Analysis of economic capacity utilization in the Nigerian sugar industry (1970 - 2010)

The study analyzed economic capacity utilization rates in the sugar industry for the period 1970 to 2010 in Nigeria. Secondary data obtained from sugar firms; Central Bank of Nigeria; National Bureau of Statistics and the Federal Ministry of Finance were used in the study. Stochastic Cobb-Douglas cost functions for the sugar industry were estimated from which indices of economic capacity utilization rates were obtained. Trend in the economic capacity utilization rate showed undulated pattern with an average index of 60.30% and excess economic capacity of 39.70%. Multiple-regression of various forms based on the ordinary least squares technique was used to determine factors that influence the performance indicators in the industry. Empirical results revealed that economic capacity utilization rates in the sugar industry was influenced by the inflation rate, per capita real GDP, energy consumption of the industry, federal government expenditure on the sugar industry and the period of liberalization. The result of the regression and descriptive analyses revealed that the sugar industry in Nigeria was constrained by insufficient production inputs. Policy measures aimed at reduction or maintaining a steady or less fluctuated inflation rate in the country, expansionary aggregate demand, increase funding to agencies that have direct dealings with the sugar production and adequate provision of electricity to the industry as well as the adoption of the liberalization industrial policy on sugar industry were recommended.