Nigeria’s failure to industrialise is partly due to
bad industrial policy. The industrial sector accounts for six per cent
of economic activities, while in 2011, the manufacturing sector
contributed only 4 per cent to GDP. The economic transformation agenda,
otherwise known as Vision 20:2020, sets out the direction for current
industrial policy in Nigeria.
The industrialisation strategy aims at achieving greater global
competitiveness in the production of processed and manufactured goods by
linking industrial activity with primary sector activity, domestic and
foreign trade, and service activity.
The National Bureau of Statistics (NBS) shows that the
manufacturing firms, micro-enterprises, retail, and residual businesses
are not doing well. The manufacturing survey addressed a wide range of
issues pertinent to the industrial sector. Among the 2,387 firms
surveyed, only 42 per cent fell within the industrial sector.
At independence in 1960, and for much of that decade, agriculture was
the mainstay of the Nigerian economy. The sector provided food and
employment for the populace, raw materials for the nascent industrial
sector, and generated the bulk of government revenue and foreign
exchange earnings. Following the discovery of oil and its exploration
and exportation in commercial quantities, the fortunes of agriculture
gradually diminished.
Nigeria’s first attempt at comprehensive and integrated planning took
the form of the First National Development Plan. The plan included an
aggregate growth rate target of 4 per cent per annum, an increase in the
rate of investment from 11 per cent to 15 per cent of GDP and an
increase in the ‘directly productive component’ of government
investment. To encourage industrial development and lessen dependence on
foreign trade, import substitution industrialisation (ISI) was
introduced conserving foreign exchange by producing local products that
were previously imported.
Import duty relief, accelerated depreciation allowances, and easy
remission of profits aimed to attract foreign investors. The period of
this plan witnessed the commissioning of energy projects such as the
Kanji Dam and the Ughelli Thermal Plants, which provided a vital
infrastructural backbone for the emerging industrial sector. Other
important industrial infrastructure included an oil refinery, a
development bank, and a mint and security.
Military intervention in Nigeria’s governance in 1966 resulted in a
30-month civil war from July 1967 to January 1970. The post-war economy
was dominated by the oil sector, arising from the unprecedented increase
in the price of crude oil in the international market. Oil exports as a
percentage of total exports rose from 58 per cent in 1970 to 83 per
cent in 1973. The oil boom enabled public sector expansion in
infrastructure and manufacturing, most of which was aimed at achieving
IS of foreign consumer goods and consumer durables. These measures were
encompassed in the Second National Development Plan (1970–74). The
government embraced ambitious and costly industrial projects in sectors
such as iron and steel, cement, salt, and paper.
According to stakeholders in industrial sector, who spoke to Daily
Sun, recently, the period of the 1970–74 plan also witnessed a dramatic
shift in policy from private to public sector-led industrialisation.
It was clear that there was a dearth of human capital and skills
required for initiating, implementing, and managing industrial projects
among Nigerian entrepreneurs. Foreign technical skills and services were
heavily relied upon. The oil economy was characterized by ‘Dutch
Disease’, signified by the diversion of productive resources away from
agriculture into commercial activities that thrived on trade in imported
manufacturing goods. The windfall in oil revenue affected the fiscal
policy of government.
They noted that the Third National Development Plan (1975–80) was
launched at the height of the oil boom—emphasis remained on public
sector investment in industry. Indigenization policy was implemented in
1973 and 1978, with the objectives of increasing the level of local
managerial control, building local technological capability, and
extending state ownership. Heavy subsidies were provided for public
companies and corporations. The Nigerian Enterprises Promotion Act of
1977 aimed to further support Nigerian businesses.
It became apparent that the country had entered into industrial
project agreements with very little concern for capabilities for
technology acquisition. While each of these projects required the
acquisition of key sector-specific skills, the agreements made by
Nigerian planners were for the turnkey transplantation of technology.
During the same period, the nation’s oil sector had become vibrant and
prosperous, and the gates of the economy had been opened up to all sorts
of imports. This had a debilitating effect on real industrial growth.
The period of the Third National Development Plan failed to advance the
course of industrial development in Nigeria in a positive way.
The Fourth National Development Plan (1981–5) coincided with a global
economic recession which sparked declining foreign exchange earnings,
balance of payment disequilibrium, unemployment, and accelerating
inflation in the Nigerian economy. This prompted emergency stabilization
measures in 1982. These measures included advance deposits for imports;
increases in import duties; review of import licences; a 40 per cent
across the board cut in public expenditure without any prioritisation;
and an upward review of excise duties, interest rates, and prices of
petroleum products. In the agricultural sector, exports became highly
constrained by the overvalued naira and production declined.
This included the production of labour-intensive export crops (e.g.
cocoa, palm oil, cotton). The decline in output was most apparent in the
manufacturing sector, resulting in gross losses in employment. This
demonstrated the vulnerability of the high cost, import-dependent
industrialization that had been encouraged by the pattern of incentives
in the 1970s. A decline in the aggregate index of manufacturing was
observed from 1982, falling by 26 per cent in 1983. Plant closures were
common in consumer goods sectors, especially in textiles. Average
capacity utilisation in industry declined from 73.3 per cent in 1981 to
38.2 per cent in 1986 .
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