Industrial Sector and Economic Growth in Nigeria: A Subsector Analysis

Abstract

This study investigated the impact of the industrial sector on Nigeria’s economic growth from 1996 to 2023. The industrial sector was disaggregated into key subsectors, namely the manufacturing industry, mining and quarrying industry, construction industry, electricity, gas, steam and air-conditioning industry, and water supply, sewage and waste management sector, while the interest rate served as a macroeconomic control variable. Data were sourced from the Central Bank of Nigeria statistical bulletin and analyzed using the autoregressive distributed lag approach, which accounts for both short-run and long-run dynamics among variables. The Bounds test for cointegration confirmed a long-run relationship between industrial sectors and economic growth in Nigeria. In the long run, the results indicated that manufacturing, mining and quarrying, construction, and electricity and gas industries had positive and significant impacts on Nigeria’s economic growth, while the water supply, sewage and waste management sector had a negative but insignificant effect. The interest rate exhibited a positive and significant long-run effect on growth. In the short run, manufacturing, mining, and electricity sectors maintained significant positive influences on gross domestic product growth, whereas the construction and water supply sectors showed negative and insignificant effects. The error correction term was correctly signed as negative and significant, indicating that about 67.9% of short-run disequilibrium is corrected annually toward long-run equilibrium. Diagnostic tests confirmed that the model satisfied the assumptions of normality, homoscedasticity, and stability. The study concludes that Nigeria’s industrial sector remains a key driver of economic growth, with manufacturing, mining, construction, and energy subsectors playing dominant roles. The study recommended that the government should promote manufacturing diversification, invest in infrastructure and energy, reform the mining sector, maintain stable interest rates, enhance industrial financing, and ensure policy consistency to sustain industrial-led growth and long-term economic development.

Keywords: Industrial Sector, Economic Growth, Manufacturing Industry, Mining and Quarrying, Construction Industry, Electricity and Energy Sector and ARDL Model.