Perspectives on Industrial Development in Nigeria: Issues, Challenges and Hard Choices (Advances in African Economic, Social and Political Development) 3030843742, 9783030843748

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Advances in African Economic, Social and Political Development

Oyeyemi Adegbite

Perspectives on Industrial Development in Nigeria Issues, Challenges and Hard Choices

Advances in African Economic, Social and Political Development Series Editors Diery Seck, CREPOL - Center for Research on Political Economy, Dakar, Senegal Juliet U. Elu, Morehouse College, Atlanta, GA, USA Yaw Nyarko, New York University, New York, NY, USA

More information about this series at http://www.springer.com/series/11885

Oyeyemi Adegbite

Perspectives on Industrial Development in Nigeria Issues, Challenges and Hard Choices

Oyeyemi Adegbite Enterprise Consultancy Services Lagos, Nigeria

ISSN 2198-7262 ISSN 2198-7270 (electronic) Advances in African Economic, Social and Political Development ISBN 978-3-030-84374-8 ISBN 978-3-030-84375-5 (eBook) https://doi.org/10.1007/978-3-030-84375-5 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

This book is dedicated to the following: My Late Wife, Mrs. Titilayo Augusta Adegbite (1945–2018) and My Children and Grandchildren

Preface

This is the first of two books I decided to write based on my extensive research and consulting experience in both the public and private sectors of the Nigerian economy spanning a period of over five decades. This first book titled Perspectives on Industrial Development in Nigeria: Issues, Challenges and Hard Choices is largely based on my research and consulting experience working on assignments in the public sector. These assignments were undertaken on behalf of Ministries, Departments and Agencies (MDAs) of the Federal Government of Nigeria (FGN) as well as various international organizations and agencies such as the World Bank, United Nations Development Programme (UNDP), United Nations Industrial Development Organization (UNIDO), International Labour Organization (ILO), International Trade Centre UNCTAD/WTO, European Commission, Centre for Development of Industry, Brussels, and the Secretariat of the Economic Community of West African States (ECOWAS), amongst others. The second book currently under preparation and tentatively titled Perspectives on the Practice of Management in Nigeria is by and large based on my research and consulting experience in the private sector. Now to the first book. After gaining independence from Britain in 1960, successive governments in Nigeria had been preoccupied with the goal of achieving rapid industrialization of the economy in order to catch up, as it were, with the more advanced economies as well as boost socio-economic development in general. This preoccupation has led to ambitious plans and programmes aimed at speeding up the process of industrial development in Nigeria since 1960 to the present time. However in spite of all the efforts, resources, and attention directed at this goal, the country has only made very modest gains in industrial progress as compared to the newly industrialized countries of South East Asia which were more or less at the same level of development with Nigeria in 1960. Indeed Nigeria continues to grapple with the same set of policy issues from 1960 to the present time as it

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struggles with the challenge of transiting from an agrarian to a modern industrialized state. Here a few examples will help to highlight some of the perennial issues and challenges which the country continues to face without any significant progress. For over 30 years, despite the incentives put in place to promote non-oil exports, crude oil continues to be the mainstay of the economy accounting for over 90% of foreign exchange earnings and the bulk of government revenue. The goal of diversifying the economy and reducing the over-dependence on a single export commodity remains elusive. In spite of the huge expenditure estimated at over $10.00 billion spent on the development of the steel industry, the two major integrated steel complexes at Ajaokuta and Ovwian-Aladja are more or less grounded with the former still to be completed after over 30 years of project execution and the later operating only intermittently for nearly 20 years before its privatization. Current efforts being made to reactivate the two steel complexes are still to yield any significant results. Thus the goal of setting up a viable integrated domestic steel industry to galvanize rapid industrial development in the country is yet to be realized. In the transport sector, the railway system which ought to form the hub for industrial and commercial dispersal has been virtually grounded for over two decades, thus putting unbearable pressure on the road network for the movement of goods and services. In addition the country’s road network is largely in a state of disrepair due to lack of maintenance. In terms of electricity supply, this continues to be grossly inadequate and constitutes a major constraint to industrial development with less than 4000 megawatts (MW) of electricity being generated or distributed in a country of over 200 million people. Thus power supply continues to be erratic and subject to regular disruptions with reliance on standby generators being the order of the day by both industrial and domestic consumers. In the manufacturing sector which is widely believed to be the catalyst for rapid industrial development, only modest progress had been made in spite of the resources available. The sector is still to grow beyond the first phase of import substitution industrialization with very little production of intermediate and capital goods. Thus the country is still to unbind itself from the colonial trading pattern of an exporter of raw and semi-processed commodities and an importer of manufactured goods and general merchandise of all kinds. The Chinese are currently replacing the western countries in this trading pattern. One of the primary objectives of this book therefore is to attempt to bring into sharper focus the need to set challenging but attainable goals as well as the political will necessary to drive the achievement of national aspirations in the industrial sector in particular and overall socio-economic development in general. The second objective, which is closely related to the first, is to highlight the mistakes of the past so that policy makers can learn from them with a view to pursuing a more robust development strategy in future in order to achieve industrial take off within two to three decades. This is a major challenge that can only be tackled by an enlightened and visionary political leadership which hopefully will emerge in due course.

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The range of topics covered in this book should therefore be of interest to policy makers in both the public and private sectors as they grapple with the task of formulating and implementing corporate development strategies in a rapidly changing environment. The book should also be of interest to industrial development scholars and practitioners, graduate students of economics and business as well as those in public administration who are interested in contemporary industrial development policy issues. It is expected that managers at all levels will find the book useful in their effort to formulate strategies and action plans to win the competitive battle in the marketplace, not only for the present but also for the future, especially as the country transits from the early stages of industrial take off into that of self-sustaining industrial development. Furthermore, it is hoped that the book will be of interest to the public at large, both within and outside Nigeria, especially arising from the fact that the country has now emerged as the largest economy in Africa with great prospects for future growth and development if the right policies are pursued. To accommodate the general reader, technical jargons have been kept to a minimum in order to facilitate easy comprehension of the issues under discussion. However, given the increasing interdependence in today’s global village between politics, economic development, industrialization, international diplomacy, trade, and investment, the general reader is advised to aspire to achieve some level of economic literacy in order to comprehend contemporary socio-economic development issues. Lastly, it goes without saying that the Nigerian economy being largely dependent on crude oil exports remains exposed to international oil price movements, especially given the current downturn in the global economy arising from the COVID-19 pandemic and the resultant negative impact on the demand for crude oil. Thus, the policy issues arising from these developments will continue to pose serious challenges requiring hard choices to be made by the country’s political leadership. Lagos, Nigeria December 30, 2020

Oyeyemi Adegbite

Acknowledgements

To start with, I wish to point out that a significant proportion of the materials contained in this book owe their origins to three sources, namely: 1. Insights gained while working on consulting assignments on behalf of Ministries, Departments and Agencies (MDAs) of the Federal Government of Nigeria (FGN) as well as various international organizations and agencies 2. Papers presented at workshops and seminars organized by various bodies, both local and foreign 3. Articles published in reputable local and international journals Due acknowledgement is hereby given as may be appropriate in all cases. In respect of specific chapters contained in the book due acknowledgement is given as follows: Chapter 4 on the Nigerian Steel Industry benefits from insights gained while working on assignments commissioned by the Federal Ministry of Mines, Power and Steel in 1988 (under World Bank funding) and the Bureau of Public Enterprises in 2001. Both assignments were undertaken in collaboration with Messrs. Hatch Associates of Toronto, Canada. Chapter 5 on Resources and Opportunities for Competitive Industrial Systems in Nigeria’s Agro-Allied and Forest-Based Industries is a revised and updated version of a paper I presented at a National Workshop on Industrial Strategies/Master Plan for Nigeria organized by the United Nations Industrial Development Organization (UNIDO) in collaboration with the Federal Ministry of Industries. Chapter 6 is based on my article on Industrial Estate Development in Nigeria published in NCEMA Policy Analysis Series, 2001, Volume 7, Number 2, by the defunct National Centre for Economic Management and Administration. The article benefits from assignments undertaken on behalf of the United Nations Development Programme (UNDP) and the Federal Ministry of Industries. Chapter 7 on Incentives and Disincentives to Foreign Direct Investment in the Nigerian Manufacturing Sector owes its origin to various assignments undertaken in collaboration with the Economist Intelligence Unit (EIU) of London while serving as xi

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their Country Representative in Nigeria as well as assignments undertaken on behalf of Federal Government Agencies, State-owned investment corporations, and private investors, both local and foreign. Chapter 8 is a revised and updated version of a paper which I presented at a Seminar on Boosting Non-oil Exports from Nigeria organized by the Lagos Chamber of Commerce and Industry (LCCI). The paper benefits from assignments undertaken on behalf of the Nigerian Export Promotion Council (NEPC), the European Commission, and the International Trade Centre UNCTAD/GATT, Geneva. Chapter 9 is based on a paper I presented as a Guest Speaker at a Workshop on the new Ecowas Common External Tariff (ECOWAS CET) organized by the Manufacturers Association of Nigeria (Ogun State Chapter). The paper draws on insights gained from previous assignments undertaken under World Bank funding on behalf of the Federal Ministry of Finance and the Budget Office of the Federation. Chapter 10 on the Future of Manufacturing in West Africa Under the Economic Partnership Agreement (EPA) with the European Union (EU) benefits from an assignment I undertook on behalf of the Secretariat of the Economic Community of West African States (ECOWAS). Chapter 11 on Small and Medium Enterprise Development Under the Structural Adjustment Programme in Nigeria is based on my article published in Small Enterprise Development Journal 1997, Volume 8, No 4, by Practical Action Publishing in the UK. The article draws from my experience in previous assignments undertaken on behalf of the National Planning Commission, the International Labour Organization (ILO) Geneva, and the Centre for the Development of Industry, Brussels. Chapter 12 on Business Incubators and Small Enterprise Development in Nigeria is based on my article published in Small Business Economics 2001, Volume 17, No 3, by Springer Nature. The chapter benefits from assignments undertaken on behalf of the United Nations Fund for Science and Technology Development (UNFSTD), New York, and the Federal Ministry of Science and Technology (FMS&T). I wish to thank Professor Vincent Akinyosoye and Professor Adebayo Adejugbe for taking time to read through the draft manuscript and for their incisive comments and observations. I also wish to place on record the contribution of all former employees, both junior and senior, of Enterprise Consulting Group (ECG) as well as Nigerian and International Consulting Associates who participated in one way or the other in the execution of some of the assignments earlier mentioned. Finally, it should be pointed out that the opinions expressed and the positions taken in all the topics covered in this book reflect my personal views for which I take full responsibility.

Contents

1

2

The Emerging Nigerian Economy . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Emergence of Nigeria as a Political and Economic Entity . . . . . . . 3 Nigeria and the Challenge of Nationhood . . . . . . . . . . . . . . . . . . 4 Growth of the Economy and Changing Structure of Production 1960–2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Rebasement of National Accounts and Growth of the Economy Since 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Summary and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 2 4

14 18 20

Manufacturing Sector in the Nigerian Economy . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Overview of the Manufacturing Sector . . . . . . . . . . . . . . . . . . . . 2.1 Contribution to Gross Domestic Product . . . . . . . . . . . . . 2.2 Structure of the Manufacturing Sector . . . . . . . . . . . . . . . 2.3 Employment in the Manufacturing Sector . . . . . . . . . . . . 3 Performance of the Manufacturing Sector . . . . . . . . . . . . . . . . . . 4 Tariff Policy and the Manufacturing Sector . . . . . . . . . . . . . . . . . 5 Some Key Features of the Manufacturing Sector . . . . . . . . . . . . . 5.1 Geographical Distribution of Industrial Establishments . . . 5.2 Ownership Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Trades in Manufactures . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 Raw Material Import Dependence . . . . . . . . . . . . . . . . . . 5.5 Low Technology and Assembly Operations . . . . . . . . . . . 5.6 Old Machinery and Equipment . . . . . . . . . . . . . . . . . . . . 5.7 High Cost Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8 Weak Inter-Sectoral Linkages . . . . . . . . . . . . . . . . . . . . . 5.9 Creeping De-industrialization . . . . . . . . . . . . . . . . . . . . .

21 21 22 22 25 26 29 33 36 37 37 38 42 42 42 43 43 43

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6

Problems and Constraints Affecting the Manufacturing Sector . . . 6.1 Infrastructural Problems . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 Inconsistent Government Policies . . . . . . . . . . . . . . . . . . 6.3 High Cost of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 Hostile Business Environment . . . . . . . . . . . . . . . . . . . . 6.5 Corruption and Bureaucratic Ineptitude . . . . . . . . . . . . . . 6.6 Poor Macro Economic Policies . . . . . . . . . . . . . . . . . . . . 6.7 Weak Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8 Smuggling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9 Competition from Cheaper Imports . . . . . . . . . . . . . . . . . 6.10 Inadequate Pool of Relevant Labour Skills . . . . . . . . . . . . 6.11 Lack of Executive/Managerial Capacity . . . . . . . . . . . . . . 6.12 Security of Life and Property . . . . . . . . . . . . . . . . . . . . . 7 Summary and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44 44 44 45 45 45 46 46 46 47 47 47 48 48 49

3

Industrial Development Policies and Strategies . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Industrial Development Strategies from 1960 to 1985 . . . . . . . . . . 3 SAP Induced Policies and Strategies . . . . . . . . . . . . . . . . . . . . . . 4 Industrial Revolution Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Why Nigeria Failed to Achieve Industrial Takeoff . . . . . . . . . . . . 6 Comparison with Other Emerging Economies . . . . . . . . . . . . . . . 6.1 Background to the Four Countries . . . . . . . . . . . . . . . . . . 6.2 Demographic Indicators . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Economic Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 Industrial Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Summary and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

51 51 52 57 60 63 66 66 71 72 74 75 77

4

The Nigerian Steel Industry: Retrospect and Prospect . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Historical Evolution of the Steel Industry in Nigeria . . . . . . . . . . . 3 Overview of the Nigerian Steel Industry . . . . . . . . . . . . . . . . . . . 3.1 Ajaokuta Steel Company Limited (ASCL) . . . . . . . . . . . . 3.2 Delta Steel Company Limited (DSC) . . . . . . . . . . . . . . . . 3.3 Inland Rolling Mills . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Installed Capacity of Public Sector Owned Companies . . . 3.5 Private Sector Rolling Mills . . . . . . . . . . . . . . . . . . . . . . 3.6 Flat Steel Production . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Market Size and Demand Projections . . . . . . . . . . . . . . . . . . . . . 5 Organization and Management of the Steel Companies . . . . . . . . . 6 Problems and Constraints Affecting Development of a Viable Steel Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Lack of Political Will and Corruption . . . . . . . . . . . . . . . 6.2 Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

79 79 81 83 83 84 85 85 86 87 87 90 91 91 92

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6.3 Infrastructure Support Facilities . . . . . . . . . . . . . . . . . . 6.4 Raw Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5 Public Ownership and Management . . . . . . . . . . . . . . . 6.6 Manpower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7 Ageing Plant and Machinery . . . . . . . . . . . . . . . . . . . . . 6.8 International Competition . . . . . . . . . . . . . . . . . . . . . . . 6.9 Weak Project Management . . . . . . . . . . . . . . . . . . . . . . 7 Options and Prospects for Future Development . . . . . . . . . . . . . 7.1 Options at Individual Enterprise Level . . . . . . . . . . . . . . 7.2 Options at the National Level . . . . . . . . . . . . . . . . . . . . 7.3 Options at the International Level . . . . . . . . . . . . . . . . . 8 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

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Resources and Opportunities for Competitive Industrial Systems in Nigeria’s Agro-allied and Forestâbased Industries . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Agriculture and Agro-based Industries in the Nigerian Economy . . 3 Agro-Allied and Forest Resources in Nigeria . . . . . . . . . . . . . . . . 3.1 Agro-Allied Resources . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Food Crops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Tree Crops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 Industrial Fibres . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6 Livestock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7 Fisheries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8 Forestry Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Supply and Demand for Selected Agricultural Commodities . . . . . 5 Agro-Allied Industries in Nigeria and Prospects for Future Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Food, Beverages, and Tobacco Industries . . . . . . . . . . . . 5.2 Meat Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Dairy/Milk Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 Fruits and Vegetables Processing . . . . . . . . . . . . . . . . . . 5.5 Fish Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 Vegetable Oils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7 Grain Mill Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8 Bakery Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9 Sugar Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.10 Cocoa Products, Chocolate, and Sugar Confectionery . . . . 5.11 Manufacture of Miscellaneous Food Products . . . . . . . . . 5.12 Starch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.13 Tea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.14 Coffee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.15 Salt Refining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

93 94 95 96 96 97 97 97 99 101 102 102 103 105 105 106 109 109 110 110 115 115 115 116 116 117 121 122 122 123 124 124 125 126 127 128 129 130 130 130 131 131

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5.16 Other Food Products . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.17 Livestock Feeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.18 Beverage and Tobacco Industries . . . . . . . . . . . . . . . . . . 5.19 Distilleries and Wine Industries . . . . . . . . . . . . . . . . . . . . 5.20 Malt Liquors (Beer) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.21 Soft Drinks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.22 Tobacco Manufactures . . . . . . . . . . . . . . . . . . . . . . . . . . 5.23 Textiles, Wearing Apparel and Leather Industries . . . . . . . 5.24 Textile Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.25 Spinning, Weaving, and Finishing Textile . . . . . . . . . . . . 5.26 Made-up Textile Goods (Except Wearing Apparel) . . . . . 5.27 Knitting Mills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.28 Carpets and Rugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.29 Cordage, Rope and Twine . . . . . . . . . . . . . . . . . . . . . . . 5.30 Wearing Apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.31 Leather Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.32 Tanneries and Leather Finishing . . . . . . . . . . . . . . . . . . . 5.33 Manufacture of Footwear . . . . . . . . . . . . . . . . . . . . . . . . 5.34 Miscellaneous Leather Products . . . . . . . . . . . . . . . . . . . 5.35 Manufacture of Rubber Products . . . . . . . . . . . . . . . . . . . 5.36 Tyre and Tube Industries . . . . . . . . . . . . . . . . . . . . . . . . 5.37 Miscellaneous Rubber Products . . . . . . . . . . . . . . . . . . . 5.38 Forest Based Industries . . . . . . . . . . . . . . . . . . . . . . . . . 6 Efforts Aimed at Self-Sufficiency in Selected Agricultural Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Polices and Strategies for a Competitive Industrial System in the Agro-allied Sub-sector . . . . . . . . . . . . . . . . . . . . . 8 Synthesis and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

A Hard Look at Industrial Estate Development in Nigeria . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Industrial Policy and Goals of Industrial Estate Development . . . . 3 Review of Past Efforts at Industrial Estate Development . . . . . . . . 4 Survey of Industrial Estates in Nigeria . . . . . . . . . . . . . . . . . . . . . 4.1 Distribution of Estates . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Ownership and Sponsorship of Estates . . . . . . . . . . . . . . 4.3 Types of Industrial Estates . . . . . . . . . . . . . . . . . . . . . . . 4.4 Size of Layouts/Estates . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 Facilities/Services Provided in Estates . . . . . . . . . . . . . . . 4.6 Comparison with Other Developing Countries . . . . . . . . . 4.7 Current Operational Status of Industrial Estates . . . . . . . . 5 A Critical Evaluation of the Industrial Estate Development Programme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

131 131 132 132 133 133 134 134 134 135 136 136 136 137 137 137 138 138 139 139 140 140 141 144 146 150 152 153 153 154 156 160 160 162 162 162 163 163 164 166

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5.1 5.2 5.3 5.4 5.5

Unrealistic Targets . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inadequate Project Planning and Management . . . . . . . . Poor Funding of the Industrial Estate Programme . . . . . . Low Physical Occupation . . . . . . . . . . . . . . . . . . . . . . . Political Rather than Economic Considerations in the Choice of Locations . . . . . . . . . . . . . . . . . . . . . . . . 5.6 Public Ownership and Limited Private Sector Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7 Absence of Monitoring System for Industrial Estate Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8 Lack of Integration with Other Development Programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9 Failure to Appreciate the Special Requirements of Small Scale Industrialists . . . . . . . . . . . . . . . . . . . . . . . 5.10 Inadequacy of Supporting Institutions . . . . . . . . . . . . . . 6 Conclusion and Policy Recommendations . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Incentives and Disincentives to Foreign Direct Investment in the Nigerian Manufacturing Sector . . . . . . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Size and Origin of FDI in Nigeria . . . . . . . . . . . . . . . . . . . . . . . . 3 Direction of FDI in Nigeria Analysed by Type of Activity . . . . . . 4 Scope of FDI in the Manufacturing and Processing Sector . . . . . . 5 Recent Developments in FDI Inflows into Nigeria . . . . . . . . . . . . 6 Incentives to Attract FDI into the Manufacturing Sector . . . . . . . . 6.1 Country’s Endowments . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 Tax Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Effective Protection Through Import Tariffs . . . . . . . . . . 6.4 Export Promotion Incentives . . . . . . . . . . . . . . . . . . . . . 6.5 Export Processing Zones . . . . . . . . . . . . . . . . . . . . . . . . 6.6 Administrative Support Incentives . . . . . . . . . . . . . . . . . 7 Disincentives to FDI in the Manufacturing Sector . . . . . . . . . . . . 7.1 Corruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2 Ease of Doing Business . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 Infrastructural Problems . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 Political Instability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5 Law and Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6 Due Process and Rule of Law . . . . . . . . . . . . . . . . . . . . . 7.7 Economic Uncertainty . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8 Weak Policy Environment and Safety of Investment . . . . 7.9 Inadequate Pool of Required Labour Skills . . . . . . . . . . . 7.10 Trade Off between Incentives and Disincentives . . . . . . . 8 Improving on the Gains from FDI . . . . . . . . . . . . . . . . . . . . . . . . 9 Summary and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . .

167 168 168 168

. 169 . 169 . 169 . 170 . . . .

170 171 171 173

. . . . . . . . . . . . . . . . . . . . . . . . . . .

