing sector from 1990 to 2024. Economic globalization is proxied by foreign direct investment (FDI) net inflows as a percentage of GDP, the logarithm of the real effective exchange rate, the logarithm of trade openness, and tariffs on manufactured goods, while manufacturing sector performance is measured using manufacturing value added. Time series data were sourced from the World Bank’s World Development Indicators and the Central Bank of Nigeria Statistical Bulletin. The study employs KPSS unit root tests, ARDL bounds cointegration, ARDL estimation, Granger causality, and diagnostic tests. The findings reveal the existence of a long-run relationship in the model. ARDL long-run estimates show that FDI exerts a negative and statistically significant effect on manufacturing value added. Trade openness indicates a significant negative effect on manufacturing value added. The real effective exchange rate has statistically not significant effects on manufacturing value added. While the tariffs on manufactured goods indicate a positive correlation, albeit not statistically significant on manufacturing value added. The error correction results confirm the models’ convergence to long-run equilibrium. Based on these findings, the study recommends among others, that Nigeria should adopt performance-based FDI policies by granting incentives only to foreign firms that promote local sourcing, technology transfer, and industrial employment.