ABSTRACT Nigerian economy has been skewed towards a mono-economy with much reliance on the oil sector. However, with the fall in global oil price, there is now a shift of interest to a more promising sector capable of liberating the economy. This study is centered on private sector access to credit and manufacturing output in Nigeria. The study utilized quarterly time series data from 1981 to 2015. The key objectives of the study were to determine the impact of private sector access to credit on manufacturing output, to determine the direction of causality between private sector access to credit and manufacturing output, and to determine the response of manufacturing output and private sector access to credit to trade openness in Nigeria. The study adopted ARDL model in the estimation of the impact of private sector access to credit on manufacturing output; Toda Yamamoto VAR Granger causality test to check the direction of causality between private sector access to credit and manufacturing output and lastly, the study adopted Structural Vector Auto-regression in determining the response of manufacturing output and private sector access to credit to trade openness in Nigeria. The result of the unit root test showed that with the exception of interest rate, all other variables were found to be stationary after first difference. The study adopted Schwarz Information Criterion for the ARDL model and Hanna- Quinn Criterion (HQC) for the VAR model. The study conducted ARDL bound test and found that the variables used in the estimation of the ARDL model have long run association and thus, it estimates the long run and short run model for the ARDL. The result of the ARDL model showed that although private sector access to credit has significant impact on manufacturing output, the magnitude of the impact was meagre to bring about the desired changes expected of the manufacturing sector. The reason for this is that for accessed credit to yield maximum return, other factors such as prudent management of credits and investment environments needed to be in place. However, when Toda Yamamoto Granger causality test was conducted, the result confirmed that there exists bi-directional causality betweenprivate sector access to credit and manufacturing output in Nigeria. The result of the impulse response conducted using structural VAR confirmed that both private sector access to credit and manufacturing output response to each other’s shock but both do not response to shocks to trade openness. The implication of this is that the size of the market for Nigerian manufactured goods is small to receive a shock from trade openness and the financial system is not fully developed to allow for adequate capital flow across border. In view of the findings above, the study therefore recommends that the government should provide enabling investment environment and adequate financial training to promising entrepreneurs in order to increase the marginal return on credits.