175 175 177 181 185 190 192 192 193 195 196 197 197 198 198 199 199 200 200 201 201 201 202 202 203 205 207

xviii

8

9

10

Contents

An Appraisal of the Export Potential of Made-in-Nigeria Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Role of Export in National Development . . . . . . . . . . . . . . . . . . . 3 An Overview of Nigeria’s Export Trade . . . . . . . . . . . . . . . . . . . 4 Opportunities for the Development of Made-in-Nigeria Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Potential Export Markets for “Made-in-Nigeria” Goods . . . . . . . . 6 Problems and Constraints of Made-in-Nigeria Goods . . . . . . . . . . 6.1 High Cost Structure and Poor Infrastructure . . . . . . . . . . . 6.2 Quality Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Restrictive Trade Practices . . . . . . . . . . . . . . . . . . . . . . . 6.4 Marketing Skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5 Research and Development . . . . . . . . . . . . . . . . . . . . . . . 6.6 Tariff and Non-Tariff Barriers . . . . . . . . . . . . . . . . . . . . . 6.7 Transport and Communication . . . . . . . . . . . . . . . . . . . . 7 Strategies for Export Development . . . . . . . . . . . . . . . . . . . . . . . 8 Summary and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tariff Harmonization in West Africa and Africa: Prospects for the Nigerian Manufacturing Sector . . . . . . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Background to ECOWAS CET . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Customs Tariff Regime in Nigeria . . . . . . . . . . . . . . . . . . . . . . . . 4 Tariff Comparison Between Nigeria and UEMOA . . . . . . . . . . . . 5 Problems and Prospects for Nigerian Manufacturing Sector Under ECOWAS CET . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 The Challenge of Africa Continental Free Trade Area (AfCFTA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Summary and Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Future of the Manufacturing Sector in West Africa Under the Economic Partnership Agreement with the European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Size of West African Economy and Structure of Production . . . . . 3 Overview and Performance of the Manufacturing Sector . . . . . . . 4 Problems and Constraints to Industrial Development in West Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Potential Impact of EPA on the Manufacturing Sector . . . . . . . . . 6 Prospects for the Manufacturing Sector under EPA Final Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

209 209 210 211 220 223 226 226 227 227 228 228 228 228 229 231 232 233 233 235 239 240 241 245 246 248

249 249 250 253 257 259 261

Contents

xix

7

Implications of African Common Market and Future External Trade Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264 8 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 11

12

Small and Medium Enterprise Development Under the Structural Adjustment Programme in Nigeria . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Small Business and the Nigerian Economy . . . . . . . . . . . . . . . . . . 3 Entrepreneurship Development Programmes . . . . . . . . . . . . . . . . . 4 National Directorate of Employment . . . . . . . . . . . . . . . . . . . . . . . 5 World Bank-Assisted SME II Programme . . . . . . . . . . . . . . . . . . . 6 National Economic Reconstruction Fund . . . . . . . . . . . . . . . . . . . . 7 Empretec Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Technology Business Incubation Centres . . . . . . . . . . . . . . . . . . . . 9 People’s Bank of Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Community Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Model Industrial Estates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Industrial Development Centres . . . . . . . . . . . . . . . . . . . . . . . . . 13 UNDP-Assisted SME Development Programme . . . . . . . . . . . . . 14 Critical Appraisal of SME Development Programmes . . . . . . . . . 15 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

267 267 268 268 270 272 274 276 277 278 278 279 279 280 280 283 283

Business Incubators and Small Enterprise Development in Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Business Incubation Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Types and Roles of Business Incubators in Nigeria . . . . . . . . . . . 3.1 Industrial Business Incubators . . . . . . . . . . . . . . . . . . . . . 3.2 Technology Business Incubators . . . . . . . . . . . . . . . . . . . . 4 Survey of Business Incubators in Nigeria . . . . . . . . . . . . . . . . . . 4.1 Industrial Business Incubators . . . . . . . . . . . . . . . . . . . . . 4.2 Technology Business Incubation Centres . . . . . . . . . . . . . . 5 Needs Assessment of Business Incubators in Nigeria . . . . . . . . . . 6 Policy Issues and Recommendations . . . . . . . . . . . . . . . . . . . . . . 6.1 Ownership and Sponsorship . . . . . . . . . . . . . . . . . . . . . . . 6.2 Legal Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Size of Incubators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 Linkage with Industrial Estates . . . . . . . . . . . . . . . . . . . . . 6.5 Post Incubation Location . . . . . . . . . . . . . . . . . . . . . . . . . 6.6 Coordination with Other SME Support Institutions . . . . . . . 6.7 Management of Incubators . . . . . . . . . . . . . . . . . . . . . . . . 6.8 Admission and Exit of Tenant Firms . . . . . . . . . . . . . . . . .

285 285 286 287 287 287 289 292 293 294 297 297 297 297 298 298 298 298 299

xx

Contents

6.9 Potential for Self-Financing . . . . . . . . . . . . . . . . . . . . . . 6.10 Subsidization of Rent and Other Facilities . . . . . . . . . . . . 6.11 Cooperation with Large-Scale Firms . . . . . . . . . . . . . . . . 6.12 Opportunity for Outright Purchase of Incubator Units . . . . 7 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Postscript . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1 Recent Developments on Technology Business Incubation Centres in Nigeria . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

. . . . . .

299 299 299 299 300 300

. 300 . 301

Policies and Strategic Issues in Promoting Rapid Industrial Development in Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Visionary and Enlightened Political Leadership . . . . . . . . . . . . . . . 3 National Development Plan and Strategy . . . . . . . . . . . . . . . . . . . . 4 Infrastructure Support for Industrial Development . . . . . . . . . . . . . 5 Priority Industries to Drive Industrial Development . . . . . . . . . . . . 6 Incentives for Industrial Development . . . . . . . . . . . . . . . . . . . . . . 7 Employment and Manpower Development . . . . . . . . . . . . . . . . . . 8 Technology Acquisition and Development . . . . . . . . . . . . . . . . . . 9 International Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Foreign Direct Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Foreign Aid and Technical Assistance . . . . . . . . . . . . . . . . . . . . . 12 Foreign Exchange Rate Policy . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Local Content and Raw Materials Development . . . . . . . . . . . . . . 14 Industrial Dispersal and Infrastructure . . . . . . . . . . . . . . . . . . . . . 15 Information Flow and Market Mechanism . . . . . . . . . . . . . . . . . . 16 Private Sector Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Enabling Environment and Supporting Institutions . . . . . . . . . . . . 18 Industrial Master Plan and Strategy . . . . . . . . . . . . . . . . . . . . . . . 19 Concluding Remarks and Lessons of Experience . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

303 303 304 304 305 306 307 308 308 309 310 310 311 311 312 312 313 314 315 316 317

Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327

List of Tables

Table 1.1 Table 1.2 Table 1.3 Table 1.4 Table 1.5 Table 1.6 Table 1.7 Table 1.8 Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5 Table 2.6 Table 2.7 Table 3.1 Table 3.2

Milestones in the political history of Nigeria 1960–2020 . . . . . . . Selected socio-economic indicators of Nigeria 1960–2015 . . . . . Nigeria’s real gross domestic product at 1990 constant basic prices; 1960–2010 (¼N ¼ million) . . . . . . . . . . . . . . . . . . . . . . . . . Nigeria’s real gross domestic product at 1990 constant basic prices; 1960–2010 (percentage distribution) . . . . . . . . . . . . . . . . . . . . . . Nigeria’s: rebased gross domestic product at 2010 constant basic prices (2010–2017) Nbillion .. . . . .. . . . .. . . . .. . . . .. . . . .. . . . .. . Nigeria’s: rebased gross domestic product at 2010 constant basic prices (2010–2017) percentage distribution . . . . . . . . . . . . . . . . Nigeria’s nominal GDP in billions of Naira before rebasing at 1990 constant basic prices 2010–2013 . . . . . . . . . . . . . . . . . . . . . . . . . Percentage change in Nigeria’s nominal GDP between the old and new series 2010–2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contribution of Nigeria’s manufacturing sector to GDP 1960–2017 . . . . .. . . . . . . . . . . . . . . .. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .. . . . . . . Contribution to GDP by sub-sectors of manufacturing at 2010 constant basic prices 2010–2017 (N Billions) . . . . . . . . . . . Employment By economic activity, 2005–2009 . . . . . . . . . . . . . . . . . Some factors influencing the performance of the manufacturing sector 2010–2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Index of manufacturing production 2010–2017 (2010¼100) . . . Trends in actual unweighted average tariff rates (%) in Nigeria 1988–2001 .. . . .. . .. . .. . .. . .. . .. . .. . .. . . .. . .. . .. . .. . .. . .. . Non-oil imports into Nigeria by H.S. section (N0 billion) 2013–2017 . . . . .. . . . . . . . . . . . . . . .. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . .. . . . . . . List of Federal Government investments in the manufacturing sector as at December 1983 . . . . . . . . . . . . . . . . . . . . . . . Percentage capacity utilization in selected public industrial projects 1995–2000 . . .. . . . . .. . . . .. . . . . .. . . . .. . . . .. . . . . .. .

5 7 9 10 15 16 17 17 23 24 27 31 32 35 40 56 59 xxi

xxii

Table 3.3 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 4.6 Table 4.7 Table 4.8 Table 4.9 Table 4.10 Table 4.11 Table 5.1 Table 5.2 Table 5.3 Table 5.4 Table 5.5 Table 5.6

Table 5.7 Table 5.8 Table 5.9 Table 5.10 Table 5.11 Table 5.12 Table 5.13 Table 6.1

List of Tables

Inter-country comparison of socio-economic indicators for selected years 1965–2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ranking of world steel producing countries in million tons 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Milestones in Nigeria’s steel development . . . .. . . . . .. . . . . .. . . . .. . . Product mix of ASCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Product mix of DSC plant . . . . . . . . .. . . . . . . . . . . . .. . . . . . . . . . . . .. . . . . . . Installed rated capacity in tons per annum . . . . . . . . . . . . . . . . . . . . . . . . Nigerian market for steel products 1988 . . . . . . . . . . . . . . . . . . . . . . . . . . Market projections for steel products 1989–1995 . . . . . . . . . . . . . . . . Market for steel products in Nigeria in 2001 . . . . . . . . . . . . . . . . . . . . . Movement of raw materials and output from the steel plants tons/year . . . . . . . .. . . . . . . . . .. . . . . . . . . .. . . . . . . . . .. . . . . . . . . .. . . . . . Delta steel major raw material requirements . . . . . . . . . . . . . . . . . . . . . . Ajaokuta major raw material requirements . . . . . . . . . . . . . . . . . . . . . . . Contribution of Nigeria’s agricultural sector to GDP for selected years 1960–2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Percentage contribution of agricultural sub-sectors to total agricultural production for selected years 1960–2017 . . . . . Contribution of agro-allied industrial sub-sectors to the GDP, 2010–2017 N billion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Percentage contribution of agro-allied industrial sub-sectors to the GDP, 2010–2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Area planted for major agricultural commodities 2010–2017 (in million hectares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Estimated output of major agricultural commodities for selected years, 2010–2017 (000 tons, except otherwise stated) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Food demand growth rates 1985–1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . Growth rates in food production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selected agricultural raw material needs of industries (000 tons) 1985–1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ranking of major food imports into Nigeria over five years, 2006–2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Value of selected food imports into Nigeria, 2010–2015 NBillion . . . . . .. . . . . . .. . . . . . . .. . . . . . .. . . . . . . .. . . . . . .. . . . . . .. . . . . . . .. . . . Nigeria’s forest industries production 2010–2017 (in ‘000 Cu. metres) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gaps in Nigeria demand and supply across key crops and activities (2016 estimate) in tons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

67 80 82 83 84 86 88 88 89 93 94 95 106 107 108 109 111

113 118 119 120 121 121 142 145

Distribution of industrial layouts/estates by states in Nigeria, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161

List of Tables

Table 7.1 Table 7.2a Table 7.2b Table 7.3 Table 7.4a Table 7.4b Table 7.5 Table 7.6

Table 7.7a Table 7.7b Table 7.8 Table 7.9 Table 8.1 Table 8.2 Table 8.3 Table 8.4 Table 8.5

xxiii

FDI Flows by Region and Economy 2012–2017 (Millions of dollars) . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . . .. . Cumulative foreign private investment in Nigeria analysed by country/region of origin (in NMillion) 1962–2008 . . . . . . . . . . . Cumulative foreign private investment in Nigeria analysed by country/region of origin (in $Million) 1962–2008 . . . . . . . . . . . Naira and Dollar Values of Cumulative Foreign Private Investment in Nigeria 1962 to 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cumulative foreign private investment in Nigeria analysed by type of activity 1962–2008 (in NMillion) . . . . . . . . . . . . . . . . . . . . . Cumulative foreign private investment in Nigeria analysed by type of activity 1962–2008 (in $Million) .. . .. . .. . .. .. . .. . .. . .. FDI dollar values by economic sectors for selected years 1962–2008 ($Million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign private investment in manufacturing and processing sector analysed by type of industry 1960–2008 (in N thousand) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign private investment aggregated into eight major industrial sectors 1960–2008 (in N thousand) . . . . . . . . . . . . . . . . . . . . Foreign private investment aggregated into eight major industrial sectors 1960–2008 (in $ thousand) . . . .. . . . . . .. . . . . . .. . . FDI inflows Into Nigeria by sector/nature of business ($ million) 2011–2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rates of depreciation on capital expenditure . . . . . . . . . . . . . . . . . . . . . Trend and structure of Nigeria export trade 1960–2017 (Naira millions) . .. .. . .. . .. .. . .. . .. .. . .. . .. .. . .. . .. .. . .. . .. .. . .. . .. .. . Value of Nigeria’s exports, 1960–2017 (Million Dollars) . . . . . . . Value of Some Major agricultural exports from Nigeria, 1960–2010 ($ million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-Oil Exports by Products (Naira Million) 2013–2017 . . . . . . Manufacturing Sub-sectors with Potential for Export Development in the Short, Medium, and Long Term classified on the basis of ISIC at the 4 Digit Level . . . . . . . . . . . . . .

176 178 179 180 182 183 185

186 188 189 191 193 212 213 214 215

221

Table 9.1 Table 9.2 Table 9.3

Examples of regional trade agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 236 Trends in Nigeria’s unweighted average tariff rates % . . . . . . . . . . 240 Nigeria and UEMOA: unweighted average tariff rates in 2004 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241

Table 10.1 Table 10.2

Structure of West African Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 Gross domestic product of individual countries in West Africa, 2014 . .. . . . .. . . . .. . . . .. . . . . .. . . . .. . . . .. . . . .. . . . . .. . . . .. . 251 Structure of West Africa Economies in 2014 (In Percentage of GDP) . . .. . . . .. . . . . .. . . . . .. . . . .. . . . . .. . . . . .. . . . . .. . 252

Table 10.3

xxiv

Table 10.4 Table 10.5 Table 12.1 Table 12.2

List of Tables

Growth of the Manufacturing sector in West African Countries 2000–2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254 Manufacturing Value Added in West African Countries, 2000 and 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 Operational status of business incubators in Nigeria as at 31st December 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290 Distribution and size of incubator units . . . . . . . . . . . . . . . . . . . . . . . . . . . 292

About the Author

Oyeyemi Adegbite was born on October 3, 1944, in the then Western Region of Nigeria. He attended Christ’s School Ado-Ekiti where he completed the West African School Certificate and Comprehensive High School (CHS), Aiyetoro, Egbado, Ogun State, Nigeria, for the Higher School Certificate. At CHS, he won the school prizes in Economics, Geography, and History as the best student in each subject. In 1965 he gained admission into the University of Lagos for a B.Sc Honours degree in Business Administration which he obtained in June 1968. Under a Commonwealth Foundation Fellowship, in 1972, he attended management development programmes at the Ashridge Business School and Urwick Management Centre, both in England. For his graduate studies he attended the School of Management, Cranfield University, England, where he obtained the MBA and Ph.D degrees. In addition to his academic qualifications, Dr. Adegbite also attained the Fellowship Status in several professional bodies, including Fellow Institute of Chartered Accountants of Nigeria, Fellow Chartered Institute of Management Accountants of UK, Fellow British Institute of Management, Fellow Institute of Directors London, and Fellow Institute of Management Consultants, amongst others. Dr. Adegbite started his work career in 1968 with the Leventis Conglomerate as a management staff in the finance and accounts department of the Motors Division. He subsequently worked with the Nigerian Institute of Management (NIM), Lagos, as one of the pioneer senior staff where he rose to the post of Administrative Secretary to the Institute as well as Editor of Management in Nigeria Journal from 1970 to 1973. During this period, he also had a period of work attachment with the British Institute of Management, the Industrial Society, and Arthur Guinness (Park Royal), all in London. In 1975 he joined the academic staff of the University of Lagos as a Lecturer in Management. Subsequently he resigned his appointment to set up Enterprise Consulting Group (ECG), one of the top pioneering management consulting firms in Nigeria which he ran for over 30 years as Chairman/CEO. He also served as Country xxv

xxvi

About the Author

Representative in Nigeria to the Economist Intelligence Unit (EIU), London, from 1976 to 1986. During the course of his consulting career Dr. Adegbite undertook several highprofile assignments on behalf of Ministries, Departments and Agencies (MDAs) of both the Federal and State Governments in Nigeria. He also consulted widely for several international organizations and agencies including the World Bank Group, United Nations Development Programme (UNDP), United Nations Fund for Science and Technology Development (UNFSTD), International Labour Organization (ILO), United Nations Industrial Development Organization (UNIDO), International Trade Centre UNCTAD/GATT, Secretariat of the Economic Community of West African States (ECOWAS), the European Commission, Centre for Development of Industry, Brussels, and the Economist Intelligence Unit (EIU), London. Over the years he served as Chairman or Director on the Board of several companies in both the public and private sectors as well as non-governmental organizations. He also served as a Member of the Economic Advisory Council to Ondo State Government between 1977 and 1980, and was a Director of Ondo State Investment Holdings Limited between 1986 and 1988. In 1990 he represented Nigeria at the Third Beijing International Conference on Entrepreneurship Development and Technological Innovation organized by the UNDP in collaboration with the government of the Peoples Republic of China. Dr. Adegbite is the author of several articles and research papers, some of which have been published in reputable international journals, including an award winning article on Small and Medium Enterprise Development Under the Structural Adjustment Programme in Nigeria published by Practical Action Publishing in the UK in Small Enterprise Development Journal 1997, Volume 8, Number 4. The article won the first prize in the 1997 Small Enterprise Development Writers’ Competition. Also his article on Business Incubators and Small Enterprise Development in Nigeria published in Small Business Economics 2001, Volume 17, No 3, by Springer Nature has, on the last count as at December 2020, recorded over 1300 downloads via the web by academicians, researchers, and other interested parties worldwide. In addition, as on that date the article has been cited by over 230 writers and researchers in different publications. Dr. Adegbite has travelled widely to several countries across Europe, North America, Asia, and Africa. In addition he has visited virtually all the states in the Federal Republic of Nigeria.

Abbreviations and Acronyms

AfCET AfCFTA AfDB AU BF/BOF BOF BOI BPE CBN CDI CET ECG ECOWAS EDP EEC EIU EU FCT FDI FGN FMF FMI FMITI FMNP FMS&T FOS GATT HS ILO IMF

African Common External Tariff African Continental Free Trade Area African Development Bank African Union Blast furnace/basic oxygen furnace Budget Office of the Federation Bank of Industry Bureau of Public Enterprises Central Bank of Nigeria Centre for the Development of Industry, Brussels Common External Tariff Enterprise Consulting Group Economic Community of West African States Entrepreneurship Development Programme European Economic Community (forerunner of EU) Economist Intelligence Unit European Union Federal Capital Territory Foreign Direct Investment Federal Government of Nigeria Federal Ministry of Finance Federal Ministry of Industries Federal Ministry of Industry, Trade and Investment (formerly FMI) Federal Ministry of National Planning Federal Ministry of Science and Technology Federal Office of Statistics (forerunner of NBS) General Agreement on Tariff and Trade Harmonized System International Labour Organization International Monetary Fund xxvii

xxviii

ISI ISIC LCCI LGA MAN MDAs MSME NAFDAC NBCI NBS NBTI NDE NEPAD NEPC NERFUND NGOs NIC NIDB NIM NIPC NIRP NNPC NPC OPS R&D RMRDC SAP SITC SME SMEDAN SON TI TIC UEMOA UK UNCTAD UNFSTD UNIDO USA VAT WB WTO

Abbreviations and Acronyms

Import Substitution Industrialization International Standard Industrial Classification Lagos Chamber of Commerce and Industry Local Government Area Manufacturers Association of Nigeria Ministries, Departments and Agencies Micro, Small, and Medium Enterprise National Agency for Food and Drug Administration and Control Nigerian Bank for Commerce and Industry National Bureau of Statistics National Board for Technology Incubation National Directorate of Employment New Partnership for African Development Nigerian Export Promotion Council National Economic Reconstruction Fund Non-governmental Organizations Newly Industrialized Country Nigerian Industrial Development Bank (forerunner of BOI) Nigerian Institute of Management Nigerian Investment Promotion Commission Nigeria Industrial Revolution Plan Nigerian National Petroleum Corporation National Planning Commission Organized Private Sector Research and Development Raw Materials Research and Development Council Structural Adjustment Programme Standard International Trade Classification Small and Medium Enterprise Small and Medium Enterprise Development Agency of Nigeria Standards Organization of Nigeria Transparency International Technology Incubation Centre Union Economique et Monetaire Quest Africaine United Kingdom United Nations Conference on Trade and Development United Nations Fund for Science and Technology Development United Nations Industrial Development Organization United States of America Value Added Tax The World Bank World Trade Organization

Chapter 1

The Emerging Nigerian Economy

1 Introduction In this opening chapter an attempt is made to provide a bird’s eye view of the emergence of Nigeria as a political and economic entity. To start with it is instructive to point out that the territories which later emerged as Nigeria were carved out and ceded to Britain at the Berlin conference of 1885 which partitioned Africa amongst the major European powers of that time. However, the administration of territories now known as Nigeria formally came under the direct supervision of the British Government in 1900 following the revocation of the charter earlier granted to the Royal Niger Company which had hitherto administered parts of the territories making up Nigeria. The country, containing over 250 language groups, emerged as a single political entity in 1914 following the amalgamation of the then Southern and Northern Protectorates. At the start of British conquest, Nigeria was purely an agrarian society with agriculture and handicrafts being the predominant occupation of its peoples. The British imperial power viewed Nigeria essentially as a supplier of raw materials to feed its manufacturing industries and a market for finished manufactured products. This pattern of colonial trade had been a major feature of the Nigerian economy from 1900 to the present time. It is therefore not surprising that in 1960 when Nigeria attained independence from Britain agriculture accounted for 64.27% of the Gross Domestic Product (GDP) and over 70% of employment. On the other hand, manufacturing accounted for a mere 4.48% of the national output in that year. Thus modern industrial development is a recent phenomenon in Nigeria. One of the major challenges facing the political leadership in post-independence Nigeria is the goal of transforming the country from its agrarian roots to a modern industrialized state thereby boosting socio-economic development and catching up in due course with the more advanced countries.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5_1

1

2

1 The Emerging Nigerian Economy

More will be said later about the challenge of nationhood and that of industrial development in Nigeria. Following this introduction, in Sect. 2 of this opening chapter an attempt is made to provide an informed background to the emergence of Nigeria as a political and economic entity. In Sect. 3 a brief history of political developments in Nigeria since independence is undertaken as well as the challenge of nationhood facing the emerging nation state. Section 4 contains a general survey of the modern Nigerian economy and the changing structure of production from 1960 to 2010. In Sect. 5 of the chapter a review of the rebased national account series is undertaken as well as the performance of the economy from 2010 to the present time. This is followed in Sect. 6 with the summary and conclusion.

