26 pages
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Industrial Development in Nigeria

January 9, 2013
B.W. Adeoye
Research Fellow
Economic Development Department
Nigerian Institute of Social and Economic Research ( NISER )
A paper submitted for presentation at the 45th Annual Conference of the Nigerian
Economic Society(NES), Holding in Abuja between 24th and 26th August, 2004.
February, 2005.
The fundamental issue addressed in this paper is the extent to which Nigeria has
restructured her industrial and trade systems for effective industrialisation within the
on-going trade globalisation process.Basically, the study employs historical analysis of
trade and industrial systems in Nigeria. Findings from the study reveal that the Nigerian
economy has not changed its export and import structure over the 1970 - 2002 period.
The only changes that have taken place to its export was just a mere shift in exported
product indicating a sign of export substitution from primary agro industry-based exports
to primary mining industry-based exports(i.e crude oil).The results also suggest that the
structure of imports has not changed significantly over the period 1970 - 2002 despite
series of strategies and policies put in place by the government. While the reforms
favoured domestic resource-based industries, it produced an inverse impact on import
intensive, low value-added units. In fact, over 70 per cent of the total imports were still
manufactured goods, most of which consisted of industrial raw materials, spare parts,
machinery and equipments and capital goods. Generally, enough incentives for efficient
resource allocation in order to promote manufactured exports within the on-going process
of globalisation coupled with economic liberalisation and deregulation paradigms have not
been created. It was proposed that a mixture of the invisible hand of the market with the
visible hand of the state should guide the process of industrialisation, economic
diversification, trade and development similar to the case of the East Asian Tigers.
I. Introduction/Research Issues
Industrialisation has been seen as a veritable channel of attaining the lofty and desirable
conception and goals of improved quality of life for the populace. This is because,
industrial development involves extensive technology-based development of the
productive (manufacturing) system of the economy. In other words, it could be seen as a
deliberate and sustained application and combination of suitable technology, management
techniques and other resources to move the economy from the traditional low level of
production to a more automated and efficient system of mass production of goods and
services (Ayodele and Falokun, 2003).
Against this background, however, industrialisation seems to be central to economic
growth and development. This therefore explains the reason why successive governments
in developing countries such as Nigeria emphasise industrialisation as a way of
transforming the economy.
In the last three decades, since independence, Nigeria has pursued industrialisation with
the hope to transform the economy from a monolithic, inefficient and import-dependent
economy to a more dynamic and export-oriented economy, especially exports of industrial
goods. These aspirations as contained in the successive development plans(especially,
first and second development plans) of the Federal Government were further reinforced by
the windfall gains from crude oil boom of the 1972/73 and 1979/80 periods. However,
despite series of deregulation policies introduced since 1986 by successive governments to
facilitate industrialisation process in an economically conducive manufacturing
environment, the performance of the industrial sector remains undesirable. In the last two
decades, Nigeria recorded an unremarkable economic performance especially in
manufacturing industry in the areas of production and international trade. Besides, its
poor macroeconomic management might have largely contributed to such unfavourable
performance of the industrial (manufacturing) sector. Regardless of the numerous
constraints facing the industrial sector, the country still has some hope in the sector in
propelling the necessary economic diversification from risk and uncertainty of the mining
sector. On the trade front, historically, industrial development in Nigeria ties squarely with
the developed countries from both the east and the west. Currently, the country is a
member of the ECOWAS and has been affiliated to the World Trade Organisation (WTO).
In the current trend of globalisation of trade and investment, however, Nigeria is facing a
crucial turning point of how to improve significantly, the performance of the industry, in
terms of production and trade. Thus, the challenge to the country is how to design
strategies and policies relevant to regional and global competition given the small market
of the economy especially in the area of industrial products. Future economic development
seems to depend upon whether or not Nigeria can establish a preferable industrial structure
and participate in horizontal international specialisation in the global market. Consequent
upon the foregoing, the major research issues to be addressed in this paper include:
a) Has Nigeria in its process of industrialisation created enough incentives for efficient
resource allocation in order to promote manufactured exports within the on-going process
of globalisation coupled with economic liberalisation and deregulation paradigms?
b) To what extent has Nigeria restructured her industrial and trade systems for effective
industrialisation within the on-going globalisation process?
