Analysis of the Physical Capacity Utilization in the Sugar Industry in Nigeria

Abstract

The study analyzed the physical capacity utilization rates in the sugar industry in the period 1970 to 2010 in Nigeria. Secondary data were obtained from the sugar firms, Central Bank of Nigeria, National Bureau of Statistics and Federal Ministry of Finance. Stochastic Cobb-Douglas production functions for the sugar industry were estimated from which indices of physical capacity utilization rates were obtained. Factors which affect the physical capacity utilization of the industry were investigated. Empirical results revealed that the physical capacity utilization rates in the sugar industry was influenced by the industry’s labour productivity, per capita real GDP, sugar import, federal government expenditure on the sugar industry and the quantity of domestic sugarcane used in sugar production. The result of the regression further revealed that the sugar industry in Nigeria was demand unconstrained but resource constrained. It is recommended that appropriate policy measure that should aimed at expansionary aggregate demand as a means of promoting capacity utilization in the sugar industry should be introduced. Such policy measure should be designed to avoid inflationary tendencies. A restrictive policy measure on sugar imports should be adopted in the country. Researches should be intensified to develop good hybrids of industrial sugarcane and indigenous technology in sugar production. In addition, there are needs to widen the scope of the National Sugar Development Council and implementation of enhanced welfare packages for workers in the industry.