Identification of Key Sectors in Nigeria – Evidence of Backward and Forward Linkages from Input-Output Analysis

Abstract

The input-output table provides summary information on the industrial structure of an economy in a specific period. This table contains information on the flow of goods and services between industries and economic sectors. The backward and forward links are descriptive measures of the economic interdependence of sectors in terms of the volume of transactions. Sectors with strong backwards and forward linkages are vital sectors and play an essential role in a country’s development strategy. This paper aims to construct a symmetric input-output table for Nigeria and examine the Nigerian economy’s production structure by using the results applying traditional backward and forward linkage methods developed by Chenery-Watanabe and Rasmussen. Our study identifies the key sectors with backward and forward linkages as Crop and Animal production, Manufacture of Food products, Textiles, Refined petroleum products, Chemicals, Motor vehicles, Furniture, Machinery and equipment, Wholesale/retail trade, Land transport and Telecommunication. In addition, through the constructed symmetric input-output table, sector development can be further done in line with the relationship matrix, as it serves as a conduit for investment strategy, local linkage matrix and policy development. So, for the development strategy it is very important to determine which industries possess high backward and forward linkages, then stimulating final demand or primary inputs namely of these industries could positively influence the economic activity of the country. The results from this work may be used by policy makers in terms of which sectors of the economy stimulate (for example, by means of creating extra final demand, decreasing taxes, or with the help of subsiding) in order to gain better results in the sphere of economic development of Nigeria.