FORECASTING OF NIGERIA MANUFACTURING SECTOR GROWTH RATES USING ARIMA MODEL

Abstract

The objective of this study is to identify a good forecasting model that can predict Nigeria’s future manufacturing sector growth rate and to ascertain whether policy makers could maintain a steady and sustainable growth rate in the manufacturing sector. The study employed Autoregressive Integrated Moving Average (ARIMA) on annual data from 1970 to 2014 on manufacturing production index (MPI) as a measure of manufacturing sector growth rate. The ARIMA model selected is the Autoregressive (AR) [ARIMA (1, 0, 0)]. That is, the AR(1) model was selected as the most appropriate for forecasting model for manufacturing sector growth rates in Nigeria. The forecasted values of manufacturing sector growth for 2015, 2016, 2017, 2018, 2019 and 2020 using Dynamic Forecast were 72.1%, 75.6%, 75.9%, 76.4%, 76.8% and 77.2% respectively. The major finding of this study is that Nigeria’s manufacturing sector future growth rate is moving gradually with an average annual projected growth of approximately 90.8 %. The projected rate showed that Nigeria needs to double her efforts in order to fructify its vision of becoming twenty largest economies in the world by 2020 and the 12th largest economy by 2050.