2 Emergence of Nigeria as a Political and Economic Entity As a starting point and for a better understanding of the present situation, it is instructive to begin any discussion on the Nigerian economy in general and the industrial sector in particular within the context of historical perspective. As pointed out earlier, the geographical entity now known as Nigeria became a single country in 1914 under British colonial rule following the amalgamation of what was then known as the Southern and Northern Protectorates. Consequently the history of modern Nigeria is just a little over 100 years. However, the history of the several nationalities making up Nigeria dates back several 1000 years. As Crowder [1] observed, “although Nigeria was the creation of European ambitions and rivalries in West Africa, it would be an error to assume that its peoples had little history before its final boundaries were negotiated by Britain, France and Germany at the turn of the twentieth century. For this newly created country contained not just a multiplicity of ‘pagan tribes’ but also a number of great kingdoms that had evolved complex systems of government independent of contact with Europe. Within its frontiers were the great kingdom of Kanem-Borno with a known history of more than a 1000 years; the Sokoto Caliphate which for nearly a 100 years before its conquest by Britain had ruled most of the savannah of northern Nigeria; the kingdoms of Ife and Benin whose art had become recognised as amongst the most accomplished in the world, the Yoruba Empire of Oyo which had once been the most powerful of the states of the Guinea Coast ; and the city states of the Niger De1ta which had grown partly in response to European demands for slaves and later palm oil, the largely politically decentralised Igbo speaking peoples of the south-east who had produced the famous Igbo-Ukwu bronzes and terracottas; and the small tribes of the Plateau some of whom are descendants of the people who created the famous Nok terracottas”. Before 1500, there was little or no contact between Europe and Sub-Saharan Africa. The first European, a Portuguese, visited Nigeria around 1472. However, from then onwards, particularly in the 16th and 17th centuries, Europeans began to make their impact felt along the West African coast, first in tropical produce and ornaments and later in the infamous trans-Atlantic slave trade which lasted up to

2 Emergence of Nigeria as a Political and Economic Entity

3

1815. Following the abolition of slave trade, a new phase emerged in the relationship between West Africa and the major European powers of that time. With the rise of manufacturing industries in Europe led by Britain, the home of the first industrial revolution, raw materials were needed to feed the emerging industries. Thus began the scramble for Africa as each European power sought to establish her own area of influence on the continent to ensure regular supply of raw materials. The ensuing scramble resulted in the balkanization of Africa at the Berlin. Conference of 1885 amongst the major European powers. The country now known as Nigeria naturally went to Britain because several British companies, particularly the Niger Company (the forerunner of UAC of Nigeria Plc) had become well established around the River Niger area. Indeed, the Niger Company received a Royal charter in 1886 to administer the territories with which its agents had signed treaties. By 1850, British trading interests, as recorded by historians of that period, were concentrated in two regions, namely Lagos, the gateway to the rich forests of Yorubaland, and the Delta Ports which were the outlet for the trade of the interior of Eastern Nigeria. The chief export was palm oil and by 1855/6 the total oil exported from the Delta was over 25,060 tons which accounted for more than 50% of the total quantity of palm oil exported from Africa. The first British Consul in Nigeria, John Beecroft was appointed in 1849 as Consul for the Bights of Benin and Biafra. With the increase in trade, gunboat diplomacy and Christian missionary work, British influence grew rapidly leading to the proclamation of the Oil Rivers Protectorate over the Niger Districts in 1885 whilst the Royal Niger Company continued to administer the hinterland beyond the Niger Delta area. However, in 1899, the charter granted to the Royal Niger Company was revoked, and on 1st January, 1900, the British government took complete control of all the company territories. The whole of the territory now known as Nigeria was then re-organized into three administrative areas under the colonial office as follows: • the Protectorate of Southern Nigeria, which absorbed most of the former company territory; • the Lagos Protectorate; • the Protectorate of Northern Nigeria. This arrangement continued until 1st January, 1914, when Nigeria became a single country following the amalgamation of the Northern and Southern Protectorates under British imperial rule. To facilitate trade, the primary interest of the British, roads and railways were built and commerce flourished. As Crowder [2] again pointed out “the rapid growth of the Nigerian economy was to have profound effects on the trading structure of Nigerian societies”. This was inevitable for the following reasons. First, the stoppage of inter-tribal wars amongst the warring natives and the restoration of relative peace under Pax Britannia created a large free trade area which provided the right atmosphere for internal trade to grow and flourish throughout the new country.

4

1 The Emerging Nigerian Economy

Second, the introduction of a common portable currency facilitated trade throughout the new geographical entity called Nigeria. Hitherto cowries and other forms of trade by barter prevailed which limited the scope for internal trade. Third, the construction of roads and railways helped to open up the country for both internal and external trade. This development facilitated the evacuation of the produce from the hinterland to the sea ports. The network of internal roads also facilitated trade to virtually all parts of the country. Fourth, the rise of imports and exports, especially the introduction of European goods stimulated demand for new products and services, which led to the emergence of a nascent market economy. Fifth, the growth of the domestic and export markets helped to accelerate the production of goods for exchange beyond mere subsistence farming. Lastly, the free movement of goods, labour, and capital helped to stimulate the growth of the Gross Domestic Product and facilitated the increasing monetization of the economy in general. All the foregoing developments combined to set in motion a colonial economy based mainly on the production of primary produce such as palm oil, cotton, groundnut, timber, cocoa, etc. for export to the metropolitan countries and the import of manufactured goods and general merchandise of all types. This trade was of course dominated primarily by the colonial trading houses. This pattern continued until the 1950s when the old established order began to give way as a result of increasing and/or new competition combined with the growth of the market, both of which paved the way for the setting up of local manufacturing industries in the late 1950s and early 1960s. More importantly the rise of local nationalism and political agitation finally led to the attainment of full independence on 1st October 1960.

3 Nigeria and the Challenge of Nationhood As pointed out earlier, Nigeria is an agglomeration of several nationalities more or less independent of each other until brought together as a nation state under British imperial rule. Indeed the country, containing over 250 language groups, has been described as a mere geographical expression based on the multitude of ethnic nationalities making up Nigeria. However, three major ethnic groups, namely the Yorubas in the South West, the Ibos in the South East, and the Hausa-Fulanis in the North, each numbering several millions, taken together account for over 50% of the population of Nigeria. On the other hand there are several minority groups spread all over the country, some with population counted in millions and several other smaller groups such as the Angas and Ogonis with population figures which number only thousands. Forging a truly nation state out of these diverse groups has been a major challenge in post-independence Nigeria. Post-independence politics in Nigeria had been characterized by tensions and turmoil as the new leadership class jockeyed for power. The breakdown of law and order in sections of the country coupled with corruption and inept political

3 Nigeria and the Challenge of Nationhood

5

Table 1.1 Milestones in the political history of Nigeria 1960–2020 Period 1960–1966 January 1966–1966 July 1966–1975 July 1975–1976 February 1976–1979 September 1979–1983 December 1984–1985 August 1985–1993 August 1993–1993 November

Head of government Alhaji Tafawa Balewa General Aguiyi Ironsi General Yakubu Gowon General Murtala Mohammed General Olusegun Obasanjo Alhaji Shehu Shagari General Muhamadu Buhari General Ibrahim Babaginda Chief Ernest Shonekan

1993–1998 June 1998–1999 May 1999–2007 May 2007–2010 May 2010–2015 May 2015–Present

General Sani Abacha

Type of government Civilian prime minister Military dictatorship Military dictatorship Military dictatorship Military dictatorship Civilian president Military dictatorship Military dictatorship Civilian (interim government) Military dictatorship

General Abdul Abubakar General Olusegun Obasanjo Alhaji Musa Yar’dua Dr Goodluck Jonathan General Muhamadu Buhari

Military dictatorship Civilian president Civilian president Civilian president Civilian president

leadership eventually led to the collapse of the first republic in January 1966 when the elected government was overthrown in a military coup d’etat. Further tensions in the polity eventually led to a brutal civil war from 1967 to early 1970 when the very existence of the country was in doubt. Thereafter political developments in the country over the next 50 years have been one of a tortuous evolution with the military alternating with civilian government as highlighted in Table 1.1. All these developments have had a profound impact on the pace of industrial and socioeconomic progress in Nigeria. Despite the immense resources and potentials available in the country as well as the huge windfalls from crude oil exports estimated at over one trillion dollars since 1960, only modest achievements, to put it mildly, have been recorded in terms of industrial development in particular and socio-economic progress in general. A major consequence of the unfavourable political developments in Nigeria has been the slowing down of the rate of industrial and economic progress in the country as compared to other emerging countries which were more or less at roughly the same level of development with Nigeria in the 1960s. At independence in 1960, there were three largely viable Regional Governments which served as centres of industrial and economic development. However, the balkanization of the three regions into states, starting with 12 states in 1967 to the present 36 state structure and 774 Local Government Areas (LGAs) has resulted into an unwieldy and bloated parasitic bureaucracy dependent on Federal Government allocations from crude oil earnings to balance their budgets and pay salaries. As a result there is very little left to undertake needed capital projects and social infrastructure, all of which contribute to the prevailing poor economic situation and grinding poverty in the country.

6

1 The Emerging Nigerian Economy

Also the attempt to consolidate political and economic power by the ruling elite has resulted in systemic corruption and barefaced looting of the treasury at all levels of government. Thus funds estimated to be in billions of dollars which should have been channeled to pursue the goal of rapid industrial and socio-economic development have been diverted into private accounts, all to the detriment of the national economy. Another major fall out of the political situation in the country is the focus on short term survival issues rather than on strategic long term development issues. This unwillingness by the ruling elite to confront the major challenges facing the country and make the hard choices necessary for rapid socio-economic progress have led to stunted growth and development with the country consistently ranking very low in the annual human development index compiled by the UNDP. For example, the country was ranked in the 176th position in 2018 out of 189 countries surveyed. As compared to other comparator countries, as will be observed later, Nigeria has not been fortunate to have for a significant period at the federal level a visionary leader dedicated to the goal of rapid transformation of society. Hence the uninspiring performance of Nigeria when compared to countries such as South Korea, Malaysia, Singapore, and Indonesia which were more or less at the same level of development with Nigeria in the 1960s. These countries have recorded spectacular achievements in their industrial development efforts and by extension currently outperform Nigeria in virtually all indexes of economic and social development. This issue will be further elaborated upon later in Chap. 3 of this book. Thus the current political structure of the country coupled with a corrupt and inept leadership class constitute major barriers to industrial and economic progress. This is the challenge which has to be addressed urgently if the country is to realize its full development potential in the not too distant future. In addition to a parasitic and unstable political structure, one must also highlight the problems arising from a society still characterized by the old traditional social structure and values which are in collision and competing with forces of modernization and development. The absence of a visionary leadership class willing and able to make the hard choices necessary to drive the process of transition from the traditional society to the modern age remains a major challenge to rapid industrial development in Nigeria.

4 Growth of the Economy and Changing Structure of Production 1960–2010 Rostow [3] in his book on “The Stages of Economic Growth” identified the following five stages: • The Traditional Society. • The Preconditions for take off. • The Takeoff.

4 Growth of the Economy and Changing Structure of Production 1960–2010

7

• The Drive to Maturity. • The Age of high Mass Consumption. Although Rostow’s evolutionary postulations had been challenged by writers such as Kuznets [4], Myrdal [5] and a host of others, nevertheless in the Nigerian context, the economy can be said to have passed from the traditional society into the preconditions for take off and now on the threshold of take off if the right policies are pursued. According to Rostow the takeoff stage is characterized by the following: 1. a rise in the rate of productive investment from say 5% or less to over 10% of national income. 2. the development of one or more substantial manufacturing sectors with a high rate of growth. 3. the existence or quick emergence of a political, social and institutional framework which exploits the impulses to expansion in the modern sector and the potential external economy effects of the take-off and gives to growth an on-going character [6].

Unfortunately the takeoff stage is still to manifest in Nigeria in spite of available resources owing largely to incompetent political leadership coupled with large scale mismanagement of the national economy, high level of corruption, and the absence of a leadership class dedicated to the rapid transformation of society. However, the selected socio-economic indicators contained in Table 1.2 confirm that Nigeria is indeed marching steadily on the road to eventual industrial off. At all levels and by every parameter, Nigeria made significant advancements in economic development between 1960 and 2015 as highlighted in the table. For example, in Table 1.2 Selected socio-economic indicators of Nigeria 1960–2015 S/N 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

Main headings Population (in million) Adult literacy rate % Life expectancy at birth (years) Gross domestic product (N million) Manufacturing output (N million) Manufacturing % of GDP Exports (including oil, N million) Oil exports (N million) Imports (N million) External reserves ($ million) Currency in circulation (N million) Demand deposits (N million) Primary school enrolment (in million) Secondary school enrolment (in million) University enrolment (number) Crude oil production (million barrels/day) Limestone production (000 metric tonnes) Electricity production (MWh) GDP per capita (U.S. dollars)

1960 32 15 40 2489 114 4.58 339.4 8.8 432 217.3 159 77 2.9 0.1 1395 0.017 n.a 72.4 89

1980 80 34 46 31,547 3486 11.05 14,186.7 13,362.3 8217 5462.0 3186 6041 12.5 1.5 57,772 2.05 2170 1645 911

Sources: National Bureau of Statistics and Central Bank of Nigeria

2000 115 57 54 329,179 13,959 4.24 2,287,400 2,262,611 962,970 9386.1 274,010 363,721 24.9 6.4 1,032,873 2.2 1815 4125 515

2015 187 59 52.9 69,023,930 6586,620 9.54 9,016,321 8,339,553 11,076,069 28,284 1,857,900 5,885,856 25.5 11.1 1,274,261 2.1 18,907 4165 2683

8

1 The Emerging Nigerian Economy

terms of the growth of national output, the Gross Domestic Product rose from a mere N2489 million in 1960 to N329,179 million in 2000 and N69,023,930 million in 2015 reflecting the emergence of a modernizing economy transiting from its agrarian roots. The period also saw the progressive emergence of the secondary and tertiary sectors of the economy with the growth of manufacturing and modern service industries. In terms of external trade Nigeria became more and more welded into the global economy as exports and imports rose dramatically over the 55 year period as highlighted in the table. The economy also became increasingly monetized with a higher proportion of the population participating in the market economy characterized by the production of goods and services for exchange. The population of the country grew rapidly from about 32 million in 1960 to 115 million in 2000 and 187 million in 2015 as a result of improvements in health care delivery services and high fertility rates. The growth in population has also been accompanied by rapid urbanization of society with over 30% of the people living in urban areas. Another outcome of population increase is the growth of the labour force and working population with an increasing percentage employed in industry and services, rather than being engaged in subsistence farming. To meet the requirements of a modernizing economy, the formal educational system grew rapidly as witnessed by rising enrolment in primary, secondary, and tertiary education combined with a general improvement in the literacy level. Investments in human capital development have considerably improved the quantity and quality of the nation’s work force to meet the increasing demands of commerce and industry. In terms of transport and communications, the country recorded significant progress as many more kilometres of all weather roads were constructed linking the various regions of the country and thus integrating the country into one unified market with free movements of goods and services. However, the railway network, after a promising start, suffered neglect and hence was unable to play the role expected from the system. As for the telecommunication sector, after a slow start, rapid advances have been made in the last 15 years with teledensity rising from below 20% to over 90%. Also significant advancements have been recorded in the area of information and communication technology (ICT) coupled with a growing number of internet users, one of the highest in Africa. All the foregoing point to the fact that the process of modernization has taken roots in Nigeria and that the process will continue to be accelerated in the years ahead with the additional impact of multiplier effects. Based on the progress being made, the country’s economy is projected to be amongst the 20 largest economies in the world within the next two decades making her an important player in the league of emerging markets. For a more detailed analysis of the growth of the Nigerian economy over the 50 year period from 1960 to 2010, a presentation of the emerging trend is made in Tables 1.3 and 1.4, respectively. The tables give a bird’s eye view of the increasing level and changing structure of the nation’s Gross Domestic Product measured at

1965 1742.2 1366.2 158.0 143.4 74.6 370.8 116.8

33.0 221.0 162.2

418.4

453.2 127.6 15.4 18.2 0.0 0.0

0.0

216.4

75.6

3146.8

1960 1599.8 1284.4 139.6 131.8 44.0 145.6 11.0

20.6 114.0 110.8

309.4

323.4 97.4 8.4 8.4 0.0 0.0

0.0

156.6

52.6

2489.0

Source: National Bureau of Statistics

Activity sector Agriculture • Crop production • Livestock • Forestry • Fishing Industry • Crude petroleum and natural gas • Solid minerals • Manufacturing Building and construction Wholesale and retail trade Services • Transport • Communication • Utilities • Hotel and restaurant • Finance and insurance • Real estate and business services • Producers of Govt. services • Comm., social, and Pers. services Total GDP 4219.0

119.8

500.2

0.0

778.3 123.5 10.8 24.0 0.0 0.0

512.9

35.9 317.6 221.0

1970 1887.7 1437.0 143.8 129.2 177.7 819.1 465.6

27,172.0

1047.5

1581.0

105.3

4418.3 920.3 43.9 86.0 60.5 573.9

5718.9

505.9 1186.5 1932.5

1975 7639.4 4942.8 973.1 320.5 1403.0 7463.0 5770.6

31,546.8

978.3

1678.7

71.4

4748.1 1168.2 58.3 143.7 101.1 548.3

6318.0

682.7 3485.9 3056.0

1980 6501.8 3944.7 1557.1 270.7 729.4 10,922.9 6754.3

201,036.3

833.0

2247.5

3880.6

19,005.7 5988.6 232.3 1223.6 525.2 3431.9

27,876.7

913.0 12,032.4 3308.0

1985 65,748.4 52,750.9 8856.2 2310.9 1830.4 85,097.4 72,152.0

267,550.0

899.6

3197.2

4269.3

27,425.6 5438.8 247.9 1178.0 552.3 11,642.4

35,837.7

665.6 14,702.4 4350.8

1990 84,344.6 68,416.7 9562.0 2149.1 4216.8 115,591.4 100,223.4

281,407.4

1345.0

3467.0

5094.4

32,492.3 6289.5 279.2 1422.1 586.2 14,008.9

39,310.1

789.8 13,836.1 5221.7

1995 96,220.7 80,702.8 10,051.3 2421.9 3044.6 108,162.7 93,536.7

Table 1.3 Nigeria’s real gross domestic product at 1990 constant basic prices; 1960–2010 (¼N ¼ million)

329,178.7

2666.9

3814.1

6252.3

39,881.5 7508.1 370.3 1448.9 684.2 17,136.7

43,161.9

970.2 13,958.8 6433.8

2000 117,945.1 98,392.6 11,449.9 2555.5 5547.1 121,756.6 106,827.5

561,931.39

4167.92

5294.10

8524.36

85,478.81 14,882.05 8175.22 20,135.29 2155.35 22,144.52

77,283.06

1510.84 21,305.05 8544.48

2005 231,463.61 206,178.40 14,643.86 3005.35 7636.00 159,161.43 136,345.54

776,332.21

6758.90

7037.52

14,379.47

140,331.77 20,752.69 35,339.34 24,505.78 3888.63 27,669.45

145,074.31

2660.94 32,260.63 15,454.02

2010 317,281.65 282,605.07 20,264.42 4016.76 10,395.40 158,190.46 123,268.89

4 Growth of the Economy and Changing Structure of Production 1960–2010 9

Source Derived from Table 1.3

Agriculture • Crop production • Livestock • Forestry • Fishing Industry • Crude petroleum and natural gas • Solid minerals • Manufacturing Building and construction Wholesale and retail trade Services • Transport • Communication • Utilities • Hotel and restaurant • Finance and insurance • Real estate and business services • Producers of Govt. services • Comm., social, and Pers. services Total GDP

1960 64.27 51.60 5.61 5.30 1.76 5.85 0.44 0.83 4.58 4.45 12.43 13.00 3.91 0.34 0.34 0.00 0.00 0.00 6.30 2.11 100.00

1965 53.36 43.42 5.02 4.55 2.27 11.78 3.71 1.05 7.02 5.16 13.30 14.40 4.05 0.50 0.58 0.00 0.00 0.00 6.87 2.40 100.00

1970 44.74 34.06 3.41 3.06 4.21 10.41 11.04 0.85 7.52 5.24 12.16 18.45 2.93 0.26 0.57 0.00 0.00 0.00 11.85 2.84 100.00

1975 28.11 18.19 3.58 2.18 5.11 27.47 22.24 1.86 4.37 7.11 21.05 16.26 3.40 0.16 0.32 0.22 2.11 0.39 5.81 3.85 100.00

1980 20.61 12.50 4.94 0.86 2.31 34.62 21.41 2.16 11.05 9.69 20.03 15.05 3.70 0.18 0.46 0.32 0.74 0.23 5.32 3.10 100.00

1985 32.70 26.24 4.40 1.15 0.91 42.33 35.89 0.45 5.94 1.65 13.87 9.45 2.98 0.12 0.61 0.26 1.71 1.93 1.43 0.41 100.00

1990 31.52 25.57 3.57 0.80 1.58 43.20 37.45 0.25 5.50 1.63 13.40 10.25 2.03 0.09 0.44 0.20 4.35 1.60 1.20 0.34 100.00

Table 1.4 Nigeria’s real gross domestic product at 1990 constant basic prices; 1960–2010 (percentage distribution) 1995 34.19 28.68 3.57 0.86 1.08 38.44 33.27 0.28 4.92 1.86 13.97 11.54 2.23 0.10 0.51 0.21 4.47 1.81 1.23 0.48 100.00

2000 35.83 29.89 3.48 0.78 1.68 36.99 32.45 0.30 4.24 1.95 13.11 12.12 2.28 0.11 0.44 0.21 5.21 1.90 1.16 0.81 100.00

2005 41.20 36.69 2.60 0.53 1.36 28.32 24.26 0.27 3.79 1.52 13.75 15.21 2.65 1.46 3.58 0.38 3.94 1.52 0.94 0.74 100.00

2010 40.87 36.40 2.60 0.52 1.34 20.38 15.88 0.34 4.16 1.99 18.69 18.07 2.67 4.55 3.16 0.50 3.56 1.85 0.91 0.87 100.00

10 1 The Emerging Nigerian Economy

4 Growth of the Economy and Changing Structure of Production 1960–2010

11

1990 constant basic prices over the review period. The two tables are presented at 5 yearly intervals to give an indication of trend. From Table 1.3 it will be observed that at independence in 1960, the GDP was less than N2500 million. Out of this figure the agricultural sector accounted for about N1600 million, representing 64.27% of national output for that year and confirming that the sector was the mainstay of the economy as at that time. This was followed in the second position by the services sector which amounted to N323.40 million at 13% of GDP, and in the third position was wholesale and retail trade which amounted to N309.40 million at 12.43% of GDP for that year. The remaining two major sectors were industry (consisting of crude petroleum, solid minerals, and manufacturing) which contributed N145.60 million at 5.85% and building and construction with N110.80 million at 4.45% of the GDP, respectively. Thus at independence in 1960 agriculture was the predominant sector in terms of output, external trade, and employment. Over the next 20 years, from 1960 to 1980, there were major changes in the Nigerian economy, both in terms of output and structure of production arising from two major inter related factors. First, the discovery of oil in commercial quantities in the Niger Delta led to a massive increase in the volume of crude oil output as well as revenue accruing to the national treasury. Secondly the Arab-Israeli war of 1972/73 led to the quadrupling of oil prices which fuelled an oil boom that lasted for most of the 1970s. These favourable developments propelled the rapid expansion of Nigerian economy throughout the 1970s into the early 1980s until the bubble burst in 1981/82 following the collapse of the international market for crude oil. As can be observed from Table 1.3, the GDP rose from N4219 million in 1970, at the start of the oil boom era, to over N31,546 million in 1980.representing an increase of over 740% in absolute terms with annual GDP growth rate estimated at over 8.00% per annum for most of the 10 year period. The oil boom years, apart from stimulating the growth of national output across the board in virtually all sectors of the economy also led to significant changes in the structure of production. Whereas in 1960 agriculture accounted for about 65% of GDP, by 1980 the contribution of the sector had declined to only 20.61% as a result of the creeping neglect of the agricultural sector over the years. On the other hand the contribution of the industry sector, largely from crude oil exploitation and production rose from 5.85% of the GDP in 1960 to nearly 35% in 1980 and further rising to 42.33% in 1985. However, the contribution from the manufacturing sector to the GDP only rose modestly from 4.58% in 1960 to 11.05% in 1980 before declining to 5.94% in 1985 arising from the raw material import dependence of the sector based on low technology and assembly type operations. The contribution to the GDP from crude oil and gas rose steadily from N11.00 million in 1960 to N465.60 million in 1970, N6754.30 million in1980 and N72,152 million in 1985, accounting for 0.44%, 11.04%, 21.41% and 35.89% respectively of the GDP for the years indicated. Thus crude oil became the main engine of growth consistently contributing over 90% of export earnings and the bulk of government revenue as well as providing the wherewithal to fund various development projects.

