ANALYSIS OF GLOBALIZATION AND INDUSTRIAL PRODUCTION IN NIGERIA: AN ERROR CORRECTION MODELLING APPROACH

Abstract 

The importance of globalisation in the development of the global economy has gained significant backing over the years, as long-run global projections are sustained. Without doubt, it is strappingly believed that, there is more to gain about several striking issues that are essential in the current trend towards globalisation. Consequently, this study seeks to ascertain the bi-directional relationship (if any), between globalisation and industrial production in the context of Nigeria, with annual time series data spanning 1981-2017, employing Cointegration and error correction modelling (ECM) approach. The study however utilised the approach advanced by Tamuno and Edoumiekumo (2012). Results from the error-correction model revealed that, about 65percent of the short run shocks in industrial production is significantly corrected every 12months. This is suggestive of a high speed of adjustment of industrial production to its long run stability. The result also revealed the presence of a positive correlation between industrial production and foreign direct investment as well as openness to trade, while a negative linkage was found in the case of exchange rate and industrial production in Nigeria. The study therefore recommends among others that; efforts should be made by all strata of government within the country to put in place appropriate strategies that would promote investment-friendly environment aimed at attracting the right kind and quality of FDI into the industrial sector; the Federal government should ensure and encourage the production of non-primary, non-oil export commodities and intermediate inputs to enhance the competitiveness of the Nigerian industrial sector, boost the positive influence of trade openness on industrial production and reduce the negative effects of exchange rate fluctuations, in order to ensure swift convergence in Industrial outputs in the long run.

KEYWORDS:  Globalisation, Industrial Production, Trade Openness, FDI, Error Correction Modelling.

Table of Content

1.0INTRODUCTION

2.0LITERATURE REVIEW

2.1 Characteristics of Globalization

2.2Determinants of Industrial Production

2.3Situational Analysis of Industrial Production in Nigeria

3.0METHODOLOGY AND MODEL SPECIFICATION

3.1Theoretical underpinnings

3.2Specification of Econometric Model

3.3 Methodology

3.4Data Collection Technique

4.0DISCUSSION OF EMPIRICAL FINDINGS AND THEIR POLICY IMPLICATIONS

4.1Descriptive Statistics 
4.2Stationarity Test 

4.3Testing for Co-integration

4.4Parsimonious Error Correction Mechanism

4.5Discussion of Findings

4.6Robustness Check

4.6.2     Testing for Autocorrelation and Heteroskedasticity
4.7 Policy Implications

5.0CONCLUSION AND RECOMMENDATIONS

References