Investment Climate Impact on Total Factor Productivity of Manufacturing Industries in Nigeria
Date
2020-08-06
Authors
Ajagbe, Friday Ademola
Ajetomobi, Joshua Olusegun
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research consortium
Abstract
This study examines the influence of the investment climate on the productivity
of manufacturing industries in Nigeria. The study is conducted in two phases: in
the first phase, an econometric production function for Nigerian manufacturing
industries is estimated to produce a measure of total factor productivity (TFP)
for each firm; in the second stage, variation in TFP is statistically related to the
indicators of investment climate as well as firm characteristics. The analyses use
2009 World Bank Enterprise survey data on Nigeria. The results show systematic
variations in investment climate indicators across various industries in Nigeria.
The indicators of poor investment climate – power outages, unofficial payments, losses in transit due to breakage or spoilage and tax burdens – have significant
negative effects on the TFP of manufacturing industries in Nigeria. Increasing power
outages by one hour per month could reduce TFP by 0.06%, while a 1% rise in unofficial
payments could lead to a decline in TFP of about 1.8%. Investment climate indicators,
such as management time dealing with regulations, and percentage of firms owned by
private domestic individuals, companies and organizations have a positive influence
on the TFP of manufacturing industries.