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The third major sector which witnessed significant growth during the oil boom years was wholesale and retail trade which grew in terms of contribution to GDP from about N513 million in 1970 to N6318 million in 1980, representing 12.16% and 20.03%, respectively, of GDP for the 2 years indicated. This period witnessed large scale importation of goods for local distribution as well as significant growth of domestic trade in response to market demand. Further changes took place in the composition of the GDP between 1980 and 1985 with Industry accounting for 42.33%, Agriculture 32.70%, and Wholesale and Retail Trade at 13.87% in 1985. Thus by 1985 the three economic sectors of Industry, Agriculture, Wholesale and Retail Trade accounted for nearly 90% of GDP. The remaining two sectors, namely Services as well as Building and Construction accounted for the balance of just over 10% with the former contributing 9.45% and the latter just 1.65% to the GDP in that year. Building and Construction obviously suffered from the downturn of the economy which began in 1981 following the collapse of the market for crude oil exports leading to a sharp fall in government revenue which necessitated a cutback in government spending on infrastructure development projects. During the next quarter century, from 1985 to 2010, the Nigerian economy witnessed even more dramatic changes arising from the collapse of the international market for crude oil. This led to rapid deterioration of the Nigerian economy in the ensuing years with the country unable to pay for needed imports following the depletion of foreign exchange reserves. This led to a huge external debt estimated in 1985 to be in excess of $20 billion and with domestic debt of about the same amount. Other manifestations of the rapidly deteriorating economic situation included low capacity utilization in manufacturing industries, high rate of unemployment, galloping inflation, falling living standards, and balance payments disequilibrium. To save the economy from virtual collapse the government had to adopt a Structural Adjustment Programme (SAP) in 1986. With the adoption of SAP [7] a number of policy measures were put in place which included the following: 1. adoption of a new exchange rate regime leading to the devaluation of the Naira from N1 ¼ $1.87 in 1985 to N22 ¼ $1.00 in 1986. 2. privatization and/or commercialization of government owned enterprises. 3. abolition of Commodity Boards and price controls in general to promote market forces in the allocation of resources. 4. introduction of incentives to promote the non-oil export sector in order to diversify sources of foreign exchange earnings. 5. reduction in the dominance of the public sector and intensification of the growth potential of the private sector. The adoption of SAP constituted a radical departure from the policy framework that had prevailed for most of the years since independence. The measures adopted in 1986 provided the new policy environment that endured for most of the next 25 years.

4 Growth of the Economy and Changing Structure of Production 1960–2010

13

As a result of the measures put in place the economy was stabilized and the downward trend of economic stagnation was reversed. From Table 1.3, it will be observed that the GDP grew from a base of N201.04 billion in 1985 to N776.33 billion in 2010. In terms of percentage contribution to the GDP, the downward trend in the share of the agricultural sector was arrested. The sector’s contribution to the GDP rose throughout the 1990s reaching 35.83% in 2000 and a high of 40.87% in 2010. The oil and gas sector continued to play a major role in the economy with the sector’s share of the GDP averaging over 34% during the period 1985 to 2000. However, over the next 10 years the share of the sector in the GDP declined significantly to 24.26% in 2005 and 15.88% in 2010. It should be noted that in spite of SAP, the oil sector still accounted for over 90% of foreign exchange earnings and the bulk of government revenue throughout the review period. The contribution of the manufacturing sector to the GDP continued to be low despite all the policies put in place to encourage the growth of the sector. Thus the sector’s contribution to the GDP which stood at 11.05% in 1980 continued to decline and averaged only about 4.00% over the period 2000 to 2010. Although it is generally recognized by government that the manufacturing sector should be the engine for rapid industrial development, this objective is not likely to be realized until the binding constraints of inadequate power supply, transport and communication, capital, skilled manpower, and a conducive business environment are urgently addressed and significantly ameliorated. The two other sectors with significant contribution to the GDP during the period were wholesale and retail trade whose contribution rose from 13.87% in 1985 to 18.69 in 2010, and services which rose from 9.45% in 1985 to 18.07% in 2010. On the other hand the share of building and construction in the GDP was consistently below 2.00% over the review period, as against the situation that prevailed in the 1970s up to the early 1980s. The overall conclusion that can be drawn from a review of the performance of the national economy over the 50 year period from 1960 to 2010 is that even though considerable progress had been made given the very low base from which the country started, the half century can justifiably be called a period of missed opportunities.This assertion is based on three premises. First, given the enormous windfall from crude oil exports estimated at over one trillion U.S. dollars over the 50 year period, much more should have been achieved to catapult the country into the rank of the newly industrialized economies. Rather most of the revenue which accrued was frittered away on unproductive investments owing largely to incompetent and corrupt political leadership coupled with large scale mismanagement of the national economy. Secondly, as compared to some of the countries which were more or less at the same level of development with Nigeria in the 1960s, such as South Korea, Malaysia, and Indonesia, the country’s performance, to put it mildly, has been very modest. Whilst the other countries are being celebrated because of the rapid progress made in their development efforts, Nigeria continues to wallow in poverty with over 70% of its population living on less than two dollars a day.

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Lastly, even though some progress had been made in the last 20 years under the civilian dispensation which came into office in 1999, Nigeria still has a lot of catching up to do as the country continues to face enormous challenges. These include the over dependence on crude oil exports, a growing population currently estimated to be in excess of 200 million as well as inadequate infrastructural facilities needed to support rapid industrial development. All these challenges have to be tackled in the face of dwindling oil revenues as being currently witnessed arising from unfavourable developments in the international oil market which may become an enduring feature of the global trading system in the years to come.

5 Rebasement of National Accounts and Growth of the Economy Since 2010 In 2010, the National Bureau of Statistics (NBS), the Federal Government Agency charged with the responsibility for preparing national accounts took a bold step to rebase the national account series which had been in place since 1990.Under the new dispensation the year 2010 was selected as the base year for preparing a new national account series that will take into consideration all the changes and developments that have taken place in a growing and dynamic economy such as Nigeria over the last 20 years. This effort resulted in a new national account series with 2010 as base year. Under the new national account series the number of economic activities used in the GDP computational framework increased from 33 to 46 sectors. Also the size of the sample frame was expanded from 83,733 to 851,628 establishments. The rebasing exercise led to a better coverage of the services sector as well as the inclusion of new economic activities not captured under the old series such as entertainment, research, patents, and copyrights. Tables 1.5 and 1.6 contain a summary presentation of Nigeria’s rebased Gross Domestic Product for the period 2010 to 2017 in absolute and percentage terms, respectively. A more detailed breakdown of the rebased Gross Domestic Product is contained in Appendix 1, covering the period 2010–2019. Table 1.5 shows that the rebased GDP at 2010 constant basic prices rose from N54,612.26 billion in 2010 to a high of N69,028.93 billion in 2015 giving an average annual growth rate of 4% during the period. However, following the collapse of crude oil prices, starting from mid-2014 the economy was faced with very unfavourable headwinds leading to a contraction of the GDP in 2016. Indeed the economy slipped into recession and its growth rate was negative for the first time in over 25 years. This is a further indication that the country is critically dependent on the oil sector to drive the economy. The economy only managed to exit the recession during the last quarter of 2017 with the GDP bouncing back to N68,496.92 billion in that year. Even then the performance of the economy is still very precarious owing to the prevailing turbulence in the international oil market.

Source: National Bureau of Statistics

Activity sector 1. Agriculture (a) Crop production (b) Livestock (c) Forestry (d) Fishing 2. Industry (a) Crude petroleum and natural gas (b) Solid minerals (c) Manufacturing 3. Construction 4. Trade 5. Services (a) Transport (b) Information and communication (c) Utilities (d) Accommodation and food services (e) Finance and insurance (f) Real estate (g) Professional, scientific, and technical services (h) Administrative and support services Business services (i) Public administration (j) Education (k) Human health and social services (l) Arts, entertainment and recreation (m) Other services Total (GDP)

2011 13,429.38 12,017.19 999.40 142.46 270.32 12,874.25 8598.64 59.42 4216.19 1817.83 9640.90 19,748.68 736.24 6083.05 294.55 268.42 1394.70 4145.87 2031.47 13.82 2307.38 1087.67 374.12 76.81 934.60 57,511.04

2010 13,048.89 11,683.90 979.56 135.72 249.71 12,033.20 8402.68 51.88 3578.64 1570.97 8992.65 18,966.55 694.77 5955.06 222.26 245.76 1908.81 4127.99 1711.70 13.14 1998.47 826.67 330.96 30.93 900.02 54,612.26

1838.73 1105.90 390.30 97.83 1401.47 59,929.89

2012 14,329.71 12,919.54 972.76 146.09 291.31 13,028.05 8173.26 71.13 4783.66 1989.46 9853.68 20,729.00 711.08 6268.51 332.94 310.95 1687.91 4379.94 2190.07 13.37 1828.84 1278.41 427.72 112.44 1551.53 63,218.72

2013 14,750.52 13,247.80 1030.94 154.31 317.47 13,014.51 7105.28 82.87 5826.36 2272.38 10,507.90 22,673.41 738.08 6783.07 395.58 540.63 1833.65 4904.64 2265.11 13.72

Table 1.5 Nigeria’s: rebased gross domestic product at 2010 constant basic prices (2010–2017) Nbillion

1874.94 1391.95 472.63 129.18 1825.45 67,152.79

2014 15,380.39 13,793.45 1086.85 161.34 338.75 13,791.25 7011.81 95.21 6684.22 2568.46 11,125.80 24,286.89 770.69 7257.06 382.44 639.71 1982.67 5155.73 2390.44 13.98 1644.78 1498.71 484.34 141.33 2151.38 69,028.93

2015 15,952.22 14,274.94 1151.32 167.26 358.70 13,319.13 6629.96 102.54 6586.62 2680.12 11,697.59 25,374.78 805.46 7708.11 367.31 654.22 2123.90 5264.70 2516.07 14.47 1569.52 1518.93 475.69 146.58 2257.47 67,931.24

2016 16,607.34 14,894.45 1185.12 171.64 356.13 12,062.05 5672.21 87.61 6302.23 2520.85 11,669.06 5077.94 808.60 7858.70 335.25 619.42 2027.51 4903.60 2536.29 14.47 1563.62 1507.98 474.24 152.63 2310.55 68,496.92

2017 17,179.50 15,437.05 1204.21 177.33 360.91 12,320.61 5943.99 87.73 6288.90 2545.99 11,546.45 24,904.37 839.85 7776.90 377.61 609.47 2053.00 4694.39 2529.68 14.47

5 Rebasement of National Accounts and Growth of the Economy Since 2010 15

2011 23.35 20.90 1.74 0.25 0.47 22.39 14.95 0.10 7.33 3.16 16.76 34.34 1.28 10.58 0.51 0.47 2.43 7.21 3.53 0.02 4.01 1.89 0.65 0.13 1.63 100.00

2010 23.89 21.39 1.79 0.25 0.46 22.03 15.39 0.09 6.55 2.88 16.47 34.78 1.27 10.90 0.41 0.45 3.50 7.56 3.13 0.02 3.66 1.51 0.61 0.06 1.65 100.00

Source: Computed from Table 1.5, errors due to rounding off

Activity sector 1. Agriculture (a) Crop production (b) Livestock (c) Forestry (d) Fishing 2. Industry (a) Crude petroleum and natural gas (b) Solid minerals (c) Manufacturing 3. Construction 4. Trade 5. Services (a) Transport (b) Information and communication (c) Utilities (d) Accommodation and food services (e) Finance and insurance (f) Real estate (g) Professional, scientific, and technical services (h) Administrative and support services Business services (i) Public administration (j) Education (k) Human health and social services (l) Arts, entertainment, and recreation (m) Other services Total (GDP) 3.07 1.85 0.65 0.16 2.34 100.00

2012 23.91 21.56 1.62 0.24 0.49 21.74 13.64 0.12 7.98 3.32 16.57 34.59 1.19 10.46 0.56 0.52 2.82 7.31 3.65 0.02 2.89 2.02 0.68 0.18 2.45 100.00

2013 23.33 20.96 1.63 0.24 0.50 20.59 11.24 0.13 9.22 3.59 16.62 35.87 1.17 10.73 0.63 0.86 2.90 7.76 3.58 0.02 2.79 2.07 0.70 0.19 2.72 100.00

2014 22.90 20.54 1.62 0.24 0.50 20.54 10.44 0.14 9.95 3.82 16.57 36.17 1.15 10.81 0.57 0.95 2.95 7.68 3.56 0.02

Table 1.6 Nigeria’s: rebased gross domestic product at 2010 constant basic prices (2010–2017) percentage distribution

2.38 2.17 0.70 0.20 3.12 100.00

2015 23.11 20.68 1.67 0.24 0.52 19.30 9.61 0.15 9.54 3.88 16.95 36.76 1.17 11.17 0.53 0.95 3.08 7.63 3.65 0.02 2.31 2.24 0.70 0.21 3.32 100.00

2016 24.44 21.93 1.74 0.25 0.52 17.76 8.35 0.13 9.27 3.71 17.18 36.91 1.19 11.57 0.49 0.91 3.00 7.22 3.73 0.02 2.28 2.20 0.69 0.22 3.37 100.00

2017 25.08 22.54 1.76 0.26 0.53 17.99 8.68 0.13 9.18 3.72 16.86 36.36 1.23 11.35 0.55 0.89 3.00 6.85 3.69 0.02

16 1 The Emerging Nigerian Economy

5 Rebasement of National Accounts and Growth of the Economy Since 2010

17

Table 1.7 Nigeria’s nominal GDP in billions of Naira before rebasing at 1990 constant basic prices 2010–2013 Agriculture Industry Of which manufacturing Services Total

2010 10,310.66 15,569.29 643.07 8014.58 33,894.53

2011 11,593.43 16,569.29 694.81 9247.14 37,409.86

2012 13,413.84 16,456.46 761.48 10,673.80 40,544.10

2013 14,709.11 15,374.56 823.86 12,313.11 42,396.77

Source: National Bureau of Statistics Table 1.8 Percentage change in Nigeria’s nominal GDP between the old and new series 2010– 2013 Agriculture Industry Of which manufacturing Services Total nominal GDP

2010 25.97 10.65 1.89 239.68 59.50

2011 24.40 6.31 1.85 237.63 69.10

2012 18.67 15.60 1.87 239.56 75.58

2013 19.82 34.46 1.94 240.49 89.22

Source: National Bureau of Statistics

In order to get a better perspective on the performance of the economy, Table 1.6 shows the sectoral percentage distribution of the GDP over the same period. From the percentage distribution of the GDP it will be observed that the Services Sector is now the dominant segment of the GDP accounting on average for over 50.00% of Nigeria’s GDP, with Agriculture contributing 25.08% and Industry 17.99%, respectively in 2017. Under the Industry sector, manufacturing accounted for only 9.18% of the GDP in 2017. In addition Tables 1.7 and 1.8, respectively, attempt to capture some of the significant changes in Nigeria’s GDP between the old and rebased series as well as the emerging trends in the size, composition, and structure of the national economy. From the tables, the following observations can be made as follows: 1. under the rebased series, the nominal GDP was much higher than previously estimated. For example, the rebased nominal GDP for the year 2010 stood at N54,612.26 billion (equivalent to $360.64 billion U.S. dollars) and rose to $568.50 billion in 2014. With the rebasement Nigeria became the largest economy in Africa, overtaking South Africa which had previously been ranked as the largest in the continent with a GDP of $358 billion in 2014. However, South Africa continues to be the most advanced country in Africa 2. a more diversified national economy than earlier reported became evident, with a decline in the share of agricultural sector and a rise in the services sector. In 2010, according to the rebased series, the share of the agricultural sector has declined from 30.30% to 24 0%, industry from 46.10% to 22%, whilst the share of the services sector has increased from 23.58% to 51.25%

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3. the number of economic activities accounting for 70% of the nominal GDP has risen from three to six after rebasing. The six economic activities include crop production, trade, crude petroleum and natural gas, telecommunications and information services, real estate as well as food, beverages, and tobacco. 4. as compared to the old 1990 base year series, there is a 59.50% increase in the rebased Nominal GDP for 2010. Whereas under the old series the GDP for 2010 was estimated at about N33,894.53 billion, but this had risen to N54,612.26 billion under the new rebased series. 5. it was discovered that the growth rate of real GDP was faster under the rebased series. Whereas in 2010, the growth rate of real GDP was estimated at 5% under the old series but this rose to 5.09% in 2011, and 6.66% in 2012, respectively, under the new series. 6. there was better coverage of the services sector in general under the new series with the most notable changes observed in several sub-sectors, including human and social services, information and communication as well as professional, scientific, and technical services. In addition the service sector is expected to show the fastest growth rate in the near future. 7. also to be noted is the spectacular rise in the information and communication services sub-sector, second only to wholesale and retail trade, whereas the sub-sector was miniscule under the old series, indicating a remarkable growth rate over the last 20 years. A more detailed treatment of the differences between the old and new national account series can be found in the relevant publication on the subject issued by the National Bureau of Statistics [8]. In spite of the euphoria of Nigeria’s economy becoming the largest in Africa, this feat could have been greater or achieved at a much earlier date had the economy been better managed, large scale corruption curtailed, core industrial projects faithfully implemented and critical infrastructure such as electricity, roads, railways, etc. needed to support rapid development put in place. Until all these impediments hindering Nigeria’s industrial development are eliminated or minimized, the country’s march to modernization and socio-economic progress will continue to be sluggish relative to its potentials.

6 Summary and Conclusion In this opening chapter an attempt has been made to provide a general but informed background to the more detailed analysis of the key issues and topics to be discussed in the subsequent chapters of this book. It has been noted that Nigeria is a relatively young nation state which came into existence in 1914 following the amalgamation of the territories then known as Southern and Northern Protectorates under British suzerainty. The country attained full independence in 1960 after nearly 100 years of British colonial rule. The country

6 Summary and Conclusion

19

has been described as a mere geographical expression containing an agglomeration of several nationalities each with history dating back several 1000 years. Forging a truly nation state out of this multitude of nationalities has been a major challenge in post-independence Nigeria. Nevertheless some progress has been made in the task of nation building and socio-economic development. At independence in 1960, Nigeria’s GDP amounted to less than N2500 million, out of which the agricultural sector accounted for about 65% of national output and manufacturing a mere 4.58%. Thus Nigeria’s economy was basically rural with over 70% of the population dependent on agriculture and handicrafts for employment and livelihood. Over the next decade from 1960 to 1970, the performance of the economy was very modest arising from slow growth, internal strife, and a bloody civil war which ended in early 1970. However, over the next decade from 1970 to 1980, the country’s GDP expanded rapidly following the quadrupling of crude oil prices which provided the wherewithal to undertake several development projects. During this period the annual growth rate of the GDP averaged over 8.00%. However, this economic boom came to an end in 1981 as a result of the collapse of the international market for crude oil on which the country depended for over 95% of foreign exchange earnings and the bulk of government revenue. The rapid downturn in the economy led to the adoption of the structural adjustment programme in 1986 in order to save the economy from virtual collapse. Between 1980 and 1990 the average annual growth rate of the GDP was only 1.6%, whilst it rose marginally to 1.9% between 1990 and 2000. Given a population growing at over 3.00% per annum, per capita income growth rate was in fact negative during this period. Indeed over the 20 year period from 1980 to 2000 Nigeria’s GDP in fact contracted from $64.20 billion in 1980 to $48.40 billion in 2000 as a result of poor economic policies, dwindling oil revenue, large scale mismanagement of the national economy and endemic corruption. However, more favourable economic conditions prevailed over the period 2000 to 2015 with the average annual growth rate of the GDP estimated at 8.2%. Thus by 2014, following the earlier rebasement of the national account series, the country’s GDP surpassed that of South Africa, making Nigeria’s economy the largest in Africa, with an estimated GDP of $568.50 billion. However, as a result of the collapse of crude oil prices towards the end of 2014, the country has faced serious challenges leading to a contraction of the economy and for the first time in over 25 years a negative GDP growth rate was recorded in 2016. This confirms that the Nigerian economy remains undiversified and very exposed to movements in the price of crude oil in the international market. Thus Nigeria’s GDP fell to $375.8 billion in 2017 as against South Africa with a GDP of $349.4 billion in the same year. However, following a rebound of the economy, Nigeria’s GDP rose to $476 billion in 2019 as compared to South Africa’s GDP of $352 billion in the same year. One of the major goals of the leadership that emerged after independence has been that of transforming the country from its largely agrarian background to a modern industrialized state. Towards this end ambitious plans and programmes of

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national economic development have been pursued over the past 60 years. However, in spite of the abundant human and natural resources available in the country as well as the massive windfalls from crude oil exports since the 1970s, the country has made only modest progress in terms of socio-economic development as compared to some countries in South East Asia such as South Korea and Malaysia which were more or less at the same level of economic development with Nigeria in 1960. Thus the major challenge confronting the political leadership in Nigeria continues to remain that of achieving a faster rate of socio-economic development to meet the aspirations of its teeming population now reckoned to be in excess of 200 million.

References 1. Crowder M, 1970 The Story of Nigeria, Faber & Faber, London, p.11 2. Ibid, p.190 3. Rostow W.W,1971. The Stages of Economic Growth, Cambridge University Press, London, p.4 4. Kuznets S, 1966 Modern Economic Growth, Yale University Press 5. Myrdal G 1968 Asian Drama, Vintage Press, New York 6. Op. Cit, p.39 7. Federal Government Printer, Lagos 1986 Structural Adjustment Programme 8. National Bureau of Statistics, Abuja, 2014. Frequently Asked Questions on The Rebasing/ReBenchmarking of Nigeria’s Gross Domestic Product

Chapter 2

Manufacturing Sector in the Nigerian Economy

1 Introduction In Nigeria, as in most developing countries in Africa, Asia, and Latin America, industrialization is seen as central to the goal of achieving rapid socio-economic development. This is because of the apparent positive correlation between industrialization and socio-economic progress as demonstrated by the high standard of living achieved in the industrialized countries of Western Europe, USA, Canada, Japan and lately the People’s Republic of China. Thus Nigeria, like the other emerging nation states, had been preoccupied with the goal of transforming its largely agrarian economy to an industrialized one within the shortest possible time so as to accelerate overall socio-economic development as well as catch up in due course with the more advanced economies. This preoccupation has led, over the past six decades, to ambitious plans drawn up to stimulate rapid industrial development in Nigeria. Hence the pride of place accorded to development of the manufacturing sector in the various national development plans with a view to accelerating rapid industrialization of the economy through establishment of an increasing number of modern manufacturing industries. However, unlike the newly industrialized countries of South East Asia which had recorded spectacular successes in their industrialization programme, achievements in Nigeria had been very modest in spite of the resources available and committed to this effort. In addressing the various issues arising from Nigeria’s attempt to achieve rapid industrial development, this chapter is divided into seven parts as outlined below. Following this introduction, Sect. 2 contains an overview of the manufacturing sector in Nigeria. This is followed in Sect. 3 with an analysis of the status and performance of the manufacturing sector from independence to the present time. Thereafter Sect. 4 examines the tariff policy pursued by succeeding governments to protect and stimulate the establishment of manufacturing industries in Nigeria. In © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5_2

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2 Manufacturing Sector in the Nigerian Economy

Sect. 5 some key features of the manufacturing sector are discussed, followed in Sect. 6 with a review of the problems and constraints preventing the sector from optimal performance. Section 7 contains the summary and conclusion.

