Balance of Payments and Manufacturing Sector Performance in Nigeria

Nyeche; Ezebunwo; Ewubare Dennis; Rosemary. Chioma; IGBANI; Ishmael; Claude

doi:10.56201/jbae.vol.12.no4.2026.pg107.120

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Balance of Payments and Manufacturing Sector Performance in Nigeria

Nyeche, Ezebunwo, Ewubare Dennis, Rosemary. Chioma and, IGBANI, Ishmael, Claude

Abstract

The study analyses balance of payments and the manufacturing sector performance in Nigeria from 1985 to 2022. The study aimed to evaluate the effect of balance of payments proxied by current count balance, net financial account balance and total reserves on the manufacturing sector performance measured by manufacturing output. The time series data for the variables were obtained from the World Development Indicators. The data analysis techniques comprised of descriptive statistics, unit root test, bounds cointegration, Wald test, and autoregressive distributed lag estimation method. The result of the ARDL estimation showed that, growth in manufacturing output was significantly influenced by Nigeria’s current account balance in the short run. In the first lag period of the short run, there was evidence of significant negative effect of net financial account balance on manufacturing output, this outcome was supported by a probability value of 0.0092, less than 0.05. The study also showed that, Nigeria’s total reserves significantly influenced growth in manufacturing output at 5 percent level in the first lag period. The result of the post estimation analysis via the Breusch- Godfrey serial correlation LM test, heteroskedasticity Test, and Ramsey RESET Test respectively showed that the model of the study was free from serial correlation, heteroskedasticity, and misspecification error. Further post estimation test conducted using CUSUM of Squares disclosed that the model had structural stability. In addition, the result of the Wald test analysis showed that a significant relationship exists between balance of payments and manufacturing sector performance in Nigeria on the basis that the F-statistic value of 0.0011 is less than 5 percent level of significance. Following these empirical evidences, the study recommended among others that, government should put in place policies that will enhance increased accumulation of total reserves and prudent management of Nigeria’s total reserves to ensure more growth in the manufacturing sector.

Keywords

Balance of paymentsCurrent account balanceFinancial account balanceTotal reservesWald test. JEL Classification codes: (F32O 14)

References

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Balance of Payments and Manufacturing Sector Performance in Nigeria

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