Abstract:
Despite the gains from capital and labour productivity, there is still a problem of low total factor productivity (TFP) in Nigeria. This study, therefore, examined the impact of imports on total factor productivity as an alternative to the conventional sources of productivity gains for the country. The study covered the period 1980-2011. Building on the theoretical Cobb-Douglas production function, we developed and estimated an empirical model which incorporated Foreign Direct Investment (FDI) and from this, we extracted the total factor productivity which was then subjected to further analysis. We studied the relationship between total factor productivity and imports, as well as other variables like exports, and manufacturing capacity utilization (MCU). Cointegration was determined using the bounds testing approach which led us to an error correction model/analysis. The findings of the study are that imports have a positive impact on total factor productivity in the short-run with potential for higher impact in the long-run. We also found that exports have a short-run positive impact on total factor productivity while foreign direct investment was found to be negatively cointegrated with total factor productivity. We therefore recommend import-friendly trade policies as well the provision of an enabling environment, particularly, critical infrastructural base to support the efficient utilization of imports as a driver of total factor productivity. We also encourage the implementation of export promotion strategies as well as the provision of a suitable legal framework which will promote effective FDI inflow.