2 Overview of the Manufacturing Sector Since the attainment of independence in 1960, successive governments in Nigeria had championed the goal of achieving rapid industrial development as it was widely realized that this held the key to the wider goal of transforming the national economy from its agrarian roots to a modern industrialized state. However, despite this realization and the resources committed to this goal over the past 60 years, Nigeria’s manufacturing sector is still to make the desired impact in transforming the national economy. Nevertheless, some modest achievements have been recorded in stimulating the growth of modern industrial establishments in the country. In this section attention will be focused on the evolution, current status, and key features of the emerging pattern of the manufacturing sector in Nigeria as discussed below.

2.1

Contribution to Gross Domestic Product

The contribution of the manufacturing sector to the nation’s GDP is still relatively small both in absolute terms and as a proportion of the GDP as highlighted in Table 2.1 at 5 yearly intervals over the period 1960–2017. In absolute terms, the output of the manufacturing sector in 1960 was very small amounting to only N114 million, out of a GDP of N2489 million. However, 20 years later, by 1980 the output of the manufacturing sector had risen to N3486 million out of a total GDP of N31,547 million. At independence in 1960, the share of manufacturing sector in GDP was only 4.58%, but by 1980 this has risen to 11.05% as a result of the oil boom years of the 1970s combined with government huge investments in several industrial projects as well as the policy of import substitution industrialization. Indeed, between 1970 and 1980, the annual growth rate of the manufacturing sector averaged over 8.5%. Over the next 30 years from 1980 to 2010, even though the value of manufacturing output increased from N3486 million in 1980 to N3578.64 billion out of a GDP of N54,612.26 billion in 2010, the percentage contribution of the manufacturing sector to the GDP had continued to decline as a result of various problems impacting on the performance of the sector. Thus between 1990 and 2010 the share of manufacturing in the GDP averaged a mere 5.0%. It is therefore ironic that in spite of the gains made in the 1970s and huge public investments in the sector, the structure of the Nigerian economy was still basically the same as it was at

2 Overview of the Manufacturing Sector

23

Table 2.1 Contribution of Nigeria’s manufacturing sector to GDP 1960–2017 Year 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2016 2017

Manufacturing sector N million 114 221 318 1187 3486 12,032 14,702 13,836 13,959 21,305 3,578,640 6,586,620 6,302,230 6,286,900

GDP N million 2489 3147 4219 27,172 31,547 201,036 267,550 281,407 329,179 561,931 54,612,260 69,028,930 67,931,240 68,496,920

Manufacturing share of GDP (%) 4.58 7.02 7.52 4.37 11.05 5.94 5.50 4.92 4.24 3.79 6.55 9.54 9.27 9.18

Sources: National Bureau of Statistics

independence with manufacturing accounting for only 6.55% of the GDP in 2010 as compared to 4.58% in 1960. However, the contribution of the manufacturing sector to the GDP improved significantly over the next 7 years as a result of improvements in the macroeconomic environment rising from 6.55% in 2010 to 9.95% in 2014 before declining to 9.18% in 2017. The contribution from the different sub-sectors of manufacturing to the GDP over the period 2010–2017 is indicated in Table 2.2. From the table it will be observed that the Food, Beverages, and Tobacco sub-sector is the largest contributor to GDP, accounting for about N2937.06 billion of GDP in 2015. This is followed by Textiles, Apparel, and Footwear in the second position with a contribution of N1.423.02 billion, Cement Manufacturing in third position with N596.17 billion, other manufacturing with N353.74 billion in fourth position, and Non-Metallic Products in fifth position with a contribution of N227.23 billion to the GDP, respectively, in 2015. In 2017, arising from the economic slowdown following the collapse of crude oil prices in 2014, the contribution of the Food, Beverages, and Tobacco to the GDP contracted to N2817.56 billion, followed by Textiles, Apparel, and Leather at N1419.07 billion, Cement manufacturing at N551.76 billion, and Other Manufacturing at N282.95 billion, respectively. The only exception was the Non-Metallic Products sub-sector where output rose from N227.23 billion in 2015 to N239.10 billion in 2017. It should be pointed out that significant changes have occurred in the relative contribution of each of the manufacturing sub-sectors to the GDP. Whereas in the 1970s and 1980s textiles, apparel and footwear sub-sector along with the food, beverages and tobacco sub-sector both occupied the pride of place in terms of

Source: National Bureau of Statistics

Activity Oil refining Cement Food, beverages, and tobacco Textiles apparel and leather Wood and wood products Pulp, paper and paper products Chemical and pharmaceutical products Non-metallic products Plastic and rubber products Electrical and electronics Basic metal iron and steel Motor vehicles and assembly Other manufacturing Total manufacturing

2010 255.16 221.09 2298.52 352.54 123.38 24.36 25.17 59.55 33.86 2.51 44.47 21.89 116.14 3578.64

2011 271.00 238.20 2466.51 571.85 130.27 28.52 38.94 99.04 76.11 4.57 103.03 26.29 161.87 4216.19

2012 223.52 270.35 2628.31 815.29 157.34 30.35 61.90 112.06 106.43 4.53 124.49 35.32 213.79 4783.66

2013 344.71 376.45 2938.61 1096.39 171.31 44.02 92.64 148.21 138.51 4.76 141.11 44.40 285.25 5826.36

2014 311.38 488.28 3104.00 1438.34 193.07 50.24 127.77 198.96 180.37 5.07 163.11 55.77 367.84 6684.22

2015 200.88 596.27 2937.06 1423.02 205.21 53.67 150.99 227.23 212.63 5.13 168.19 52.68 353.74 6.586.62

Table 2.2 Contribution to GDP by sub-sectors of manufacturing at 2010 constant basic prices 2010–2017 (N Billions) 2016 205.97 564.21 2752.90 1407.50 196.93 51.43 152.79 234.50 220.27 4.72 169.40 37.39 304.22 6302.23

2017 148.92 551.78 2817.56 1419.07 197.98 51.49 153.99 239.10 222.44 4.59 169.68 29.35 282.95 6286.90

24 2 Manufacturing Sector in the Nigerian Economy

2 Overview of the Manufacturing Sector

25

output, employment and value added, the situation with regard to the textile sub sector has been reversed in the last two decades arising from the closure of several textile firms unable to withstand the competition from cheaper imports and smuggling. It is also noteworthy to observe that the contribution of the cement sub-sector had more than doubled between 2010 and 2017 as a result of the huge investments made by the cement manufacturers, especially the Dangote Group, the leading cement manufacturer in the country and Africa.

2.2

Structure of the Manufacturing Sector

In general, the structure of the manufacturing sector in Nigeria can be broken down into three broad groups, namely • Cottage industries and handicrafts. • Small scale urban industries. • Modern industrial sector. The cottage industries and handcrafts predominate in the rural areas and involve simple processing activities using basic implements. These are found in virtually all areas of human endeavour such as milling, tailoring, carpentry/wood works, shoe making, blacksmithing, and the like. The activities in this area are grouped under the informal sector and are only captured in official statistics by estimation. On the other hand, the major urban areas are populated with small scale industries employing less than ten people catering for the needs of city dwellers. These are engaged in diverse but not sophisticated activities such as printing, bakery and pastry, furniture making, motor vehicle repairs, welding, and so on. This class of industries is also generally captured by estimation in official statistics which only cover enterprises employing ten or more people. Both the rural cottage industries and small scale urban industries constitute important segments of manufacturing which should not be overlooked as they not only cater for the basic needs of the populace but also provide gainful employment to several millions. Thus it is imperative for government to put in place policies and programmes aimed at developing and modernizing their activities. Realizing the potential contribution that this class of industries could make to national development, governments at both the Federal and State levels have in the past launched various schemes aimed at developing the small enterprise sector. Indeed, as a result of the abiding interest in the development of small scale enterprises, the Federal Government recently launched the micro, small, and medium enterprise (MSME) development scheme to stimulate the growth of the sector. However, over the years, the major focus of government has been on the development of medium and large scale industrial establishments which are expected to galvanize the transformation of the economy into a modern industrialized one. The emergence of medium and large scale industrial undertakings is of a more recent origin as these enterprises came into existence in the closing years of

26

2 Manufacturing Sector in the Nigerian Economy

British colonial rule in the late 1950s and in the early years of independence in the 1960s. As observed by Kilby [1] these modern industries were established by foreign investors anxious to protect their share of the market in Nigeria rather than being shut out by high tariffs being put in place as part of government’s import substitution industrialization strategy. Thus at the initial stage, foreign private investment dominated the modern manufacturing sector. Such enterprises are found in food, beverages, and tobacco, textiles and wearing apparel, soap and detergents, brewing and soft drinks, plastics, rubber, radio and television assembly to name just a few of such enterprises. However, in the 1970s, with the windfall accruing from crude oil exports, government decided to take the lead in the establishment of core industrial projects considered strategic to the development of the industrial sector. This led to the establishment of several industrial undertakings either wholly owned by government or in partnership with foreign investors. Such core industrial projects included iron and steel, pulp and paper, cement, machine tools, motor vehicle assembly, petrochemicals, and fertilizers. Moreover since the 1970s private Nigerian investors were beginning to make their mark in the establishment of medium and large scale manufacturing enterprises. Furthermore, under the indigenization decrees of the 1970s which reserved some sectors exclusively to Nigerians and a minimum local equity participation of 40% in most foreign enterprises, Nigerian citizens and associations became joint owners of several industrial enterprises.

2.3

Employment in the Manufacturing Sector

In terms of employment, the manufacturing sector still accounts for a low share of total employment by economic activity. At independence in 1960, the total number of persons employed in the manufacturing sector was insignificant as the sector accounted for only 4.58% of GDP. Most of those employed in the sector at that time were in fact engaged in cottage industries and crafts as the modern industrial sector was just emerging. However with the emergence of modern manufacturing industries in the late 1950s into the 1960s, the number of persons employed in medium-large manufacturing enterprises rose significantly. For example, based on surveys conducted by the Federal Office of Statistics, the number of persons employed in manufacturing enterprises employing ten or more people rose from175,287 in 1974 to 324,440 in 1977. More recent figures on employment by economic activity in Nigeria over the period 2005–2009 are presented in Table 2.3. As would be expected, with the growth of the population from about 88 million in 1981 to over 160 million in 2010, the proportion of the working population in the age bracket 15–64 years also rose significantly. Thus in 2009 the total working population of Nigeria was estimated at 54.47 million out of which only 735,345, representing 1.35% of the labour force

Source National Bureau of Statistics

Description Agricultural hunting forestry and fishing Mining and quarrying Manufacturing industries Production and distribution of electricity and water Building and construction Commercial repairs of auto and domestic art Hotels and restaurants Transport, storage and communication Finance intermediation (include insurance) Real estate, renting and business activities Public administration defence and community social services Education Health and social work Others Total working population

% 58.31 0.14 1.85 0.87 0.56 0.21 0.20 0.85 0.57 0.01 10.32 19.29 0.60 6.11 100

2005 28,633,653 69,001 907,877 426,642 273,049 103,847 96,370 415,988 280,948 60,182 5,067,423 9,473,306 296,375 2,998,702 49,103,363

Table 2.3 Employment By economic activity, 2005–2009

10,017,082 313,387 3,170,830 50,281,223

288,723 109,808 101,907 439,866 297,074 62,636 5,158,298

2006 28,936,534 72,962 859,990 451,132

19.29 0.62 6.30 100

0.57 0.22 0.20 0.87 0.59 0.12 10.26

% 57.55 0.14 1.71 0.90

10,443,999 307,971 3,279,621 51,501,091

329,583 140,478 129,672 807,615 302,568 81,045 5,338,164

2007 29,049,058 81,045 821,256 389,016

20.28 0.60 6.37 100

0.64 0.27 0.25 1.57 0.59 0.16 10.36

% 56.40 0.16 1.71 1.60

11,955,826 329,406 3,466,866 54,001,022

356,407 151,203 145,803 885,617 307,806 97,202 5,572,905

2008 29,484,557 81,002 799,215 367,207

22.14 0.61 6.42 100

0.66 0.28 0.27 1.64 0.57 0.18 10.32

% 34.60 0.15 1.48 0.68

12,217,622 332,267 3,507,868 54,470,005

359,502 152,516 163,410 904,202 310,479 108,940 5,588,623

2009 29,664,365 81,705 735,345 343,161

22.43 0.61 6.44 100

0.66 0.28 0.30 1.66 0.57 0.20 10.26

% 54.46 0.15 1.35 0.63

2 Overview of the Manufacturing Sector 27

28

2 Manufacturing Sector in the Nigerian Economy

were employed in modern medium and large scale manufacturing industries employing ten or more people. The table also revealed that there had been a significant decline in the number of persons employed in the modern manufacturing sector since the turn of the century arising from the harsh operating environment in Nigeria coupled with the on-going de-industrialization of the country under the assault of cheaper imports, especially from China, South East Asia, and Japan. Thus the number of people engaged in the modern industrial sector declined from 907,877 in 2005 to 735,345 in 2009. It is worth highlighting here that the harsh operating environment had impacted very negatively on the textile subsector which in the 1970s and 1980s used to be the largest employer of labour after government. Following the closure of several textile firms, the sector which used to employ over 300,000 people now employs less than 30,000. Although government has in recent times taken steps to revamp the textile industry, including the establishment of the textile development fund, there is still no appreciable change in the situation. A more recent survey based on the new national account series conducted by the National Bureau of Statistics in 2017 revealed that the labour force in Nigeria is estimated at 85.08 million, out of which 77.55 million were engaged in some sort of economic activity for at least one hour per week. The number of people in full time employment (those working at least 40 h per week) was estimated at 51.06 million, out of which agriculture accounted for 22.95 million people at 44.9% of the total. This was followed by Trade in a distant second position at 14.9%, other services in third position at 8.5%, and Manufacturing in fourth position at 7% of the total with 3.58 million people employed in the sector. Out of the total number indicated under manufacturing, only 679,325 were in medium-large industries employing ten or more people. Thus the large number of people classified under manufacturing were in fact engaged in cottage and small scale industries employing less than 10 people. Overall, the modern manufacturing sector is still to make an appreciable impact in absorbing a larger proportion of the working population. Furthermore, when the situation on the ground in Nigeria is compared to other emerging economies such as Indonesia, Malaysia, and South Korea, which started the race for industrialization with Nigeria in the 1960s the picture that emerges is one of woeful performance. For example, the proportion of the working population engaged in the manufacturing sector in the three comparator countries of Indonesia, Malaysia, and South Korea is over 20% in each country as compared to the prevailing situation in Nigeria at less than 10%. The superior performance of the comparator countries is anchored on the growth of their manufacturing sector which now accounts for 22%, 24%, and 30% of the GDP of Indonesia, Malaysia, and South Korea respectively as compared to Nigeria where the manufacturing sector contributed a mere 4.24% to the GDP in 2000 and less than 10% as at 2017. The prevailing situation in Nigeria has resulted in massive unemployment amongst school leavers and university graduates. In terms of the distribution of manufacturing employment in Nigeria by industrial grouping, a majority of employees are engaged in consumer goods industries. This is

3 Performance of the Manufacturing Sector

29

estimated to account for over 65% of the total whilst about 28% are employed in intermediate goods production and 7% in capital goods industries. This is a reflection of the structure of the manufacturing output and confirming that Nigeria is still to graduate from the early stages of import substitution industrialization.

3 Performance of the Manufacturing Sector As pointed out earlier even though manufacturing output grew in absolute terms since 1960, its share in the GDP remained a mere 6.55% in 2010. This confirms that the manufacturing sector had failed to serve as a catalyst for rapid economic development. A review of past and present performance of the manufacturing sector reveals a number of underlying factors responsible for this situation. Following the attainment of independence in 1960 government pursued an aggressive programme of industrial promotion. However, because of the rather sluggish growth of the economy and unfolding political turmoil not much was achieved in the 1960s with the manufacturing sector contributing less than 8% to GDP in 1970. However, with the end of the civil war in early 1970 coupled with the windfall from crude oil exports the manufacturing sector grew rapidly over the next decade aided partly by increased private sector investment but more importantly by public sector investments in major capital intensive projects such as iron and steel, petro-chemicals, pulp and paper, cement, motor vehicle assembly, and machine tools. As a result the foregoing, the sector recorded an average annual growth rate of 8.5% during the 1970s culminating in manufacturing sector contribution to the GDP of 11.05% by 1980. However, most of the gains were in import substituting light consumer goods with low technology base and assembly type operations, shielded from international competition behind high protective tariff walls. Following the collapse of the international crude oil market in 1981, the Nigerian economy nosedived rapidly arising from the fact that oil exports accounted for over 95% of foreign exchange earnings and over 80% of government revenue. The downward spiral of the economy led to the adoption of a structural adjustment programme in 1986 in order to save it from collapse. Arising from the prevailing economic environment of the 1980s, the manufacturing sector faired very badly, with most of the industrial projects initiated by government such as in iron and steel, pulp and paper, machine tools, sugar, motor assembly, etc., partially abandoned or closed down completely. Manufacturing industries in the private sector were equally affected, especially those that were raw material import dependent arising from their inability to obtain hard currency to import needed raw materials and other essential inputs. This led to a downward spiral in average manufacturing capacity utilization which fell from a high of over 70% to a low of under 30% and in some instances outright factory closures. Other important contributory factors to dismal performance in the manufacturing sector included inadequate infrastructure such as epileptic power

30

2 Manufacturing Sector in the Nigerian Economy

supply, poor transport network, water supply, and telecommunications. All these led to high cost structure of made-in-Nigeria goods and made them uncompetitive against cheaper imports. It is against this background that the manufacturing sector operated over the period 1985 to 2000, with the contribution of the sector to the GDP consistently below 6%. Also during this period the average annual growth rate of the sector was very low and in some years it was negative. Following the apparent stagnation of the sector, government was forced to adopt a programme of privatization of state owned industrial enterprises. However, the programme has yielded mixed results with some of the privatized enterprises still to make any appreciable contribution to national output. Over the next decade, from 2000 to 2010, the performance of the manufacturing sector did not fair any better as most of the perennial problems facing the sector remained in place. Thus the index of manufacturing production with 1990 as base year which stood at 138.2 in 2000 fell to 89.5 in 2005 and 94.2 in 2010. A review of the more recent performance of the manufacturing sector over the periods 2010–2014 and 2015–2017 gives a more up to date picture of the current status of the sector. The underlying reasons for the improved situation of the sector during the period 2010–2014 can be inferred from a number of interrelated factors as illustrated in Table 2.4. From the table it will be observed that the performance of the manufacturing sector is influenced by both the overall macroeconomic and policy environment as well as by sectoral factors. On the macroeconomic front, it is gratifying to note that as against the previous period, real GDP growth rate rose from 5.3% in 2011 to 6.2% in 2014. This is largely attributable to a rebound in the global demand for crude oil exports coupled with higher oil prices at over $130 per barrel. This provided the bedrock for a more favourable and stable macroeconomic environment. It would be observed from the table that gross fixed capital formation as a percentage of the GDP remained steady at between 14.2% and 16.00% during the 5 year period 2010–2014. In respect of gross national saving as a percentage of the GDP, this was also impressive during the period at between 14.0% and 36.0% of the GDP. During the period inflation rate was curtailed to single digits, falling from 11.8% in 2010 to 8.0% in 2014. The Naira/Dollar exchange rate remained stable during the period at between N150-N170/US $1. In addition there was a significant growth in the country’s GDP which rose from N54,612 billion in 2010 to over N67,000 billion in 2014. Similarly GDP per capita rose from $2316.9 in 2010 to $3146.5 in 2014. All the foregoing impacted positively on the performance of the manufacturing sector in spite of the well known binding constraints confronting the sector. Thus manufacturing annual growth rate rose from 7.6% in 2010 to 17.8% and 21.8% in 2011 and 2013, respectively. However, this declined to 14.7% in 2014 and minus 1.5% in 2015 as a result of the unfavourable headwinds arising from the collapse of the international crude oil market. Manufacturing percentage capacity utilization remained steady throughout the period and rose from 56.2% in 2010 to 59.6% in 2014. Similarly the index of manufacturing production nearly doubled from 100 in the base year of 2010 to about 187 in 2014. As a result of all the foregoing, the

3 Performance of the Manufacturing Sector

31

Table 2.4 Some factors influencing the performance of the manufacturing sector 2010–2017 Heading Real GDP growth rate Gross fixed capital formation % of GDP Gross national saving % of GDP Inflation rate % Naira/dollar official exchange rate Manufacturing % annual growth rate Manufacturing output as % of GDP Manufacturing % capacity utilization Index of manufacturing production (2010 ¼ 100)

2010 n.a

2011 5.3

2012 4.2

2013 5.5

2014 6.2

2015 2.8

2016 (
1.6)

2017 0.8

n.a

16.0

14.6

14.2

15.1

14.8

14.7

12.1

n.a

23.5

36.0

14.0

16.8

11.5

10.5

9.5

10.3 158.27

12.0 157.33

8.0 157.26

8.0 169.68

9.6 197.00

18.5 305.00

15.4 306.00

17.8

13.5

21.8

14.7

(
1.5)

(
4.3)

(
0.21)

9.54

9.27

9.18

11.8 150.66 7.6

6.55

7.33

7.98

9.22

9.95

56.2

56.3

56.8

57.8

59.6

59.9

49.0

52.0

100

117.70

133.74

162.85

186.85

187.3

180.00

179.6

n.a not available Source; Central Bank of Nigeria Annual Reports

contribution of the manufacturing sector in absolute terms rose from N3.578.64 billion in 2010 to N6684.22 billion in 2014. As a proportion of the GDP the contribution of manufacturing output rose from 6.55% in 2010 to nearly 10% in 2014. In terms of the performance of the different sub-sectors of industry over the period under review, Table 2.5 on the index of manufacturing production provides a glimpse of recent developments in each of the major sub-sectors as illustrated in the table. From the table it will be observed that even though the overall performance of the manufacturing sector nearly doubled between 2010 and 2014, individual sub-sectoral performance varied from one to the other. Thus the level of production rose by over 500% in plastic and rubber products as well as in chemical and pharmaceuticals products during the period under review. This was followed by the textile, apparel and footwear sub-sector where production increased by over 400%. In the basic metal, iron and steel, non-metallic products, and other manufacturing sub-sectors, production increased by over 300%. However, the rate of increase in the level of production between 2010 and 2014 was more modest in oil refining at 22%, food, beverages, and tobacco at 35%, wood and wood products at nearly 57%. In the sub-sectors of cement, pulp, paper and paper products, electrical and electronics, motor vehicles and assembly,

