Investment Climate Impact on Total Factor Productivity of Manufacturing Industries in Nigeria
Date
2020-12-10
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.