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THE PRODUCTION FUNCTIONS OF THE TEXTILES MANUFACTURING INDUSTRY IN NIGERIA: A CASE STUDY OF THE UNITED NIGERIAN TEXTILES LTD (U.N.T.L.)KADUNA
Abstract:
This thesis has attempted an empirical analysis of the production functions in the textiles subsector of the manufacturing sector. In tackling the problem we have examined the production functions of the united Nigerian Textiles Limited (U.N.T.L.), Kaduna, with respect to scale parameter, factor-intensity, technical efficiency and factor substitution. We have sought, in this study, to expose the production functions of the U.N.T.L. and its manifold characteristics such as the productivity of the inputs and its relation to substitution technological process and the efficiency of production. We advanced three hypothetical propositions with respect to the character of the firm’s production functions. Firstly, we hypothesized that the U.N.T.L, operates a capital-intensive production functions, secondly, that the firm experiences increasing returns to its factors. And thirdly, that it enjoys technical efficiency (Hicks-neutral) in the process of production, in testing the validity of these hypotheses we examined four types of model specifications using an econometric approach. These are broadly categorized into “aggregated” and “disaggregated” models for Models I and II and Models III and IV respectively. All the models were estimated (vii) for the Cobb-Douglas (CD) production function, while only Model I was estimated for the constant Elasticity of substitution (CES) production function for convenience in the technique of estimation. Our findings indicate that the first hypothesis was generally rejected in Model II. This rejection in favour of the raw material input shows that the manufacturing production in Nigeria is highly sensitive to the use of raw materials. This sensitivity became acute in the 1980s when the supply (cotton) crisis adversely affected the capacity utilization in the textiles industry. We observed a divergence between the results obtained in Model III and Model IV with respect to the coefficients of capital taken individually and collectively. This, we explained, could be due to the use of machines of different vintages in production processes which we have, for convenience, singly harmonized in this study. The study has also shown that the U.N.T.L. generally experiences increasing returns to scale. This finding theoretically implies that the firm’s profit has not reached a global maximum. This is probably due to the imperfection in both the product and factor markets. The results obtained with respect to technical efficiency are generally positive. Technical changes (efficiency) contribute about 47 per cent to the growth of the firm’s output per annum. We observed that these technical changes are both capital-deepening and raw material— (viii) deepening implying that the productivity of each of the factors in question is enhanced overtime. We also discovered that the U.N.T.L. exhibits elasticity of substitution less than unity. This finding confirms Maitha’s (1973) conclusion that manufacturing industries in developing economies are characterized by capital-intensive production processes, we are, therefore, based on these results, making the conclusion that the expected benefits of the import-substitution industrialization strategy with respect to the unemployment problem, sectoral linkages, and transfer of technology have not been generally realized in Nigeria. The raw material crisis in the industry has exposed the dependency of the textiles industry on imported inputs as well as the increasing capital-intensity in the production processes vis-a-vis the worsening unemployment problem. This is an indication that the transnational corporations do not perform properly their expected roles in the industrialization process in Nigeria as in other dependent developing economies of the world
THE PRODUCTION FUNCTIONS OF THE TEXTILES MANUFACTURING INDUSTRY IN NIGERIA: A CASE STUDY OF THE UNITED NIGERIAN TEXTILES LTD (U.N.T.L.)KADUNA