100.00 106.21 87.60 135.10 122.12 78.7 80.68 58.4

2010 2011 2012 2013 2014 2015 2016 2017

100.00 107.67 122.27 170.23 220.79 269.6 255.18 249.6

Cement

100.00 107.28 114.37 127.85 135.04 127.8 119.75 122.6

Source: Central Bank of Nigeria

Oil refining

Year

Food, beverage and tobacco

100.00 161.28 233.51 314.03 412.14 406.6 401.58 404.7

Textile, apparel and footwear

100.00 105.63 127.60 134.90 156.22 166.4 159.63 160.5

Wood and wood products 100.00 117.01 124.67 180.74 206.23 220.3 211.13 211.4

Pulp, paper and paper products 100.00 166.75 245.67 367.94 507.56 599.9 607.10 611.8

Chemical and pharmaceutical products

Table 2.5 Index of manufacturing production 2010–2017 (2010¼100)

100.00 224.72 188.66 249.26 334.84 382.4 344.70 402.4

Nonmetallic products 100.00 182.11 314.32 409.05 532.66 628.0 650.60 656.9

Plastic and rubber products 100.00 231.11 180.55 189.83 202.10 204.8 188.05 182.7

Electrical and electronics 100.00 231.46 279.95 317.21 366.60 378.0 380.73 381.3

Basic metal, Iron and Steel

100.00 120.16 151.59 203.01 255.13 214.4 171.70 134.5

Motor vehicles and assembly

100.00 139.34 184.21 245.65 316.82 304.6 262.00 243.6

Other Manufacturing

100.00 117.70 133.74 162.85 186.85 187.3 180.00 179.6

Total

32 2 Manufacturing Sector in the Nigerian Economy

4 Tariff Policy and the Manufacturing Sector

33

increases in the level of production faired better at over 200% during the review period. As pointed out earlier, this impressive performance of the manufacturing sector was made possible by the very favourable macroeconomic environment which prevailed during the period, before the unfavourable economic headwinds which began in mid-2014. The superior performance recorded between 2010 and 2014 was predicated on the sustained increase in crude oil prices driven by strong commodity demand in the international oil market. Unfortunately international commodity prices suffered a downturn by mid-2014 with crude oil prices crashing from over $130 per barrel to less than $40 per barrel. These developments impacted negatively in subsequent years on the Nigerian economy in general and on the manufacturing sector in particular. As a result the manufacturing sector recorded negative growth rates of
1.5%,
4.3%, and
0.21% in the years 2015, 2016, and 2017, respectively. Consequently the Nigerian economy contracted in 2016 for the first time in over 25 years. This led to a significant drop in the level of manufacturing output with the index of manufacturing production with 2010 as base year dropping from a high of 187.3 in 2015 to 179.6 in 2017. This development again confirms that the Nigerian economy remains undiversified with critical dependence on crude oil for foreign exchange earnings and government revenue. In a replay of the situation that prevailed in the early 1980s, the economy has come under siege with foreign exchange shortages, balance of payments problems, inability to import essential inputs needed by manufacturers, ballooning domestic and foreign debt as well as general economic gloom with the Naira/Dollar exchange rate crashing from N160 ¼ $1 in mid-2015 to over N400 ¼ $1 in 2016. As it relates to manufacturing value added in the Nigerian economy, this is still very low. As a percentage of the GDP this was estimated at 9.5% in 2015 and declined to 8.8% in 2016. This is no doubt a reflection on the current status of manufacturing industry in the country which is still to grow beyond the first phase of import substitution industrialization. This state of affairs arose as a result of the stunted growth of the manufacturing sector owing largely to failed government policies to provide an enabling environment for private enterprise to thrive coupled with the non-takeoff on a sustained basis of core industrial projects in iron and steel, petro-chemicals, pulp and paper, machine tools, motor vehicle assembly, etc.

4 Tariff Policy and the Manufacturing Sector Any discussion on the Nigerian manufacturing sector will not be complete without some reference to the tariff policy and the structure of protection put in place to protect and stimulate industrial production in the country over the past 60 years. As observed by Oyejide [2] since the late 1950s, government had used tariff policy as one of the key instruments for influencing the direction of trade and industrial development in Nigeria.

34

2 Manufacturing Sector in the Nigerian Economy

This policy was anchored on import substitution industrialization (ISI) whereby high tariffs were imposed to protect nascent domestic infant industries from international competition. Thus it was envisaged that domestic based industries will be nurtured behind high protective tariff walls until they can withstand international competition. This policy led to an outburst of new manufacturing establishments in the late 1950s into the 1960s in such areas as vegetable oil milling, soap and detergents, textiles, and other consumer goods industries all based largely on domestic raw materials. Under this policy the weighted average import duty rate which stood at 23% in 1957 rose to 57% in 1967. This policy of import substitution prevailed for most of the next three decades. However, unfortunately Nigeria has not moved far beyond this first phase of import substitution industrialization into the second phase which involves the production of intermediate and capital goods. This state of affairs arose because most of the industrial projects which were initiated by government in the oil boom years of the 1970s in such fields as iron and steel, pulp and paper, petrochemicals, fertilizers, machine tools, etc. were not properly implemented to their logical conclusion as most of them collapsed in the 1990s. This continues to be the prevailing situation till the present time. Following the economic crisis arising from the collapse of international crude oil prices, the government had to adopt a World Bank supported structural adjustment programme in 1986. Under the programme, a number of reforms were adopted which included privatization and/or commercialization of government owned enterprises, promulgation of the export (incentives and miscellaneous provisions) decree of 1986, as well as import tariff reforms culminating in the comprehensive customs and excise tariff consolidation decree of 1988. The new import tariff regime adopted in 1988 was to last for 7 years from 1988 to 1994 in order to provide for stability in the operating environment and was very comprehensive in its coverage. The tariff structure was a cascading one in which basic tariff rates increase with the levels of processing. To these basic rates were added supplements in order to provide for anti- dumping, lifting of import prohibition and luxury goods surcharge. Basic rates varied between 5% and 10% for raw materials, agricultural capital goods, and agro-chemicals. The rates rose to between 15% and 25% for intermediate goods, between 25% and 40% for consumer goods, and over 50% for luxury goods. The tariff reform was a clear movement towards a more uniform tariff rate for all imported commodities and a clear departure from the situation that prevailed between 1981 and 1986 which featured very high tariff rates, import prohibitions, licensing, and quotas. At the expiration of the tariff regime which prevailed from 1988 to 1994 a successor 7 year tariff regime from 1995 to 2001 was put in place. Like its predecessor, the new tariff regime was based on the same cascading principle with tariff rates increasing with the level of processing. Rates, all ad-valorem, ranged from 0% to 150% at the inception of the tariff regime in 1995 dropping to 100% in 2001. The maximum rate of 150% applied to products that were import prohibited and was therefore redundant. In all there were 20 different tariff bands at 5% intervals from 0 to 100%. As will be observed later the rates were too many and

4 Tariff Policy and the Manufacturing Sector Table 2.6 Trends in actual unweighted average tariff rates (%) in Nigeria 1988– 2001

Overall economy (of which) Agriculture Mining Manufacturing (of which) Consumer goods Intermediates Capital goods

35 1988 33.8

1995 15.8

2001 27.6

31.0 13.5 34.3

14.9 9.4 16.0

16.0 14.2 28.1

53.5 26.2 17.1

25.4 11.9 8.2

43.9 21.0 15.5

Source: Federal Ministry of Finance/ECG

provided opportunities for rent seeking and arbitrage. During the life of the new tariff regime annual amendments were also made to the published tariff rates, thus defeating the twin objectives of stability and consistency envisaged under the new tariff regime. In addition the objectives of transparency and predictability were not realized as several product groups and sub-sectors received approvals to import at concessionary rates. The procedure for obtaining approvals was not entirely transparent, hence there was no level playing field for all investors. All these interventions provided opportunities for administrative discretion and corruption. The overall picture of the actual (as opposed to the published) tariff rates which prevailed in Nigeria over the period 1988–2001 is presented in Table 2.6. At the expiration of the 1995–2001 tariff regime there was no immediate successor regime. Thereafter the life of the old tariff was extended through annual amendments up to 2004. The intention had been that a new ECOWAS Common External Tariff (ECOWAS CET) covering the 15 member countries will take effect from 2002 in line with the decision of the Authorities of ECOWAS Heads of State at their 2000 Abuja meeting. At the meeting it was resolved that the new ECOWAS CET will be based on the prevailing lowest tariff regime in the sub-region, which in effect meant the adoption of the UEMOA CET which was applicable in the eight Francophone countries of ECOWAS. Under the UEMOA CET (which was to be adopted as ECOWAS CET) all products for tariff purposes were classified into four tariff bands, namely 0% for social, medicaments, cultural and basic goods, 5% for raw materials and capital goods, 10% for intermediate goods and semi-finished products, and 20% for final consumer goods and finished products, respectively. However, as at 2001, Nigeria’s tariff structure was far more complex and dispersed than the UEMOA CET which only has four rates. As at that date, Nigeria’s tariff rates consisted of 20 tariff bands ranging from 0% to 100% at 5% intervals. In addition nearly 50% of the Nigerian rates exceeded the UEMOA maximum rate of 20%. Thus immediate and wholesale adoption of the UEMOA CET by Nigeria would have caused major disruptions to her manufacturing industries in terms of the prevailing structure of protection as well as inflict significant damage to government revenue.

36

2 Manufacturing Sector in the Nigerian Economy

As a result of the foregoing, the Nigerian Government commissioned studies [3] to determine the likely impact of the adoption of UEMOA CET. Based on the recommendations arising from the studies government decided on a partial adoption of the ECOWAS CET to be phased over a transition period of 4 years from 2005 to 2008 within a framework of five tariff bands, namely 0%, 5%, 10%, 20%, and 50%, respectively. Whilst the 0% to 20% tariff rates correspond with the UEMOA CET, the 50% rate was imposed on final consumer and luxury goods. In addition some goods were placed under import prohibition to protect domestic industry. Under this arrangement over 30% of the tariff lines in Nigeria did not fall within the newly adopted ECOWAS CET. This was the situation that prevailed over the next 10 years until January 2015 when Nigeria along with other ECOWAS member states agreed to fully implement the new common external tariff regime across all countries based on five tariff bands of 0%, 5%, 10%, 20%, and 35%, respectively.The 35% tariff rate, imposed largely to accommodate the concerns of Nigeria, is to protect specific goods needed for economic and regional development. Majority of goods protected under this rate are agricultural products, designated final consumer goods, and luxury goods. In addition to the tariff rates, there is an ECOWAS levy of 0.5% imposed on all goods for a transitional period of 5 years. For the sub-group of UEMOA countries there is a 1.0% levy to support the work of the UEMOA Commission. There are also provisions for anti-dumping and countervailing measures under the ECOWAS CET to protect domestic industries as well as regulatory safeguards when domestic industries are threatened with massive competing imports. The adoption of ECOWAS CET will no doubt promote regional integration in West Africa as envisaged by the founding fathers of the Community. It will also bring West Africa in line with similar trading blocs as found in other parts of the world. As for Nigeria, despite the initial adjustment pains, the availability of a protected regional market will be to Nigeria’s advantage as industrial projects promoted in the country will be targeted not only at the large domestic market but also at the larger regional market thereby benefitting from scale economies. Such a development should also propel Nigeria to compete in the wider international market. Thus Nigeria has come full circle from the era of high protective tariff rates which prevailed since the 1960s to the age of globalization and trade liberalization featuring lower tariff rates worldwide and the promotion of trade and investment to drive economic development. It is hoped that government will continue to do the necessary homework to benefit maximally from this paradigm shift in international trading system as espoused under World Trade Organization (WTO) rules.

5 Some Key Features of the Manufacturing Sector In addition to the issues discussed in the preceding sections of this chapter, other important features of the manufacturing sector worth highlighting are summarized below.

5 Some Key Features of the Manufacturing Sector

5.1

37

Geographical Distribution of Industrial Establishments

Industrial establishments in Nigeria are highly concentrated in a few locations across the country due to a number of interrelated factors, namely: • • • • • •

nearness to ports, superior infrastructural facilities such as power supply, transport network, etc., proximity to markets, proximity to raw materials, seat of government, government deliberate policy.

Thus the Greater Lagos Area accounts for the lion’s share of manufacturing establishments in Nigeria owing to a combination of factors such as proximity to ports, superior infrastructure, availability of industrial estates, large urban population and until 1992 the Federal Capital of Nigeria. To a lesser extent the same set of factors apply to Port Harcourt/Aba Axis in Eastern Nigeria which also accounts for a significant proportion of industrial establishments. In the hinterland, industries are also concentrated in the Kaduna/Kano Axis, being centres of large urban population with Kano historically a centre of the famous trans—Sahara trade and Kaduna serving as the administrative capital of the old Northern Nigeria. Beyond the foregoing, the decisive factors in the choice of location of the following industries are as highlighted below. Cement plants—proximity to limestone deposits. Sawmills, cotton ginning, palm oil processing—proximity to source of raw materials. Breweries and soft drinks—proximity to market. To avoid industrial concentration in a few locations, the Federal Government has put in place policies to encourage industrial dispersal, by offering tax incentives to industries locating in economically disadvantaged Local Government Areas (LGAs). The efficacy of this policy is still to be demonstrated in the location decision making of industrial promoters.

5.2

Ownership Structure

Since independence in 1960, the ownership of modern manufacturing establishments in Nigeria has gone through a process of evolution. Whereas handicrafts and cottage industries have always been in the domain of Nigerian natives, the modern manufacturing sector was initially dominated by foreigners until the winds of change in post-independence Nigeria. Thus over the past five decades the ownership structure of modern manufacturing industries has evolved into four main strands as follows.

38

2 Manufacturing Sector in the Nigerian Economy

Wholly owned Private Nigerian businesses—these are found predominantly in small scale urban industries and of recent, increasingly in medium to large scale industrial establishments as Nigerian entrepreneurs emerge to take their rightful place in the economic scene. Joint ventures with Nigerians as minority partners- under the indigenization decrees of the 1970s, which made it mandatory for Nigerian citizens and/or associations to have a minimum equity of not less than 40% in industrial and commercial enterprises, several industrial establishments hitherto wholly owned by foreigners were forced to divest some of their holdings to Nigerians. Even though the law has since been set aside, today there are several such enterprises in the country with significant local equity holdings. Joint Ventures with Nigerians as majority partners- under the same indigenization decree, it was required that Nigerians must own a minimum of 60% equity participation in certain designated enterprises. Until this law was repealed in the 1990s, many industrial enterprises had majority control held by Nigerians. However, effective management control still remained with the foreign minority shareholders who had the technical and managerial know- how to successfully run such enterprises. Following the amendments to the indigenization decrees several of these enterprises have reverted to majority equity control by foreigners. Government Owned Industrial Enterprises - these are enterprises promoted by government that are either fully or partly owned by government in collaboration with foreign partners. In an attempt to fast track industrial development several of such enterprises were established especially in the 1970s when government was awash with the windfall from crude oil exports. However, following a major reversal of policy, starting with the structural adjustment programme initiated in 1986, several of these enterprises have reverted to private ownership under the privatization programme of government owned enterprises. The current position is that except for military and defence industries, private investors, both local and foreign, are welcomed to establish manufacturing operations in virtually all areas of the economy. The role of government is now seen as providing the necessary enabling environment and infrastructure required for private sector operators to thrive and grow the economy.

5.3

Trades in Manufactures

A very apparent feature of the Nigerian economy is that the country is yet to unbind itself from the trading system which prevailed under colonial rule when the country was seen primarily as a producer of raw materials to feed manufacturing industries in Europe. Sadly after 60 years of independence the country’s international trade is still dominated by the exportation of primary commodities with little or no value addition and the importation of manufactured goods and general merchandise. When it comes to trade in manufactures, Nigeria is still primarily an importer of manufactured products with imports of manufactured goods consistently on the

5 Some Key Features of the Manufacturing Sector

39

average accounting for over 60% of total imports. This is as a result of the stunted growth of the manufacturing sector in Nigeria due primarily to failed policies and non-completion of government industrial projects in iron and steel, petro-chemicals, pulp and paper, aluminium, machine tools, sugar, and a host of others. Thus Nigeria continues to import a wide range of manufactured products as illustrated in Table 2.7. From the table it will also be observed that Nigeria is critically dependent on import of intermediate and capital goods, especially in areas such as machinery and mechanical appliances, vehicles and transport equipment, base metals, chemical products, plastic and rubber products, as well as prepared foodstuffs. On the other hand, the export of manufactured goods from Nigeria is still very small, accounting for less than 1.0% of total exports. Presently the range of such products exported from Nigeria is very narrow and consist mainly of semimanufactured agricultural produce and some manufactured goods. The adoption of the Structural Adjustment Programme in 1986 and the promulgation of the Export (Incentives and Miscellaneous Provisions) decree were intended to stimulate non-oil exports by boosting value added agricultural produce as well as manufactured goods in general. Arising from these policies some modest achievements were recorded in the exportation of semi-manufactures and manufactures reaching a high of $113.00 million in 1991. These rose to N396.4 billion ($2.63 billion at prevailing rate of exchange) in 2010 and accounted for about 50% of non-oil total exports, but less than 1% of total merchandise exports. Based on more recent official statistics, a range of semi-manufactured and manufactured products are currently being exported from Nigeria. Under semimanufactured goods are processed agric based products such as cocoa, cotton, wood/furniiture, leather/skins, palm produce and others. Under manufactures, a wide range of products are recorded as being exported from Nigeria, however this is on a small scale as the total value of such goods amounted to only N145 billion (about $855 million) in 2014. The manufactured goods exported include beer and beverages, aluminium, asbestos, carpet, and rugs, glass, empty bottles, insecticides, plastics and plastic footwear, soap and detergents, textiles, and several other manufactured products. Generally the country lacks the capacity to export manufactured products on a large scale because of binding supply constraints. Even where there was low capacity utilization in manufacturing enterprises such excess capacity could not be deployed to produce for export markets because their output was uncompetitive due to the high cost structure of operations. Besides, several of the companies are inefficient with their operations geared to produce for the domestic market behind high protective tariff walls.

Section 1. Live animals; animal products 2. Vegetable products 3. Animal or vegetable fats and oils and their cleavage products, prepared edible 4. Prepared foodstuffs; beverages, spirits and vinegar; tobacco and manufactured 5. Mineral products 6. Products of the chemical or allied 7. Plastics and articles thereof; rubber and articles thereof 8. Raw hides and skins, leather, furskins, and articles thereof; saddlery and 9. Wood and articles of wood; wood charcoal; cork and articles of cork 10. Pulp of wood or of other fibrous cellulostic materials; waste and scrap of paper or 11. Textiles and textiles articles 12. Footwear, headgear, umbrellas, sun umbrellas, walking sticks, seat sticks, whips 13. Articles of stone, plaster, cement, asbestos, mica, or similar materials; ceramic 14. Natural or cultural pearls, precious or semi-precious stones, precious metals. 15. Base metals and articles of base metal 16. Machinery and mechanical appliances; electrical equipment; parts thereof; sound

2014 483.52 650.50 129.04 578.65 1777.23 833.95 635.72 8.21 21.35 231.33 151.64 37.21 160.10 1.80 968.28 2441.63

2013 350,2. 414.90 55.97 890.94 1949.92 675.43 849.16 13.32 30.56 176.76 129.61 35.52 142.74 1.65 746.30 1788.49

Table 2.7 Non-oil imports into Nigeria by H.S. section (N0 billion) 2013–2017

949.38 2612.74

1.47

162.59

150.42 51.00

26.28 250.67

2105.83 957.37 626.31 12.49

573.70

2015 539.94 691.07 122.65

745.99 2637.13

1.54

131.61

186.32 74.28

23.13 276.22

303.85 1227.32 783.81 13.28

759.21

2016 432.71 670.72 110.61

771.61 2924.24

1.91

102.65

217.20 64.94

29.89 324.70

342.41 1465.46 874.44 16.29

831.39

2017 607.89 923.11 143.96

836.31 2480.85

1.67

139.94

167.04 52.59

26.24 251.94

1295.85 1031.91 753.89 12.72

726.78

Averages 482.85 670.06 112.45

8.14 24.16

0.02

1.36

1.63 0.51

0.26 2.45

12.62 10.05 7.34 0.12

7.08

% of total 4.70 6.53 1.10

40 2 Manufacturing Sector in the Nigerian Economy

Source:- Central Bank of Nigeria Annual Report 2017

17. Vehicles, aircraft, vessels and associated transport equipment 18. Optical, photographic, cinematographic, measuring, checking, precision, medical 19. Arms and ammunition; parts and accessories thereof 20. Miscellaneous manufactured articles 21. Works of art, collectors pieces and antiques Total

1252.65 98.31 0.08 78.02 0.10 10,538.91

1030.03 80.08 0.24 76.88 0.68 9439.42

1.30 82.82 0.16 11,076.07

1006.22 149.64 0.12 104.64 0.18 9480.37

807.11 190.58 0.03 68.66 0.12 10,804.85

929.08 164.86 0.35 82.20 0.25 10,267.92

1005.02 136.69 0.00 0.80 0.00 100.00

9.79 1.33

5 Some Key Features of the Manufacturing Sector 41

42

5.4

2 Manufacturing Sector in the Nigerian Economy

Raw Material Import Dependence

In the absence of domestic supplies, manufacturing industries in Nigeria are very dependent on foreign sources for supply of needed inputs. Finding foreign exchange to fund the import of such materials is currently a major challenge given the foreign exchange crunch facing the country. Based on a survey carried out by MAN in 2014 the extent of dependence on imported inputs is greatest in such sub-sectors as vehicle assembly, electrical machinery, industrial plastic and rubber, all at over 75% of industrial inputs. Imported input costs are lowest in food, beverages, and tobacco, wood and wood products, and non-metallic mineral products, all at below 40% because of availability of domestic supplies. However, in order to encourage the development and utilization of local raw materials government in 1988 established the Raw Materials Research and Development Council (RMRDC). In addition, to encourage the utilization of local raw materials tax incentives are given on expenses incurred on research and development effort. These initiatives, according to MAN surveys, have made some modest impact in reducing the proportion of foreign inputs in industrial costs. Nevertheless a lot still remains to be done as several manufacturing sub-sectors are still critically dependent on foreign raw material inputs. Currently some manufacturing establishments are operating at less than full capacity owing to inability to obtain foreign exchange to pay for critical supplies.

5.5

Low Technology and Assembly Operations

The manufacturing sector in Nigeria is still very much dominated by low technology and assembly type operations. These are commonly found in such fields as food processing, motor vehicles assembly, electrical and electronic goods. Generally the sector is still stucked in the first phase of import substitution production and has not made any significant progress into the manufacture of intermediate and capital goods.. This situation arose out of the failure of core industrial projects promoted by government to come on stream as planned or completely abandoned owing to funding constraints. This has led to the stunted growth of the manufacturing sector.

5.6

Old Machinery and Equipment

Generally speaking local subsidiaries of manufacturing enterprises promoted by multinational corporations have world class production equipment and technology such as those found in Unilever, Cadbury, Nigerian Breweries, Coca Cola, British American Tobacco etc. However, the same is not true of wholly owned Nigerian

5 Some Key Features of the Manufacturing Sector

43

businesses and several foreign owned enterprises. As these enterprises have been operating under very tough conditions they have not been able to generate enough surpluses to plough back into the purchase of new and more modern equipment. A good example is the textile sub-sector where several of the factories still operate on old and obsolete equipment.

