Effects of production costs on manufacturing supply in Nigeria: an ARDL approach

The imperative of a functioning manufacturing sector has long been recognised in the economics literature. Manufacturing sector has been described as the driver of economic growth and a quick way out of underdevelopment. However, in recent times, there has been increasing cost of production which continue to affect manufacturing production in Nigeria. This study examined the effect of production costs on manufacturing output in Nigeria. The study is anchored on the conventional supply theory, after which, a time series regression model was specified for data covering 1981 to 2022. The ARDL estimation methodology was employed to estimate the equations in tandem with the results obtained from the unit root and cointegration tests. In order to confirm the accuracy of the model estimates, pertinent diagnostic tests were also performed. The result indicated that while government subsidy to manufacturing sector (as a negative cost) and government general capital stock have positive effect on manufacturing output, diesel price on the other hand, has a negative effect on manufacturing output in Nigeria.