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No doubt, structural transformation lies at the heart of economic progress of any nation. Most significantly, the industrial sector, especially manufacturing, is a key engine of growth and development. Unfortunately, manufacturing development in Nigeria, over the years have not improved despite the banking sector reforms. This paper empirically investigated the shock effects of the banking sector reform on gross manufacturing output in Nigeria between the period 1970-2018. The variables used in the paper include gross manufacturing output, bank credit to the manufacturing sector, interest rate spread, nominal exchange rate, market capitalization, manufacturing capacity utilization and a dummy variable. The data were sourced from the Central Bank of Nigeria Statistical Bulletin, International Monetary Fund Financial Reports and the World Bank Development Indicator (2019). The Vector Autoregressive Model (VAR) estimation techniques were employed to achieve the objective of the paper. The results showed that gross manufacturing output responded negatively to bank credit during all the reforms phases. It further revealed that it responded negatively to a unit shock in exchange rate during the pre-SAP and bank recapitalization periods, but positively during the deregulation, regulation and liberalization periods. It showed also that gross manufacturing output responded negatively to shock in interest rate spread during all reform phases in Nigeria. The policy implication of these findings attested to the fact that the linkage between the banking sector and real sector is weak in Nigeria. Hence for Sustainable Development Goal 9, in particular 9.2, to be achieved, the linkage between both critical sectors must be integrated and strengthened via improving on the banking sector fundamentals and introduction of shock measures from the reform.

EFFECT ANALYSIS OF BANKING SECTOR REFORM AND GROSS MANUFACTURING OUTPUT IN NIGERIA: IMPLICATIONS FOR ACHIEVING SUSTAINABLE DEVELOPMENT GOAL 9