5.7

High Cost Structure

It is a well known fact that manufacturing enterprises in Nigeria suffer from high cost of operations. This is as a result of the very poor state of infrastructural facilities in the country arising from inadequate power supply, poor transport network, water, telecommunications and postal services. It should be noted that some improvements have been recorded since the introduction of mobile telephony and courier services. However, as a result of poor infrastructure support, industrial enterprises have to generate their own electricity, sink boreholes for water supply, construct and maintain access roads to factory gates and generally undertake services which ordinarily should be provided by the State or Local Government. All these add to the cost of doing business and render the output of such enterprises uncompetitive with cheaper imports.

5.8

Weak Inter-Sectoral Linkages

As earlier pointed out, Nigeria is still stuck in the first phase of import substitution industrialization leading to an absence of a virile intermediate and capital goods production sub-sectors. As a result, the manufacturing sector is characterized by weak inter-sectoral linkages and very little forward and backward linkages in industry. This situation will continue to persist until the various heavy industrial projects in iron and steel, petro-chemicals, pulp and paper, aluminium smelting, etc. are completed and operating efficiently. In addition the government needs to put in place a well articulated strategy that will put emphasis on domestic resource based industrialization.

5.9

Creeping De-industrialization

A recent feature of the manufacturing sector in Nigeria is the apparent evidence of creeping de-industrialization taking place in the country. Hitherto virile enterprises in diverse manufacturing fields have had to close operations in Nigeria as a result of not only the harsh operating environment but also arising from the influx of cheaper imports and smuggled goods mainly from China and South East Asia. This has led,

44

2 Manufacturing Sector in the Nigerian Economy

for example, to the virtual collapse of the textile sub-sector, shutting down of the two automobile tyre manufacturing companies and a host of other manufacturing establishments, as investors seek safer and more favourable havens outside the country. Thus the gains of earlier years in industrial progress are being gradually eroded under the prevailing circumstances. This situation needs to be urgently arrested before industrial progress can become cumulative and self-sustaining.

6 Problems and Constraints Affecting the Manufacturing Sector The manufacturing sector in Nigeria continues to underperform because of a number of binding constraints which impede the development of the sector. Some of these problems are discussed below.

6.1

Infrastructural Problems

High on the list of the problems confronting manufacturing industries in Nigeria is the inadequacy of basic infrastructures needed to support industrial development. This cuts across a broad spectrum. Chief amongst these is poor power supply. The country currently generates less than 4000 MW of electricity for a population estimated to be in excess of 200 million people. Power supply is grossly inadequate and erratic for both domestic and industrial consumers and subject to regular disruptions. Consequently manufacturers have to rely on costly alternative sources of power supply. There is also an inadequacy of a whole range of services such as water supply, postal and telecommunication services, waste disposal, etc. In addition, one must highlight the negative impact of a decaying transport system featuring roads in complete disrepair and a comatose rail transport system making the movement of goods and services very cumbersome and expensive.

6.2

Inconsistent Government Policies

Government policies in general have largely been inconsistent and at times unpredictable, whether monetary, fiscal and otherwise. And in the areas of trade and industrial development in particular, stop and go economic policies are a common feature leading to several instances of the banning and unbanning of products from being imported into Nigeria thereby adversely affecting investment decision making.

6 Problems and Constraints Affecting the Manufacturing Sector

45

Another factor responsible for inconsistent government policies arises from the regular change in government policies associated with each change of government as new political actors initiate policies of their own to be seen as different from the previous government. Thus, there is no continuity in the implementation of policies, however good such policies may be. Given the several changes in government leadership at both the Federal and State levels since 1960, these have led to premature abandonment of otherwise good policies sacrificed on the altar of political expediency.

6.3

High Cost of Funds

Since the 1990s, manufacturers in Nigeria have had to contend with the high cost of funds consistently reckoned to be in double digits. Given the high cost of funds which is currently in excess of 22%, investible resources are diverted to trading and other short term investments to the detriment of the real sector such as agriculture and manufacturing which have longer gestation periods. Thus the high cost of funds is a major impediment to the growth of the manufacturing sector, whether in terms of funds required for short term working capital or for investment in major longer term capital projects.

6.4

Hostile Business Environment

The business environment in Nigeria has always been considered hostile given the range of obstacles which investors in general and manufacturers in particular have to contend with. Thus the “Ease of Doing Business” which measures the ease of doing business based on selected parameters across several countries published annually by the World Bank has consistently ranked Nigeria as one of the most hostile in the world. For example, in the 2018 edition Nigeria was ranked 146 out of 190 countries surveyed. The parameters rated include, amongst others the following: starting a business, getting construction permits, enforcing contracts, getting electricity, registering a property. However, it is gratifying to note that in the 2020 edition of the ranking published by the World Bank some improvements have been recorded such that Nigeria moved up to the 131 position, a 15 point jump over the ranking of 2018.

6.5

Corruption and Bureaucratic Ineptitude

Nigeria is also rated as one of the most corrupt countries to do business in the world by Transparency International (TI) based on annual Corruption Perception Index (CPI). In 2018 Nigeria was ranked 144 out of 180 countries in terms of perceived

46

2 Manufacturing Sector in the Nigerian Economy

corruption. Of course such a negative attitude is bound to scare away potential foreign investors in a country that is in dire need of FDI to stimulate a faster rate of growth in industrial development in particular and socio-economic development in general. Apart from the high level of perceived corruption, the bureaucracy is also viewed as largely incompetent and inept. Although efforts are currently being made to improve on the prevailing situation, but the country still has a long way to go to be able to compete in the global marketplace.

6.6

Poor Macro Economic Policies

Nigeria’s macro-economic policies relating to interest rate, inflation rate, exchange rate and balance of payments have always not been optimal and consistently lag behind prevailing economic realities. Thus, in the 1970s when the country was awash with petro dollars the Naira was over-valued which encouraged cheap imports and discouraged export production. This led to the stagnation of the agricultural sector and the establishment of import dependent manufacturing establishments sheltered behind high protective tariff walls. Although some changes in policy orientation have been observed since the adoption of the structural adjustment programme in 1986, it has, however, been an uphill task to persuade the government to face up squarely to the demands and challenges of the economic realities of the day. Generally there is a lag between economic reality and action.

6.7

Weak Institutions

Most of the institutions of society in Nigeria, whether political, legal or economic are still very weak and subject to manipulation by the ruling elite. This is a characteristic common in societies transiting from the traditional to the modern age. Nigeria is no exception. However, after over 60 years of independence, more progress is expected to have been made especially as countries with similar backgrounds to Nigeria such as South Korea, Singapore, Malaysia, and Indonesia have all recorded a faster rate of progress in establishing durable and modern institutions which aided their industrial and socio-economic development.

6.8

Smuggling

Manufacturing industries in Nigeria are faced with large scale smuggling of goods arising from the country’s numerous porous borders and a largely ill equipped and inefficient Customs Service. The incidence of large scale smuggling of relatively cheaper goods and second hand products have virtually crippled some

6 Problems and Constraints Affecting the Manufacturing Sector

47

manufacturing sub-sectors such as textiles and wearing apparel. Also the incidence of high import tariffs and prohibition which prevailed from the 1960s into early 2000s encouraged smuggling activities. Hopefully with the regime of lower import tariffs under the ECOWAS CET this problem should be minimized through voluntary compliance.

6.9

Competition from Cheaper Imports

Because of the high cost of doing business in Nigeria, the output of some domestic industries cannot compete favourably with imported goods which are invariably cheaper. Thus, despite the high protective tariffs, imported goods can still compete on the basis of price and quality or are otherwise smuggled into the market. As a result of the high cost structure of goods made in Nigeria, such goods can neither compete in the domestic market nor in export markets despite the low capacity utilization in manufacturing industry. This is a problem that has to be addressed urgently if manufacturing industry in Nigeria is to become export oriented as it is presently being advocated.

6.10

Inadequate Pool of Relevant Labour Skills

There is an acute shortage of needed labour skills required by industry especially at the engineers, technicians, and artisans level. Consequently manufacturers have to rely on costly imported labour in order to meet the shortfall. The absence of a pool of technical skills required by industry constitute a major impediment to rapid industrialization. Government efforts to ameliorate the situation through the establishment of the Industrial Training Fund to promote vocational and technical skills should be invigorated for more effective results.

6.11

Lack of Executive/Managerial Capacity

Given the relative youth of modern manufacturing in Nigeria there is dearth of a pool of skilled indigenous managerial manpower required to run large scale industrial establishments. The crash programme of indigenization of managerial positions in a situation of limited management talents has led to short supply with high turnover of senior executives as a result of the fierce competition for the limited available supply. To confront the situation expatriates have to be recruited at high costs to fill vacancies at senior levels. This adds to the cost of operations.

48

6.12

2 Manufacturing Sector in the Nigerian Economy

Security of Life and Property

In addition to all the problems discussed above as facing manufacturing establishments, the Nigerian business environment is further compounded by problems relating to the security of life and property. Thus incidents of civil strife and religious disturbances are common as well as banditry, armed robbery, and kidnapping. All these give rise to general insecurity of lives and property. The foregoing problems need to be tackled as no serious foreign investor will want to invest in such an environment where the safety of its personnel and plant will not be guaranteed. In spite of the foregoing problems and constraints, the manufacturing sector can still live up to expectations and make the desired impact in galvanizing rapid economic development in Nigeria if the right strategic choices are made and the right policies are implemented. This and related issues will be discussed in the next chapter.

7 Summary and Conclusion In this chapter, a review of the evolution and development of the Nigerian manufacturing sector from the colonial period up to the present time was undertaken. As pointed out earlier, the manufacturing sector was virtually non-existent during the colonial period as the role assigned to the colony was that of a supplier of raw materials to feed manufacturing industries in Europe and the colony a market for manufactured goods. This colonial trading pattern had been a major feature of Nigerian economy from which the nation is still to unbind itself even till the present time. Currently Nigeria’s economy remains undiversified with crude oil exports accounting for over 90% of foreign exchange earnings and the bulk of government revenue. The chapter also reviewed the performance of the manufacturing sector which remains uninspiring despite the resources and efforts committed to the sector. Thus the contribution of manufacturing to the GDP which stood at 4.58% in 1960 remains at below 10% in 2017. This state of affairs is due to a number of factors militating against the performance of the sector amongst which are grossly inadequate infrastructure, hostile business environment, poor macro-economic policies, high cost of funds, inconsistent government policies, smuggling, corruption, and bureaucratic ineptitude. Nevertheless, some progress had been recorded given the very low base from which the country started. There are now several manufacturing establishments operating all over the country in diverse industries ranging from simple processing to more complex activities cutting across all the major industrial classifications. However, the country is still to make a transition from the first stage of import substitution industrialization into large scale production of intermediate and capital goods.

References

49

References 1. Kilby Peter 1966 Industrialisation in an Open Economy: Nigeria 1948-1966, Cambridge University Press, London 2. Oyejide Ademola 1975 Tariff policy and industrialization in Nigeria, Ibadan University Press 3. Enterprise Consulting Group 2012, Comprehensive Review of Nigeria’s Customs and Excise Tariffs and Other Trade Policies, Consultancy Report for Federal Ministry of Finance, Abuja

Chapter 3

Industrial Development Policies and Strategies

1 Introduction Since the attainment of political independence in 1960, the Federal Government of Nigeria has initiated policies and strategies designed to achieve the goal of rapid industrial development in particular and sustainable socio-economic progress in general. This is in sharp contrast to the policy of the colonial government in the pre-independence era which saw Nigeria essentially as a supplier of raw materials to feed factories in Europe and a market for manufactured goods. Indeed Nigeria’s Development Secretary stated in 1946 that the colonial government did not envisage Nigeria becoming a country of factories belching forth smoke and producing a mass of manufactured goods. Thus by 1950, there was little or no manufacturing capacity in Nigeria, with the sector accounting for only 0.4% of the GDP in that year. However, under internal self-government and in the closing years of British rule in the late 1950s the situation began to change with new legislation put in place to promote the growth of domestic industry. Some of the laws enacted to achieve this goal included the following: Aid to Pioneer Industries Ordinance of 1952. Industrial Development (Import Duty Relief) Act of 1957. Industrial Development (Import Tax Relief) Act of 1958. Custom Duties (Dumbed and Subsidized Goods) Act of 1958. Approved Users Scheme Regulation of 1958. Drawback (Customs) Regulation of 1959. The foregoing laws provided the policy framework designed to stimulate industrial development in Nigeria prior to the attainment of full independence in 1960. For the purpose of assessing industrial development policies and strategies in post-independence Nigeria, this chapter is divided into seven sections. Following this introduction, Sect. 2 reviews developments in the first quarter century after independence from 1960 to 1985. Section 3 contains an analysis of the policies and © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5_3

51

52

3 Industrial Development Policies and Strategies

strategies adopted under the structural adjustment programme which provided the framework for action and direction over the next quarter century from 1986 to 2010. In Sect. 4 the key elements of the country’s newly launched Industrial Revolution Plan are elaborated upon, leading to Sect. 5 where a synthesis of why Nigeria failed to achieve industrial takeoff is undertaken despite the resources and efforts committed to achieving this goal. Section 6 contains a comparative analysis of performance of Nigeria’s economy vis a vis three other countries from South East Asia, namely Indonesia, Malaysia, and South Korea, all of which were more or less at the same level of development with Nigeria in the 1960s. The chapter ends with Sect. 7 which contains the summary and conclusion.

2 Industrial Development Strategies from 1960 to 1985 Following the attainment of independence and with emergence of new political leadership in 1960 further impetus was added to the drive for rapid industrial development in order to accelerate the pace of socio-economic progress. Both the three Regional and Federal Governments gave the pride of place to industrial promotion to drive economic development. Some of the policies pursued at the regional level included the establishment of development corporations to promote industrial development either on their own or in collaboration with foreign partners, selected overseas industrial promotion tours and the establishment of industrial estates. At the Federal level, the government continued with the policies put in place to make the country attractive to foreign direct investment, especially in the manufacturing sector through protective import tariffs and favourable income tax regimes. All these measures led to an outburst of new manufacturing investments in Nigeria in the late 1950s and early 1960s, especially by the old mercantile houses and other foreign enterprises anxious to protect their share of the market in a promising market rather than being shut out by high tariffs. This policy of import substitution industrialization was the bedrock of the strategy pursued to promote industrial development in Nigeria over the next two decades. This period witnessed the launching of the first, second, third, and fourth national development plans spanning the period 1962 to 1985 by the Federal Government, all aimed at stimulating rapid socio-economic development in Nigeria. The first national development plan, prepared by the Federal Ministry of Economic Development, for the period 1962–1968 was launched in early 1962 with stated goals and strategies for accelerating socio-economic and industrial development. The goals set for the first plan [1] included the following: 1. an average growth rate of 4% or more for the overall economy. 2. a rise in per capita consumption by about 1% per year. 3. an increase in the domestic savings ratio from about 9.5% of GDP in 1960 to about 15% by 1975.

2 Industrial Development Strategies from 1960 to 1985

53

4. a more equitable distribution of income both amongst people and amongst regions. 5. the creation of more jobs and opportunities in non-agricultural occupations. 6. achievement of self-sustaining growth not later than the end of the third or fourth national development plan. 7. attainment of a modernized economy consistent with the democratic, political, and social aspirations of the people. Several projects, including industrial ones, were programmed for implementation during the plan period. However, because of the rather sluggish growth of the economy, and lack of funds coupled with political turmoil which culminated into a civil war from 1967 to 1970, not much was achieved in the post-independence decade. With the end of the civil war in early 1970 and followed with increased earnings from crude oil exports and the launching of the second national development plan 1970–1974, the stage was set for ambitious programmes of economic and industrial development. The plan envisaged a strong and self-reliant nation with a great and dynamic economy and the progressive elimination of foreign dominance in the national economy in terms of ownership, managerial, and technological control. In the industrial sector, the new policy [2] of government designed to lay a solid foundation for long term growth and development was stated as follows: 1. Promote even development and fair distribution of industries in all parts of the country. 2. Ensure a rapid expansion and diversification of the industrial sector of the economy. 3. Increase the incomes realized from manufacturing activity. 4. Create more employment opportunities. 5. Promote the establishment of industries which cater for overseas markets in order to earn foreign exchange. 6. Continue the programme of import substitution as well as raise the level of intermediate and capital goods production. 7. Initiate schemes designed to promote indigenous manpower development in the industrial sector. 8. Raise the proportion of indigenous ownership of industrial investments. At the start of the plan period initial effort was directed at rehabilitation and reconstruction of the war damaged economy. This led to the rapid recovery of the economy, aided in part by the windfall accruing to government from crude oil exports over the next 5 years. For example, Federal Government revenue rose from N436.00 million in 1969/70 to N4,537 million in 1974/75, a more than tenfold increase. In furtherance of its policy of promoting indigenous ownership in commerce and industry, government promulgated the Nigerian Enterprises Promotion decree in 1971. Under Schedule 1 of the decree certain enterprises were exclusively reserved to Nigerian citizens and associations, whilst Schedule 2 of the decree contained a list

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of enterprises in which Nigerians must have a minimum equity of 40%. In addition government acquired 40% equity interest in all the major banks. This marked the beginning of the goal of achieving indigenous ownership in commerce and industry. Other notable developments during this period included the setting up of bodies to aid industrial development in the country. These included the Industrial Training Fund (ITF) with the primary objective of training a pool of manpower required in commerce and industry, the Industrial Research Council of Nigeria to promote and coordinate industrial research programmes, the Standards Organization of Nigeria (SON) to advise government on standards and quality of products and raw materials, quality control and metrology as well as the establishment of the National Steel Development Authority to coordinate programmes for steel development. In spite of the extension of the plan period by 1 year into 1975, several projects included in the plan document remained unimplemented owing largely to lack of feasibility studies, poor project documentation, and a dearth of executive capacity needed for project implementation. Despite the modest achievements recorded in some areas, the overall picture that emerged at the end of the plan period was one of unfulfilled expectations despite the availability of funds from crude oil exports. At the end of the second national development plan, a third development plan spanning the period 1975–1980 was launched with much fun fare, as the nation was awash with crude oil revenues accruing from the booming international oil market. As it relates to the manufacturing sector, the overall objective of government policy [3] under the new plan was stated as follows: 1. removal of most of the problems identified as impeding the performance of the sector. 2. the liberalization of industrialization policy to encourage indigenous and foreign entrepreneurs in most of the sub-sectors of manufacturing. 3. increased use of Development Finance Institutions as well direct government participation as the main instruments of ownership and indigenization of business. 4. review of the existing incentives to take account of the present realities of the Nigerian situation. As with the 1970–1974 development plan, several projects were packaged for implementation during the 1975–1980 period, especially within the context of the prevailing oil boom and enhanced revenue accruing to the Federal Government. For example, income from Nigeria’s crude oil exports rose from N4.93 billion in 1975 to N14.08 billion in 1980, a growth rate of over 23% per annum during the 5 year period. In line with government indigenization policy, a second indigenization decree was promulgated in 1977 which expanded the scope of local ownership in commerce and industry. Under the amended decree enterprises were classified into three categories in terms of ownership as follows. Schedule 1—enterprises exclusively reserved to Nigerian citizens and associations.

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55

Schedule 2—enterprises in which Nigerian equity participation must not be less than 60%. Schedule 3—enterprises in which Nigerian equity participation should not be less than 40%. Apart from the indigenization policy, another major policy thrust in the industrial sector was the decision of government to take control of the commanding heights of the economy through public ownership of industrial projects considered strategic to the economy as well as direct establishment of manufacturing industries where the private sector had failed to venture in order to stimulate a faster growth of industrial development. This policy provided the framework that led to the huge investments made by government in the manufacturing sector over the period 1975–1980. With the phenomenal rise in government revenues, funding was no longer a constraint to policy makers in actualizing ambitions in the industrial sector. Thus during this period government investments in the manufacturing sector ballooned without any underlying strategy or due regard to sustainability and availability of executive capacity to drive project implementation. Investments by government in the manufacturing sector became an all comers affair with funds committed to several projects ranging from core projects such as iron and steel, pulp and paper, petro-chemicals, fertilizers, motor vehicle assembly plants, cement, machine tools to non-core projects such as textiles, wood processing, food and beverages, fishing, and salt refining. All these interventions took place in the misguided belief that funds will always be available to sustain the momentum of government intervention. As a result of the booming economic environment of the 1975–1980 period and investments made by both the private and public sectors, manufacturing share of GDP rose from 8% in 1975 to over 11% in 1980. However, it should be noted that in spite of the huge financial commitments made, virtually all the core projects embarked upon by government remained uncompleted and were still on-going at the end of the third national development plan in 1980. Towards the end of the third development plan, a fourth national development plan spanning the period 1981–1985 [4] was drawn up and launched in early 1981. The fourth plan was based on very optimistic assumptions of the booming economic environment of the 1970s. However, unfortunately this expectation did not materialize following the collapse of the international oil market in 1981/1982. The ensuing financial crisis led to the virtual collapse of the economy which eventually led to the adoption of the Structural Adjustment Programme in 1986. Thus most of the industrial projects initiated by government during the 1970s were more or less suspended and/or abandoned owing to lack of funds. Meanwhile as a result of the indiscriminate policy of intervention, government’s investments in the manufacturing sector have expanded into a widespread spectrum of activities, both planned and unplanned. By way of illustration, Table 3.1 provides a partial list of Federal Government direct investment/ownership in manufacturing activities as at December 1983. From the list, it will be observed that Federal Government investments in the manufacturing sector cut across a broad spectrum and well beyond the level of available resources and executive capacity to manage effectively.

