EFFECT OF MOTOR VEHICLE ASSEMBLY AND FABRICATED METAL PRODUCT ON THE MANUFACTURING CAPACITY UTILIZATION OF NIGERIA ECONOMY (1985-2010)

The study examined the effect of motor vehicle assembly and fabricated metal product on the manufacturing capacity utilization of Nigeria economy from 1985 to 2010. The study employed data from statistical bulletin of Central Bank of Nigeria (CBN, 2012). The study data comprises of manufacturing capacity utilization (MCUt) as the dependent variable and, motor vehicle assembly (MVAt) and fabricated metal product (FMPt) as the independent variables respectively. The data is analysed using Ordinary Least Square (OLS) multiple regression approach with the aid of statistical software called E-view, version 7. Augmented Dickey-Fuller (ADF) unit root test and Johansen’s cointegration method was also employed to check if the variables are stationary or not and if the presence of a long run relationship exist between the variables. The findings revealed that the coefficient of multiple regression accounted for approximately 52.42% in explaining the explanatory variables. This model shows a moderately good fit. The findings also revealed that only FMPt is statistically significant in explaining the variation in MCUt at 5% level of significance. The overall test of significance, which is the F-test, indicates that the whole regression is statistically significant due to the overriding effect of FMPt. The ADF unit test revealed that MCUt, MVAt, and FMPt doesn’t have unit root problem at first difference and the variables are stationary at 1%, 5%, and 10% significant level respectively. The Johansen system cointegration test revealed that the trace and max-eigen statistic test shows that the variables are cointegrated and have a long run relationship. The implication of the result is that as more locally fabricated metal product is supply to the economy, it will have a consequential effect on the assembly of motor vehicle parts and the manufacturing capacity utilization rate of the nation due to the relatively exorbitant prices of the supplied product compared with the imported counterparts occasioned by high cost conditions.

Keywords: Motor Vehicle Assembly; Fabricated Metal Product; Manufacturing Capacity Utilization; Nigeria Economy