Low level of capacity utilization is one of the major problems that have militated against sustainable
industrial development and general economic growth in Nigeria. This study focussed on the assessment
of capacity utilization of agro-allied industry in the country. Time series data were collected from the
statistical bulletin of the Central Bank of Nigeria on annual capacity utilization of agro-allied industry
and some macro-economic and institutional factors thought to be associated with level of capacity
utilization. The data covered a period of 30 years spanning 1976 – 2005. Analysis of data were done
using both descriptive statistics (average, standard deviation and coefficient of variation), and
inferential statistics (regression analysis). Also graph was used to assess the pictorial trend in average
capacity utilization of agro-allied industry in Nigeria within the period under review. Result showed a
general decreasing trend in capacity utilization of the industry within this period. The trend line fitted
with regression analysis yielded a coefficient of –1.34 which tested highly significant at 1% indicating
that capacity utilization has been witnessing downward trend over the years. Furthermore, the result of
regression analysis showed that interest rate, exchange rate and inflation rate yielded negative
coefficients while capacity utilization of power sub-sector had a positive coefficient. Based on the
overall result, it was recommended among other things that the federal government should formulate
and implement policies that will check the volatility of these factors as a way of ensuring sustained
growth in capacity utilization of agro-allied industries in Nigeria. Such policies will include among
others, the privatization of power generation and distribution in Nigeria for more efficiency and the use
of monetary policcies such as cashless transactions to cub excess liquidity which encourages inflation in
the economy.