IMPACT OF DOMESTIC PRICE LEVEL ON THE MANUFACTURING SECTOR IN NIGERIA (1981-2019)

Abstract

This study investigated the impact of manufacturing price deflator on the Nigerian manufacturing sector, it also analyzed the impact of consumer price index on the manufacturing sector in Nigeria and assessed whether a positive or negative relationship exists between the GDP deflator and manufacturing output in Nigeria. This study spans a period of 1981 to 2019 while using time series data on relevant data in respect to the research objectives. Some of which are the implicit price deflator, manufacturing price deflator, manufacturing value added, real interest rate, monetary policy rate, consumer price index and so on. These data were collated across various sources, some of which include World Development Indicators (WDI), Central Bank of Nigeria statistical bulletin etc. data collected were analyzed using graphs, tables etc. This research employed the Auto Regressive Distributed Lag (ARDL) model, an estimation technique of that is, the, on which the stationarity of variables used were tested using the Phillip-Perron and Augmented Dickey-Fuller tests. Also, long run and short run relationship across various variables was determined using the bounds test approach to cointegration and the Error Correction form. Optimal lags for each model were determined using the VAR lag order selection criteria, which was determined by democracy. The results obtained from this research show that the relationship between the manufacturing price deflator and manufacturing sector is a negative one in both the short run and long run, conforming to a-priori expectations, although not significant in the short run Also, Consumer Price Index was found to have a negative relationship with the growth of the manufacturing sector in the short run, however, positive in the long run. It was seen that CPI is an insignificant determinant of occurrences in the manufacturing sector. The implicit price deflator was also seen to have a negative and non-significant effect on the manufacturing sector in the short run and long run. This study concludes that these variables are not significant contributors to the performance of the manufacturing sector, but detrimental.