CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Manufacturing
sector plays a catalytic role in a modern economy and has many dynamic benefits
crucial for economic transformation. In
a typical advanced Country, the manufacturing sector is a leading sector in
many respects. It is an avenue for
increasing productivity related to import replacement and export expansion,
creating foreign exchange earning capacity; and raising employment and per
capital income which causes unique consumption patterns. Furthermore, it creates investment capital at
a faster rate than any other sector of the economy while promoting wider and
more effective linkages among different sectors. In terms of contribution to the Gross
Domestic product, the manufacturing sector is dominant but it has been
overtaken by the services sector in a number of Organization for Economic
Co-operation and Development (OECD) Countries.
Before independence, agricultural
products dominated
economy and accounted for the major share of its foreign exchange
earnings. Initially, inadequate capital
investment permitted only modest expansion of manufacturing activities. Early efforts in the manufacturing sector
were oriented towards the adoption of an import substitution strategy in which
light industry and assembly related manufacturing ventures were embarked upon
by the formal trading companies. Up to
about 1970, the prime mover in manufacturing activities was the private sector
which established some agro-based light manufacturing units such as vegetable
oil extraction plants, turneries tobacco processing, textiles, beverages and
petroleum products. The strategy of
light and assemblage manufacturing shifted some what to heavy Industries from
the period of the third National Development plan (1975-1980) when government intervened
to establish care industrial plants to provide basic imports for the downstream
industries.
The import dependent industrialization
strategy virtually came to a halt in the Late 1970s and early 1980s when the liberal
impart policy expanded the imports of finished goods to the detriment of
domestic production.
In this regard, industrialization
constitutes a veritable channel of attaining the lofty and desirable conception
and goals of improved quality of life for the populace. Thus, in a supportive mood, Lavis (1967)
assumes that in any economy, one or more sectors serve as a prime mover moving
the rest of the economy forward. This role of engine of growth or leading
sector has usually been played by industrial sector under the industrialization
process.
Against this background,
industrialization involves extensive technology based development of the
productive (manufacturing) system of an economy. Thus, the development of the industrial
sector represents the deliberate and sustained application and combination of suitable
technology, management techniques and other resources to move the economy from
the traditional low level of production to a more automated and efficient
system of mass production of goods and services. Arising from the foregoing affirmed
centrality of industrialization as the pivot of economic growth and
development, industrialization process seems to be the main hope of most
developing countries such as
with large population and large labour force.
In spite of these aspiration which ought to have favoured effective
industrialization process in an economically conducive manufacturing
environment, most of these results as reflected in the performance of the
manufacturing sector remain socio-economically undesirable. Against this back drop, current economic planning
and policy instruments are diverted at the development of the key productive
sectors, particularly manufacturing and commerce for the promotion of an
increasing pace of industrialization in
The major problem facing the Nigerian
manufacturing sector is having adequate finance resource for investment. Because of the low level of income of this,
saving is very low.
Since the attainment of independence
in 1960, commercial banks in
have been playing an important role in development process of a nation. The banks in collaboration with other
financial institutions have been mobilizing the scarce domestic resources for
rapid social, economic and industrial transformation of the country.
Other services provided by the
commercial banks include facilities for safe-keeping of important documents,
provision of advice to customers on insurance and investment matters and
provision of cash for bulk payment of non-customers salaries and wages, Umole
(1985).
In recognitions of this potential
roles of the sector, successive governments in
articulate policy measures and programmes to achieve industrial growth
incentive and adequate finance. The central
goal of government policy was to foster growth in the manufacturing
sector. Over the years, and largely in
response to some of the previous policy strategies, the main features of the
Nigerian manufacturing sector had emerged.
The
role of bank credits in the growth of manufacturing sector cannot be
over-emphasized. For instance, the
Federal Government’s Appropriation Bill for the year 2005 has as one of its
broad policy objectives to achieve a high economic growth rate (i.e GDP of at
least 5%) through a better mobilization and prudent use of economic
resources. This objective is not
achievable without significant levels of resources from the financial sectors
being mobilized and deployed to
Social Plugin