This paper therefore attempts to examine changes in the industrial and trade structure of
Nigerian economy in the context of the current wave of globalisation between 1970 and
2002, in particular the manufacturing sub sector. The comparison of the industrial and
trade structure between 1970 and 2002 will reveal the results of governments efforts to
make industries efficient and competitive through a series of deregulation packages since
1986. The study employs simple descriptive statistical technique such as ratio, changes in
shares , percentages and growth rates to describe the Nigerian industrial and trade structure
precisely and comprehensively. Basically, the study employs historical analysis of trade
and industrial systems in Nigeria.
The paper is structured as follows: After the introductory section, Section 2 deals with
theoretical and empirical issues relating to industrial development and trade globalisation .
Industrial and trade performance are examined in Section 3. Section 4 provides the
summary, recommendations and conclusions.
II. Theoretical and Empirical Issues
Studies on industrial development and trade in Nigeria are very few, probably because of
patchy data available on this important issue. Although, increased attention has been
devoted to the need for industrial development in recent years, adequate statistics for valid
arguments and firm conclusions are still scanty. Theoretical and empirical studies on
industrialisation and globalisation in Nigeria have focused mainly on sources of industrial
growth and the linkage effects of different sectors of the economy. Among these studies
include- Ohiorhenuan (1978), Olofin and Iyaniwura (1983), Ajakaiye (1990), Falokun
(1996), Egwaikhide(1997) , Adeboye(2002) and Ayodele and Falokun(2003).
The work of Ohiorhenuan is an attempt at clarifying the concept of industrial linkages
vis-a-vis the developing economies as against the developed economies. Also, in line with
this study, is the study conducted by Olofin and Iyaniwura in 1983. The study was an
attempt at ascertaining the degree and nature of the inter-sectoral relationship existing in
the Nigerian economy before the emergence of the oil as a dominant sector using the
measures of direct and indirect dependence. Likewise, Ajakaiye (1990), attempts to
empirically determine the inter-industry linkages in the Nigerian economy for the periods
1973 and 1977. In a similar study by Falokun (1996), ten key sectors of the economy that
the government can stimulate through its export diversification and expansion programme
in order to bring about rapid industrial transformation of the economy were identified. The
study findings however show that the economy is still largely dependent on the external
sector for the supply of intermediate input. The study concludes that the productive base of
the Nigerian economy is still largely dependent on the crude petroleum export for the
generation of revenue.
In a related study for Indonesia, Hayashi (1996), examines changes in the structure of
industry and trade, employing an Input-Output analysis. Based on the results of the
analysis of the study, it was suggested that further deregulation measures should be
introduced continuously and consistently. The study concludes that much attention is
needed to be paid to the GATT/WTO regulations. Egwakhide(1997), presents a review of
studies on Nigerias import substitution industrialisation . Evidence from the study shows
that the implementation of this model of development aggravated the problem of balance
of payments, as it increasingly relied on foreign inputs, technology and expertise for
production. It is inferred from the study that while it was easy for Nigeria to achieve the
early stage of import substitution industrialisation, it was exceedingly difficult to proceed
to the more difficult stage of producing capital goods. This was ascribed to the
inappropriate industrial policies of that period which were not sufficiently discriminatory.
Adeboye ( 2002 ), in his views on Globalization and industrialisation process posits that
those who win are those who trade in goods and services characterized by increasing
returns. The pace and structure of Globalization and industrialisation are usually dictated
by the winners. While in the past, Globalization and industrialisation process were dictated
by colonialism and gunboat diplomacy, in recent years, it is driven by more subtle
ideology propagated by the international financial institutions and the World Trade
Organization (WTO ). However, much of the financial flow - over 60 per cent - is
speculative rather than developmental. Thus, in this regard, Globalization has always led to
the de-industrialization of losers at the expense of winners.

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