IIMS Journal of Management Science
Search
Samson Edo1
1 Department of Economics, University of Benin, Benin City, Nigeria
Creative Commons Non Commercial CC BY-NC: This article is distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 License (http://www.creativecommons.org/licenses/by-nc/4.0/) which permits non-Commercial use, reproduction and distribution of the work without further permission provided the original work is attributed.`
This study investigates how digital payment affects industrial sector activity in selected Sub-Saharan African countries. The selected countries are Nigeria and South Africa, which are the largest economies in the sub-region with rapid adoption of digital payment. The investigation is motivated by the strategic importance of the payment system in facilitating industrial production and turnover. The methodologies of unrestricted error correction model (UECM) and dynamic ordinary least squares model (DOLS) are employed in the study. The UECM results show that the adoption of digital payment impacted significantly on industrial sector activity in both countries. The impact is, however, lower than the impact of physical capital, human capital, and personal income. The positive role of digital payment is, therefore, strongly complemented by the three variables. On the other hand, trade openness has an insignificant effect, which indicates a relatively weak role in facilitating industrial activity. The DOLS results are not significantly different from the UECM results, which indicates that the estimated impacts on industrial activity are consistent. The findings suggest the need to deepen the digital payment system, in order to sustain its role in industrial production and expansion. This could be done by strengthening the internet technology that is used in digital payment. Furthermore, the role of physical and human capital needs to be sustained by encouraging capital investment, while that of personal income may be sustained by reducing income tax. The low effect of trade openness could be improved by controlling the import of industrial goods.
Digital payment, industrial activity, policy analysis, developing economies
Adejumo, A. V. (2020). Foreign direct investment-led industrialization: Any direction for spillovers in Nigeria? Journal of Co-operative and Business Studies, 5(1), 14–43.
Aga, A. K. (2014). The impact of foreign direct investment on economic growth: A case study of Turkey 1980–2012. International Journal of Economics and Finance, 6(7), 71–84.
Akpan, E. S., & Eweke G. O. (2017). Foreign direct investment and industrial sector performance: Assessing the long-run implication on economic growth in Nigeria. Journal of Mathematical Finance, 7(2), 391–411.
Ali, A. (2020). Industrial development in Saudi Arabia: Disparity in growth and development. Problems and Perspectives in Management, 18(2), 23–35.
Aliyu, A. J., & Ismail N. M. (2017). Food imports and exchange rate: The application of dynamic cointegration framework. Malaysian Journal of Mathematical Sciences, 11(2), 101–114.
Banerjee, A. V. (2000). Notes toward a theory of industrialization in developing world. In N. Banerjee & S. Marjit (Eds), Development, displacement and disparity (pp. 139–159). Orient Longman.
Chen, J., & Xie, I. (2019). Industrial policy, structural transformation and economic growth: Evidence from China. Frontiers of Business Research in China, 13(4), 18–29.
China.org.cn. (2023). Covid-19 impact on China’s industries. https://www.china.org.cn
Engidaw, A. E. (2021). The effect of external factors on industry performance: The case of lalibela city micro and small enterprises, Ethiopia. Journal of Innovation and Entrepreneurship, 10(10), 1–14.
Grossman, G., & Helpman, E. (1990). Comparative advantage and long-run growth. American Economic Review, 80(4), 796–815.
Iamsiroroj, S., & Ulubasoglu, M. A. (2015). Foreign direct investment and economic growth: A real relationship or wishful thinking? Economic Modelling, 51(4), 2000–2213.
Inada, M. (2013). The effects of foreign direct investment on industrial growth: Evidence from a regulation change in China (Working Papers 856). Kyoto University, Institute of Economic Research.
International Labor Organization. (2023). International standard industrial classification of all economic activities (ISIC). ILO.
International Trade Administration. (2023). South Africa country commercial guide. ITA.
Jiang, H., & Liu, C. (2011). Forecasting construction demand: A vector error correction model with dummy variables. Construction Management and Economics, 29(3), 967–979.
Kansas City Fed. (2023). China’s post-covid recovery: Implications and risk. Economic Bulletin. Federal Reserve Bank.
Kasri, R. A., Indrastomo, B. S., Hendranastiti, N. D., & Prasetyo, M. B. (2022). Digital payment and banking stability in emerging economy with dual banking system. Heliyon, 8(11), 1–12.
Kiely, R. (1994). Development theory and industrialization: Beyond the impasse. Journal of Contemporary Asia, 24(2), 133–160.
Kummritz, V. (2016). Do global value chains cause industrial development? (CTEI Working Papers series 01–16). Centre for Trade and Economic Integration.
