AN EVALUATION OF PRODUCTION PROCESSES AND CAPACITY UTILIZATION

AN EVALUATION OF PRODUCTION PROCESSES AND CAPACITY UTILIZATION

Abstract

Economists have often emphasized the importance of efficient capacity utilization in attempts at increasing manufacturing productivity growth rate. In line with this, this study is carried out to evaluate the production processes and capacity utilization on the manufacturing productivity index which is used as a proxy for manufacturing productivity growth. The study makes use of co- integration analysis to analyze the data. The results of the co- integration analysis reveal that capacity utilization would in the long run negatively impact the manufacturing productivity growth because of low electricity supply and government’s spending on inefficient sectors. The empirical results also show that exchange rate will decrease the value of the manufacturing productivity growth rate in the long run. The study concludes by stressing on the need to improve the average capacity utilization rates in most manufacturing sub-sectors and it also suggests several strategies that can be employed to reverse the ugly trend of poor capacity utilization and embarrassing growth rate of manufacturing productivity one of which is to accelerate electricity supply to industrial firms.

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