MAXIMUM MANUFACTURING SECTOR OUTPUT REQUIRED FOR POVERTY REDUCTION IN NIGERIA

Abstract The study investigated the maximum manufacturing sector output required for poverty reduction in Nigeria from 1981 to 2022. The objectives of the study were to analyze the impact of manufacturing output on poverty reduction, determine the required maximum manufacturing output to reduce poverty and trace the direction of causality between manufacturing output and poverty reduction in Nigeria. Pre-estimation tests of unit root and co-integration were carried out using Augmented Dickey-Fuller (ADF) tests of stationarity and co-integration in order to find out the possibility of mean reversibility and the existence of long run relationship among the variables used in the model. The study employed a quadratic non-linear model to determine the maximum manufacturing sector output required to minimize poverty in Nigeria. The study further applied Error Correction Model (ECM) to trace the speed of adjustment in addition to short run dynamic effects. Granger Causality test was done to trace the direction of causality between variables in the model. The result of the Augmented Dickey-Fuller unit root test showed that all the variables were stationary at first difference, I (1) except external debt which was integrated of order two I (2). The result of the non-linear quadratic regression indicated a maximum of 7.65% of the manufacturing output in a long run and 5.378% in a short run to minimize poverty in Nigeria. The result of the short run dynamics indicated that MSO had positive impact on household consumption (proxy for Poverty). A unit increase in manufacturing sector output increased household consumption by 217.43. The findings of the Pairwise Granger Causality test showed a unidirectional causality running from poverty to manufacturing sector output and a bi-directional causality between exchange rate and manufacturing sector output in Nigeria. JEL Classification: M2; O4.