Research Topics: Nigerian Manufacturing Industry

What are the impacts of the Naira devaluation on Nigerian manufacturing industry?

Introduction             Massive devaluation of the naira, which would lead to the attainment of what was described as a market determined realistic exchange rate for the currency constitutes the focal point of SAO. This is based on the IFIs argument that the fundamental cause of Nigeria’s economic crisis centers around the overvaluation of the naira, which introduced severe distortions into the country’s economy. It is claimed that nature of foreign exchange management in Nigeria in the period between 1960 and 1986 promoted a progressive overvaluation of the naira. An inflexible nominal exchange rate policy, which resulted in the progressive appreciation of the naira, was adopted in 1994. Thus, apart from a 10 percent devaluation of the naira in 1973 and a gradual devaluation of the naira between 1984 and June 1986m no substantial devaluation of the Nigerian currency occurred before the introduction of SAP in 1986. In any case, it was clamed that the very high degree of the overvaluation of the naira introduced fundamental structural defects into the economy. It made imports cheaper while locally produced goods were overpriced, therefore more expensive, thereby creating import dependency and a disincentive for local industries to manufacture goods. Form a position of purported overvaluation of the naira, the currency became so extremely undervalued that the outcome was spiraling inflation. This high level of inflation in turn had adverse effects on the economy. For instance, official figures showed that the rate of inflation more than tripled between 1987and 1988, rising from 10.2 percent to 38.3 percent and then to 72.8 percent in 1995. In spite of the very high level of inflation caused by the reckless devaluation of the naira and the severe adverse consequences of devaluation on other sectors of the Nigerian economy, neoliberal scholars have praised the massive devaluation as one of the most significant achievements of SAP. Other scholars have emphasized the supposed benefits of the rational devaluation of the naira on different sectors of the Nigerian economy. Such benefits include increase in government revenue, increase in the income of primary producers generally, and particularly those engaged in agricultural export production, increased efficiency in resource allocation, the ability of manufacturers to get imported raw materials relatively more easily, and improvement in capacity utilization of manufacturing industries. Devaluation, it was argued strengthened the weight of the domestic market by bringing consumption more into line with domestically produced goods and services. Furthermore, by increasing the price of imports and agricultural exports, devaluation acted to shift real incomes to rural areas where the majority of the population live.             One of the aims of SAP was to end import dependency and diversify the productive base of the economy through the resuscitation of the manufacturing sector. The program therefore sought to correct the distorted incentive structure that encouraged excessive dependence on imports. However, the short-term strategy was to provide a sharp injection of imports that would enable production to recover while the medium-term strategy aimed at developing local technology, raw materials, and intermediate inputs. These goals were to be achieved through the provision of the enabling conditions like devaluation, trade liberalization, abolition of import licensing, reduction in the number of banned import items, lifting of ex-factory price controls and the revision of tariffs. The available evidence shows that the adjustment policies had adverse effects on the manufacturing sector, which experienced serious decline under SAP. Manufacturing output growth fell drastically from annual average of 18.5 percent in the period of 1976-1985 to 2.6 percent during the 1986-1998 period which was much less than the expected 8 percent growth rate needed to put the sector on the path to recovery. In fact, the period from 1993 to 1998 recorded an average negative growth in manufacturing output.   Problem Statement             This research aims to answer the question: What are the impacts of the Naira devaluation on Nigerian manufacturing industry?   Methodology The planned methodology is secondary research. The researcher will make use of published materials such as books, magazines and newspapers to collect data and information regarding the topic. The researcher will also make use of the internet to obtain information about the company such as its background and other related information. For the research, the researcher will mainly rely on secondary data in obtaining the information. Due to inaccessibility of the subject or the case study, other research methods are not applicable. Secondary data are data that have been collected for some other purpose. Secondary data can provide a useful source from which to answer the research question(s). Punch (1998) mentions several advantages of using existing data. Expenditure on obtaining data can be significantly reduced and data analysis can begin immediately, so saving time. Also, the quality of some data may be superior to anything the researcher could have created alone (Thomas, 2004, p. 191). On the other hand, the chosen research method also has several disadvantages. Data that have been gathered by others for their own purposes can be difficult to interpret when they are taken out of their original context. It is also much more difficult to appreciate the weak points in data that have been obtained by others. The data may be only partially relevant to the current research question (Thomas, 2004, p. 191).   Credit:ivythesis.typepad.com

What are the impacts of the Naira devaluation on Nigerian manufacturing industry?

Introduction Massive devaluation of the naira, which would lead to the attainment of what was described as a market d...