Kuo, C. (2016). Does the vector error correction model perform better than others in forecasting stock price? An application of residual income value theory. Economic Modelling, 52(2), 772–789.
Legros, P., & Newman, A. (1995). Wealth effect, distribution and the theory of organization. Journal of Economic Theory, 70(2), 312–341.
Li, X., & Liu, X. (2005). Foreign direct investment and economic growth: An increasingly endogenous relationship. World Development, 33(3), 393–407.
Martorano, B., Sanfilippo, M., & Haraguchi, N. (2017). What factors drive successful industrialization? Evidence and implications for developing countries. Inclusive and Sustainable Industrial Development (Working Paper Series no. WP 7 | 2017). UNIDO.
Mishra, D., Mody, A., & Murshid, A. P. (2001). Private capital flows and growth. Finance and Development, 38(2), 2–5.
Morduch, J. (1990). In Risk production and savings: Theory and evidence from Indian household. Harvard University Press.
Nigeria Bureau of Statistics. (2022). Annual report and statistics.
Otavio, R. M., Doornik, B., & Oliveira, G. (2011). Modelling and forecasting a firm’s financial statement with VAR-VECM Model. Brazilian Business Review, 8(3), 20–39.
Pandya, V., & Sisombat, S. (2017). Impacts of foreign direct investment on economic growth: Empirical evidence from Australian economy. International Journal of Economics and Finance, 9(5), 121–132.
Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335–346.
Rahman, A. S. (2010). An exceptionally simple theory of industrialization (Working Papers 27). US Naval Academy.
Romer, P. (1990). Endogenous technological change. Journal of Political Economy, 98(5), 21–37.
Safeguard Global. (2023). Top 10 manufacturing countries 2023. https://safeguardglobal. com
Samantha, N., & Liu, H. (2018). The effect of foreign direct investment on industrial sector growth: Evidence from Sri Lanka. Journal of Asian Development, 4(2), 88–106.
Samouel, B., & Aram, B. (2016). The determinants of industrialization: Empirical evidence for Africa. European Scientific Journal, 12(10), 219–239.
Saroy, R., Jain P., Awasthy, S., & Dhal, S. C. (2023). Impact of digital payment adoption on Indian banking sector efficiency. Journal of Banking and Financial Technology, 7(1), 1–13.
Singh, A. K., & Kumar, S. (2021). Assessing the performance of factors affecting industrial development in India states: An empirical analysis. Journal of Social Economics Research. 8(2), 135–154.
Solow, R. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70(1), 65–94.
Stock, J. H., & Watson, M. W. (1993). A simple estimator of co-integrating vectors in higher order integrated systems., Econometrica, 61(4), 783–820.
Sugihara, K. (2019). Multiple paths to industrialization: A global context of the rise of emerging states. In K. Otsuka & K. Sugihara (Eds), Paths to the emerging state in Asia and Africa. Springer.
Swan, T. (1956). Economic growth and capital accumulation. Economic Record, 32(3), 334–361.
Worku, G. (2010). Electronic banking in Ethiopia––Practices, opportunities and challenges. Journal of Internet Banking & Commerce, 12(2), 42–58.
Tongxina, A., Yuejinb, F., & Huanc, Z. (2011). An analysis of the model of China’s industrial restructuring and upgrading-borrowing ideas from the experience of Japan. Energy Procedia, 5(1), 1461–1466.
Unified Payments Interface. (2023). India UPI: A global front-runner in digital payment systems. https://www.npci.org.in
Vertakova, Y., Plotnikovb, V., & Culicov, M. (2015). The key factors, determining the industrial development of Russia under the conditions of membership in the WTO. Procedia Economics and Finance, 24(3) ,743–749.
West, D. M., & Lansang, C. (2018). Global manufacturing scoreboard: How U.S compares with 18 other nations. Brooking Research Paper. https://www.brookings.edu
Whitfield, L., Staritz, C., & Morris, M. (2020). Global value chains, industrial policy and economic upgrading in Ethiopia’s apparel sector. Development and Change, 51(4), 1018–1043.
Yang, F., Sun, Y., Zhang, Y., & Wang, T. (2021). Factors affecting the manufacturing industry transformation and upgrading: A case study of Guangdong–Hong Kong–Macao Greater Bay area. International Journal of Environmental Research and Public Health, 18(2), 1–14.
Yu, J., Jong, R., & Lee, L. (2008). Quasi-maximum likelihood estimators for spatial dynamic panel data with fixed effects when both N and T are large. Journal of Econometrics, 146(1), 118–134.
