The impact of cost of production on sustainability and growth in dispersed and concentrated manufacturing firms: Evidence from Nigeria

Nigeria’s economic dynamics has been very challenging especially for some sectors. The manufacturing sector of the economy has been very hard hit, hence most firms in Nigeria experience low capacity utilization, high cost of inputs, rising prices of component parts and raw materials, inadequate public power supply which many of them use for their power generating sets, hike in price of diesel and transportation cost lack of capital etc. In a bid to survive, most manufacturing firms in Nigeria have adopted varying corporate strategies hinging on dispersion of production of component parts of material unlike the traditionally concentrated manufacturing system and even outsourcing of their activities. It is against this background that this paper seeks to empirically examine the impact of cost of production on sustainability and growth for dispersed and concentrated manufacturing firms in Nigeria from 1998 to 2007 adopting the two-variable linear regression model. We found that whether the firm is dispersed or concentrated, the cost reduction effect of having to either source raw material in separate places or concentrated places does not matter as with respect to the sustainability and growth of firms. The study accordingly recommends that for improved productivity in the manufacturing sector, government has a major role to play. Government must ensure that there is regular supply of power while providing some form of incentives such as tax holidays, moratorium periods for loan and advances, provision of subsidy to firms in the manufacturing sector of the Nigerian economy, etc. These will reduce the cost of production and increase real capital available to firms for productive purposes.