Financial Sector Reforms and Output Growth in Manufacturing: Empirical Evidence from Nigeria
Campbell Omolara (PhD); Asaleye Abiola John

Abstract
Adopting descriptive statistics and Vector Autoregressive Model (VAR) we examined the effect of financial reforms on output growth of the manufacturing sector in Nigeria. The paper is justified given the need to provide empirical evidence on the effectiveness of financial reforms in promoting output growth in the manufacturing sector during the pre and post - reform era in Nigeria. The findings from the statistical and econometric analysis indicate that the financial sector performed better in the post reform era compared to the pre-reform era. Surprisingly, the growth of manufacturing output indicator was low in the post reform era. The correlation coefficient of the financial indicators was likewise low which suggests that the development of the manufacturing sector under financial reforms in Nigeria has not been impressive. Vector Error Correction Model (VECM) results indicate a short run divergence between variables. The paper concludes that Nigeria experienced increase in Gross Domestic Product (GDP) with minimal contribution from the manufacturing sector. This is to say that the increase in GDP does not translate to the development of the manufacturing sector which could have helped to reduce the unemployment problem in the country. Based on the findings the paper suggests the need for proper review of the financial sector reforms introduced to enhance output growth of the manufacturing sector as the sector is critical to the growth of the economy at large due to its multiplier effect on other sectors of the economy. Specific financial concerns through appropriate financial sector reforms should be directed to the reinforcement of the performance of the manufacturing sector. Most of the policies are dynamic in nature, thus the need to ensure consistency through strong and well established institutions (both financial and political) cannot be overemphasized.

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