EXTERNAL FINANCING AND INDUSTRIAL SECTOR OUTPUT IN A DEREGULATED ECONOMY: ECONOMETRIC EVIDENCE FROM NIGERIA

Abstract

This study examined the nexus between external financing and the Nigeria industrial sector
output from 1986-2018. It employed the Auto Regressive Distributed Lag (ARDL) bounds
testing approach to co-integration analysis to establish the long run relationship between the
relevant time series data. The result revealed that the industrial sector output and selected
external financing variables included in the models have a long run relationship. The result also
shows that in the short-run, the external financing has significant impact on Nigeria industrial
output while on the long run foreign direct investment, remittance and official development
assistance have direct and significant effect on Nigeria industrial output. External debt has
direct but insignificant effect on Nigeria industrial output while foreign portfolio investment
has inverse and insignificant effect on Nigeria industrial output. Therefore, the study
recommended that short run deregulation policies should be tailored towards the attraction of
foreign finances to augment domestic capital needs for the expansion of and improve
productivity of the Nigerian industrial sector, there is need to spend large amount of remittance
on productive investment in the industrial sector instead of consumption, the Nigerian
government should concentrate more on foreign direct investment compared to portfolio
investment to create enabling environment for the private sector to thrive in the Nigerian
industrial sector and finally, there is need for industrialist to analyzed the profitability of all
external loan financing projects to ensure that the returns would be in excess of the interest and
principal.