Industrial Sector Investment and Industrial Growth in Nigeria: A Granger Causality Analysis

This paper assess the long term effects of industrial sector investment on the industrial growth performance for the Nigerian economy between the periods of 1981-2013. Econometric models were developed to investigate the extent of relationship between the unexplained and explanatory variables using the Johansen Normalized co-integration technique and Granger Causality Approach. The result indicates a negative but strong significant long run relationship between industrial investment and industrial growth implying that growth in the industrial sector depends on industrial investment in previous periods). The Granger Causality also indicates a case of unidirectional causation for the Nigerian economy, arguing that most developing countries are not likely to be endowed with vibrant manufacturing sectors due to poor human capital development allowing us to state that many developing countries are likely to attract investment due to high industrial GDP that can be attributed largely to exports in primary goods e.g. from agriculture and natural resources, making industrial GDP (INDGDP) responsible for high investment inflow to the industrial sector. From the findings of this study, recommendations were made to promote a friendly investment environment to boost the performance of the industrial sector in order to sustain growth.