Industrial Policy and Industrial Sector Productivity in Nigeria

Industrial sector serves as an effective tool of promoting growth and development. However, in the recent years, Nigerian industrial sector has significantly been underperforming which prompted the need to investigate the effect of industrial policy on industrial sector productivity. The study adopted secondary data from Central Bank of Nigerian Statistical Bulletin which covered the period of 1986 to 2017 and analyzed using Augmented Dickey Fuller Unit Root Test, Johansen Co-integration and Error Correction Model. The result of the unit root test revealed that industrial output, trade openness, ex-change rate, credit to private sector and government capital spending were stationary first difference while the Johansen Co-integration test indicated that there is long run relationship among the varai-bles. The result of the error correction model showed that trade openness produced insignificant and negative effect on industrial output. Also, the result showed that exchange rate had statistically insig-nificant and positive effect on industrial output. Furthermore, government capital spending exerted positive and significant effect on industrial output and finally, credit to private sector is statistically significant in predicting the value of industrial output in Nigeria. The result of the granger causality test revealed trade openness and government capital expenditure did not granger caused industrial output while exchange rate and credit to private sector granger caused industrial output. Thus, the study concluded that industrial policy has been partly effective in influencing industrial sector productivity in Nigeria. In light of this government should formulate and implement policies that will advance trade and economic integration between the country and international countries in order to enable industrial sector enjoy the opportunities of foreign cooperation.