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Table 3.1 List of Federal Government investments in the manufacturing sector as at December 1983

Steel plants Ajaokuta Steel Company Delta Steel Company Oshogbo Steel Rolling Mills Katsina Steel Rolling Mills Jos Steel Rolling Mills Fertilizer plants Federal Superphostate Fertilizer Co National Fertilizer Company Paper mills Nigerian National Paper Manufacturing Co Nigerian Newsprint Manufacturing Co Nigeria Paper Mills Motor vehicle assembly plants Peugeot Automobile of Nigeria Volkswagen of Nigeria Leyland Nigeria Steyr Nigeria Anambra Motor Manufacturing (Mercedes Benz) Nigeria Truck Manufacturing (Fiat) Sugar and related products Nigerian Sugar Company Savannah Sugar Company Sunti Sugar Company Lafiagi Sugar Company Save Sugar Company Nigerian Yeast and Alcohol Manufacturing Co. Cement plants Sokoto Cement Company Ashaka Cement Company Calabar Cement Company Benue Cement Company West African Portland Cement Nkalagu Cement Company Food and beverages North Breweries Nigerian Beverages Production Company Flour Mills of Nigeria West African Distilleries

Value in naira

Value in U.S. $

% by FGN

1,653,599,866 781,278,061 139,895,678 139,645,307 147,395,261

1,237,884,860 584,864,756 104,725,905 104,538,477 110,340,092

100 100 100 100 100

27,419,533 132,333,112

20,526,262 99,064,568

100 70

121,190,900 130,500,000 97,000,000

90,723,508 72,614,200

64 100 100

5,250,000 6,000,000 5,250,000 7,385,000 8,400,000

3,930,150 4,491,600 3,930,150 5,528,411 6,288,240

35 35 35 35 35

7,000,000

5,240,200

35

1,970,106 47,120,000 3,168,000 N.A 7,670,000 573,750

1,474,821 35,274,032 2,371,565 5,741,762 429,509

19.70 75.40 90 70 46 51

7,440,000 35,000,000 6,000,000 20,680,000 13,000,000 1,400,000

5,569,584 26,201,000 4,491,600 15,481,048 9,731,800 1,048,040

32 72 38 39 20 11

7,500,000 2,500,000 3,000,000 2,000,000

5,614,500 1,871,500 2,245,800 1,497,200

50 55 12 100 (continued)

3 SAP Induced Policies and Strategies

57

Table 3.1 (continued) Value in naira Agro-allied industries Bauchi Meat Factory Ltd National Grains Production Company Ltd Nigerian Food Company Ltd National Root Crops Production Company Ltd Nigerian Fruit Company Ltd Nigerian Dairies Company Ltd National Animal Feed Company Ltd Madara Dairy Company Ltd Nigerian Poultry Production Company Ltd National Livestock Production Company Ltd Textiles Aba Textiles Specomill Textiles Nichemtex Industries Salt New Nigeria Salt Company National Salt Company Wood companies Nigerian Romanian Wood Company South Eastern Romanian Wood Company Oil palm Okomu Oil Palm Company Ode/Irele Oil Palm Company Fishing Nigerian National Fish Company Nigerian National Shrimp Company Machine tools and engineering goods Nigerian Machine Tools Electricity Meters Company

Value in U.S. $

N.A N.A N.A N.A N.A N.A N.A N.A N.A N.A

% by FGN 100 100 100 100 100 100 100 100 100 100

10,500,000 2,400,000 1,200,000

7,860,300 1,796,640 898,320

70 60 10

16,500,000 9,500,000

12,351,900 7,111,700

100 100

3,000,000 2,440,000

2,245,800 1,826,584

25 20

N.A N.A

100 100

4,620,000 2,880,000

3,458,532 2,155,968

66 76

18,072,000 2,700,000

13,528,699 2,021,220

85 60

N.A. not available. It should be noted that FGN Investments have been converted to U.S. $ at the prevailing exchange rate of N1 ¼ $0.7486 as at December 1983.

3 SAP Induced Policies and Strategies As a fall out of the dire economic situation which prevailed from 1981 to 1985, government was forced to adopt a Structural Adjustment Programme (SAP) in 1986 in order the save the economy from collapse. This led to a rigorous reappraisal of the economic and industrial development policies that have been pursued since 1960 and the fashioning of new policy initiatives aimed at reviving the economy for long term sustainable growth and development.

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The major objectives of the Structural Adjustment Programme [5] were stated as follows. 1. 2. 3. 4.

to restructure and diversify the productive base of the economy. to achieve fiscal and balance of payments viability. to lay the basis for sustainable non-inflationary growth. to lessen the dominance of unproductive investments in the public sector, as well as improve the sector’s efficiency. 5. to intensify the growth potential of the private sector. The implementation of SAP policies resulted, amongst others, in the massive devaluation of national currency, adoption of market forces in the allocation of resources, tariff and trade policy reforms, design of incentives to promote exports, and the lessening of government dominance in the economy through privatization of state owned enterprises. As part of the tariff and trade reforms, a 7 year comprehensive customs and excise tariff was put in place to last from 1988 to 1994 in order to provide stability in the operating environment. The new tariff regime was simpler and more internally consistent, unlike the chaotic situation which prevailed from 1982 to 1987. Under the Export (Incentives and Miscellaneous Provisions) Decree, a package of export promotion incentives was adopted in order to stimulate non-oil exports and reduce the over dependence on crude oil which has consistently accounted for over 90% of foreign exchange earnings and the bulk of government revenue. In order to reduce government direct ownership and management of economic activities, under schedule 1 of the privatization and commercialization decree of 1988, over 100 industrial and commercial enterprises in which government had equity interest were either to be fully or partially privatized. In addition, under schedule 2 of the decree a further list of 25 public corporations and state owned enterprises were to be fully or partially commercialized in order to reduce their dependence on the Treasury for funds. It is worth pointing out here that most of the investments made by government were unproductive with several of the enterprises out of production or operating at fractions of their installed capacity as illustrated in Table 3.2. Rather than making profits and contributing to the Treasury they had become drain pipes on the national economy. Finally, in an effort to launch the economy on the path of self-sustaining growth and accelerated industrial development government announced a new industrial policy for Nigeria in 1988. Under the new policy, the industrial sector was expected to become the prime mover of the economy. The key elements of the policy in achieving this objective were stated in the document [6] as follows: 1. 2. 3. 4. 5.

providing greater employment opportunities increased export of manufactured goods dispersal of industries improving the technological skills and capability available in the country increased local content of industrial output

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59

Table 3.2 Percentage capacity utilization in selected public industrial projects 1995–2000 Sugar Nigerian Sugar Company, Bacita Savannah Sugar Company, Numan Paper Nigerian Paper Mill, Jebba Newsprint Company, Oku-Iboku Iwopin Pulp and Paper Co. Fertilizer FSPC, Kaduna NAFCON, Onne Petrolchemicals Warri Warri Carbon Black Eleme PE PP Kaduna Ref. Petro-chemical Refineries New Port-Harcourt) — Old Port-Harcourt) Warri Kaduna Cement Sokoto WAPCO Nkalagu Ashaka Calabar Ukpilla, Bendel Benue Steel plants Ajaokuta DSC Jos Katsina Oshogbo ALSCON, Ikot Abasi Automobile Peugeot automobile Volkswagen Anamco Steyr Leyland

1995

1996

1997

1998

1999

2000

27.7 21.0

27.3 16.0

10.0 7.4

5 23.8

0 Neg

Neg 6.2

4.4 Closed 8.5

Closed Closed 6.0

0 0 0.5

0 0 0.15

0 0 0

0 0 0

2.8 76.3

3.2 40.0

0 Neg

0 Neg

0 Neg

0 Neg

0 0 – – 42.7

0 0 11.0 16.5 29.5

0 0 n.a n.a 0

0 0 n.a n.a 0

0 0 n.a n.a 0

0 0 n.a 0 0

76.2

58.4

Neg

Neg

Neg

Neg

37.4 42.4

52.5 49.4

Neg 0

Neg 0

Neg 0

Neg 0

32.2 87.5 6.3 86 0 6 43.1

2.6 80 4.0 85 0 7 53

28 84 2 90 0.5 4.5 40

23 83 3.7 75 0.5 5.0 23.6

21 87 4.0 106 0 0. 22.6

14 86 2.3 103 0 0 11.8

0 3.6 6.7 7.5 5.2 0

0 1.4 1.1 6.8 3.1 0

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

5.9 0 2.4 Neg 0

5.9 0 6.0 Neg 0

7.5 0 3.7 0.2 0

8.2 0 4.9 Neg 0

9.5 0 5.7 0 0

11.2 0 2.5 0 0

n.a not available, neg negligible Source: Enterprise Consulting Group Report

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6. attracting foreign capital 7. increased private sector participation in the manufacturing sector All the foregoing measures and initiatives, by and large, provided the policy framework for economic management in general and industrial development in particular by successive governments in Nigeria over the period 1986–2010. Besides, it should be pointed out that in spite of the adoption of 3 year rolling plans, the first of which was launched in 1990, not much was achieved during the 1990s in terms of industrial development. Indeed most of the core projects initiated by government in iron and steel, pulp and paper, petro-chemicals, sugar, etc. were either abandoned or came to a complete stand still owing to lack of funds. However, with the emergence of civilian rule in 1999, the new government initiated several reforms and launched the National Economic Empowerment and Development Strategy (NEEDS) in 2003 with a view to boosting socio-economic and industrial development. In addition, a Vision 2020 Perspective Plan was launched by government in 2009 to cover the 4 year period from 2010 to 2013. The primary objective of the Plan was to transform the economy to a modern industrialized one so that by 2020, the Nigerian economy will be amongst one of the 20 largest in the world. The Plan was later modified and branded as the Transformation Agenda by the government which took over in 2010. However, no spectacular results were achieved in all these plans as the structure of the economy remained basically the same with reliance on primary production and commodity exports.

4 Industrial Revolution Plan Despite all the steps taken to improve the performance of the manufacturing sector, its contribution to the GDP has consistently fallen far short of expectations averaging less than 5% over the 15 year period, from 1995 to 2010. This is a very poor performance as compared to achievements recorded in other emerging economies which started the race for industrialization like Nigeria in 1960. Given the consistently low contribution of the manufacturing sector to national output, employment, and productivity in spite of the effort and resources committed to the sector, government was forced in 2011/2012 to undertake a hard look at the sector with a view to charting a holistic approach to guide future policy direction. This effort culminated in the launching of a new industrial development document [7] in 2013, branded “Nigeria Industrial Revolution Plan (NIRP)”, which is intended to drive and accelerate the pace of industrial development in the future. The policy document recognized that the manufacturing sector had failed to undergo the critical structural transformation necessary for it to play a leading role in economic growth and development owing to several factors, amongst which are absence of basic industries such as iron and steel, low technological base in manufacturing activities, lack of a pool of skilled manpower as well as systemic

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61

issues related to power and transport and a general lack of competitiveness in the sector. Under the new plan, it is envisaged that manufacturing share of the GDP will rise from its current low level to over 10.00% in 2017. The guiding principles in promoting Nigeria’s industrialization are stated in the plan as follows: 1. a focus on labour intensive low and medium technology manufacturing. 2. building up core base industries that are essential for other more advanced industries to thrive later. 3. using the large Nigerian market demand to deepen industrial capacity of local firms, as a first step, before going regional and global. 4. strategically using key manufacturing sectors as technology drivers of the economy. The Plan aims at linking the country’s trade policy with investment and industrial policies in order to bring coherence to government agenda aimed at diversifying the economy on a self-sustaining basis. The NIRP document also highlighted the strengths and weaknesses as well as the opportunities and threats confronting the Nigerian economy in general and the industrial sector in particular. This is with a view to leveraging on the strengths and opportunities on the one hand and on the other addressing comprehensively the weaknesses and threats identified in the operating environment. Amongst the strengths identified are abundant raw materials, large domestic market, strategic location along the gulf of Guinea and abundance of labour. The weaknesses identified are grossly inadequate infrastructure, high cost of funds, policy inconsistency, lack of institutions to drive industrial development, low industrial skills, lack of innovation, inadequate metrology and standards, weak competition, low effective consumer purchasing power, and low patronage of made-in-Nigeria goods. The opportunities highlighted include the potential to become No 1 in Africa and amongst the top 10 globally in many industrial sectors, building up labour intensive industries to take advantage of a youthful population with a median age of 18 years, becoming the manufacturing hub for ECOWAS and Africa, attracting new investment from East Asia where labour costs have begun to rise, opportunity to diversify exports, and sources of foreign exchange earnings. Against the opportunities earlier identified are threats from the following sources, namely, large scale discoveries of shale oil and gas in North America which will lead to long run fall in the price of crude oil, increased competition from other newly industrialized countries, trends in global trade policies which may not be too favourable, and therefore need to fast track industrial development in Nigeria to take advantage of ECOWAS, African Continental Free Trade Area, EPA and similar trade agreements. From the foregoing perspective, NIRP is the first strategic, holistic, comprehensive, and integrated roadmap aimed at achieving rapid socio-economic and industrial development in Nigeria. Within this context, attention is to be focused on the development of domestic resource based industries, especially in areas where Nigeria has comparable as well as competitive advantages, backward integration strategies in industrial development

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as well as a robust institutional framework to drive implementation of policies and plans. Under the NIRP a number of priority sectors were identified to drive industrial development. The criteria used in selecting the priority industries include the following. • • • • • • •

Existing skills and installed capacity. Natural endowments. Competitive cost base. Labour intensity. Potential for linkages with other industries. Local and regional demand. Ability to export to developed markets. Based on the foregoing the following priority sectors were selected, namely

• Agro and agro-allied industries: food processing, sugar, palm oil processing, cocoa processing, leather and leather products, rubber products, textiles, and garments. • Solid minerals and metals: cement, basic metal, aluminium, chemicals autoassembly. • Oil and gas related industry: petro chemicals, fertilizers, methanol, plastics, refineries. • Construction: housing. • Light manufacturing: consumer and home goods. • Services. In addition, seven supporting structures and enablers were identified as crucial to promote competitiveness and reduce the impediments to higher productivity in the manufacturing sector. The enablers highlighted for this purpose include infrastructure (with particular emphasis on power and transportation), skills (technical and vocational skills), innovation (replication of current technologies, improving and adapting them to local needs), improvement of investment climate (in terms of ease, time and predictability of operating a business), standards (strong product and service standards), local patronage (through deliberate policies to promote local capacity utilization), financing of credit at affordable cost to industrialists. The NIRP document also made a robust provision for an institutional framework for effective implementation. This features an inclusive governance model and a programme management structure to support plan implementation, at the top of which is a Industrialization Advisory Board chaired by the Minister for Industry with a leading private sector industrialist as alternate chair to provide private sector perspective. The overall programme is ultimately headed by the President of the country who is described as the final authority, approver and decision maker who provides overall guidance and direction to the Advisory Committee headed by the Minister. Whilst it is too early to appraise the success or otherwise of the NIRP, it should be pointed out that this is a bold step in the right direction if the policies and the stated

5 Why Nigeria Failed to Achieve Industrial Takeoff

63

objectives of the plan are vigorously pursued. It is equally gratifying to note that the new government which came to power in 2015 has adopted the policy framework of the Plan rather than the usual practice of abandoning policies initiated by previous governments. Nevertheless, after 5 years in the saddle under the new political leadership, the economy is still to make the envisaged leap in industrial development. In addition, the downturn of the economy arising from the collapse of the international oil market since 2014 continues to pose enormous challenge towards the realization of the goals set out in the Industrial Revolution Plan.

5 Why Nigeria Failed to Achieve Industrial Takeoff Against the background of all the industrial development policies and strategies pursued by succeeding governments since independence to the present time, a synthesis of the factors which prevented Nigeria from achieving industrial takeoff is attempted here. Given the massive windfall which accrued from crude oil exports between 1970 and 2015 as well as an abundance of human and material resources, the question then arises as to why Nigeria failed to achieve industrial takeoff as compared to three selected emerging economies, namely South Korea, Malaysia and Indonesia which were more or less at the same level of development with Nigeria in 1960. The failure of Nigeria to achieve industrial takeoff can be attributed to a combination of interrelated factors as summarized below. First is the absence of a visionary leadership at the national level dedicated to the goal of rapid transformation of society. Except for the leadership class which emerged at the regional level in the closing years of British rule that eventually won independence for Nigeria, the country has not been fortunate to have a charismatic and visionary leader for a significant period at the Federal level to drive the process of industrialization and economic development. In this regard countries such as Malaysia under Dr. Mahathir Mohamad, Singapore under Lee Kuan Yew, and South Korea under General Park Chung-Hee were more fortunate to have leaders who vigorously pursued policies which transformed their national economies between 1965 and 2010. Second, the process of industrial development in Nigeria has been hampered by large scale mismanagement of the national economy, especially during the oil boom years leading to unimaginable diversion of public funds into unproductive uses as well as activities and projects not in consonant with a country desirous of rapid industrial development. This recklessness led to the virtual collapse of the national economy in the early 1980s and the subsequent adoption of the structural adjustment programme in 1986. The same pattern of reckless behaviour also repeated itself over the period 2010 to 2015 with the economy in 2016 left prostrate and in a state of depression. Currently there is an urgent need to put in place a robust economic plan to save the economy from the abyss of depression brought about by incompetent political leadership.

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Third is the dearth of infrastructural facilities needed to support industrial development. These include inadequate power supply, roads and railways, water transport, telecommunications (some improvement recorded on the introduction of GSM and Broadband) as well as inadequate municipal services such as water supply, waste disposal, and environmental management in general. This lack of infrastructural facilities remains major impediments to industrial progress in Nigeria. Fourth is the endemic corruption pervasive in the country leading to undiluted and barefaced roguery of public funds by those entrusted with leadership positions at all levels of government. In the prevailing atmosphere funds which should have been committed to core industrial and infrastructural development projects to facilitate rapid socio-economic progress have ended up in private pockets to the detriment of the country. As observed by Harrison [8] “corruption is a cancer at the heart of most Third World states. It eats away at the foundation of trust between people and their rulers. It exemplifies the two key weaknesses of the developing state: the unholy marriage of political and economic power, whereby money buys influence, and power attracts money; and the softness of the state –its inability to apply and enforce its own laws and regulations, so that reform – even if it is legislated- rarely gets put into effect”. Sadly, this is the situation in Nigeria today. Fifth is the absence of a pool of high level professional cadre required to drive industrial planning and project implementation at both the Federal and State levels. This impacted negatively on all the development plans drawn by government over the 60 year period under review. The dearth of executive capacity to manage and supervise projects earmarked for implementation led to unrealized goals in virtually all areas of economic activity. In the event the industrial development goals and targets set for each of the various plans amounted to no more than wishful thinking as the level of achievement fell far below expectations in virtually all cases. The lack of a pool of trained high level manpower capable of driving development has been attributed to the crash programme of indigenization of almost all senior managerial positions in the public sector following the attainment of independence. As Adedeji [9] observed “Yet immediately after independence, African governments relentlessly pursued the Africanisation of their civil services. Literally overnight, Africans were catapulted from relatively junior posts to positions of high responsibility. They were rushed through crash training programmes provided by the hastily established institutes of public administration. As is to be expected, given the magnitude of the task involved—it is believed that the exercise involved training for some 100,000–200,000 expatriate held posts which were Africanised between 1958 and 1968, standards fell and the level of performance and efficiency suffered”. Nigeria is no exception to this situation as this was the reality after independence in 1960. Sixth, the plans which were intended to guide the process and sequencing of project implementation were largely ignored. This led to a mismatch between the expected intersectoral linkages envisaged in the plans. In addition there were several unplanned and non-priority projects introduced into the plans on the basis of political expediency and the whims and caprices of political actors without due consideration of what is best for the national interest. Moreover too many projects were started at the same time without due regard to prioritization, funding, and sustainability. These

5 Why Nigeria Failed to Achieve Industrial Takeoff

65

account for the large number of uncompleted and abandoned projects littered all over the country. Seventh, several core industrial projects in the public domain such as those in iron and steel, petro-chemicals, pulp and paper, sugar, machine tools, automotive assembly, aluminium smelting, etc. were not properly implemented to their logical conclusion to become self-sustaining as viable industrial enterprises. In the event most of the projects collapsed or were abandoned midway, constituting a drain on the national economy. The on-going privatization of these enterprises is expected to restore some sanity. However, sadly the process appears to have been compromised without any significant change in the situation in terms of output, employment and productivity. Eighth, there was a lack of intermediate manpower needed by industry, especially at the engineers, technicians, and artisans level. Although the output from the educational institutions has increased tremendously over the years to meet this challenge but unfortunately most of the output from these institutions are not of the calibre and mix required by industry. This remains a major constraint to industrial development. Thus the country continues to rely on expatriates to fill the vacuum at great cost to the economy. Ninth, there was an absence of robust statistical data to support sound economic and industrial development planning, hence several of the projects earmarked for implementation were not backed up with proper documentation and appraisal This lack of evidence based planning led Professor Stopler [10] who supervised the preparation of the first national development plan, 1962–1968, to describe the process in Nigeria as planning without facts. Finally, the negative impact of the political and social environment of business in Nigeria has slowed down the process of industrial and economic development. At the political level this is characterized by unstable polity which witnessed about 15 different Heads of Government over the 60 year period. Generally speaking, changes in the political leadership of the country have always been accompanied with turmoil, uncertainty, and the threat of disintegration of the country thereby increasing the level of risk premium attached to long term investment decision making, whether by local or foreign investors. In addition to the foregoing, tribal chauvinism is very rife and the business environment of the country is characterized by widespread incidents of civil strife, banditry, kidnapping, and religious unrest. Hence the country appears to be at war with itself with several incidents of sabotage and willful destruction of key infrastructural installations in the oil and gas industry and of public utilities in general. Besides the volatile political environment, one must also highlight the negative social tensions and consequences arising from the collision between the traditional social structure and beliefs against the forces of modernization and development. Given all the foregoing it should not come as a surprise that Nigeria trails far behind the other three comparator countries of Indonesia, Malaysia, and South Korea in terms of industrial and overall economic development. To ameliorate the prevailing situation in Nigeria there is an urgent need to go back to the drawing board with the aim of producing a comprehensive master plan to drive the process of

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industrial development. However, this can only be achieved under a committed, dedicated, and visionary leadership able to set challenging but attainable goals for socio-economic progress so that over the next 20–30 years Nigeria could emerge as an industrialized country. This will require hard choices to be made in the following areas: curbing corruption and bureaucratic ineptitude, population control, infrastructure upgrading, human capital development, optimal and durable political structures with supporting institutions, due process and the rule of law, sound economic management, national values and discipline, amongst others. In addressing the foregoing issues, some suggestions are made in the last chapter to this book, namely Chap. 13, to guide policy formulation and strategic choices to be made in promoting a faster rate of industrial and socio-economic development in Nigeria.

6 Comparison with Other Emerging Economies For the purpose of inter-country comparison, three South East Asian countries, namely Indonesia, Malaysia, and South Korea have been selected and their industrial development strategies compared to that of Nigeria during the 50 year period, 1965–2015, under review. The relevant background socio-economic statistics of Nigeria and the three countries are presented in Table 3.3 for purposes of comparison and analysis.

6.1

Background to the Four Countries

To start with, it is instructive to note that all the four countries are emerging nation states carved out as geographical entities by foreign imperialist powers which colonized them at one time or the other before they attained full independence. In the case of Malaysia and Nigeria, both were colonized by Britain with the former attaining independence in 1957 whilst the later attained independence in 1960. On the other hand, Indonesia was colonized by the Dutch and only became an independent state in 1945 at the end of the second world war after years of nationalist rebellion. As for South Korea, she emerged as a separate country in 1953 following the partition of the Korean Peninsula into north and south after the Korean war. Before then the Korean Peninsula had been colonized by the Japanese from 1910 to 1945. At the end of WWII, the Korean Peninsula was placed under UN Trusteeship with the North under the control of the former Soviet Union and the South under U.S. administration. Generally speaking therefore all the four countries are relatively young nation states and share the same background of colonial experience. In terms of economic development all the four countries were more or less at roughly the same level of development in 1960 with their economies based on rural

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67

Table 3.3 Inter-country comparison of socio-economic indicators for selected years 1965–2014

Demographic indicators Population (million) 2014 1980 Population growth % 2014 1980–2000 Labour force % of population of working age 15– 64 years 2014 Incidence of poverty % of total on less than $2/day 2014 Life expectancy at birth (years) 2014 1980 Adult literacy 2014% Area ‘000 km2 Density 2014 persons/km2 Urban population 2014% of total Economic indicators GDP ($billion) 1965 1980 2000 2014 GDP per capita ($) 1965 1980 2000 2014 GDP average annual %growth rate 1965–1980 1980–1990 1990–2000 2000–2014 % GDP growth by sectors Agriculture 1965–1980 1980–1990 1990–2000 2000–2014

Nigeria

Indonesia

Malaysia

South Korea

177.5 73.5

254.5 147.5

29.9 13.8

50.4 38.1

3.1 3.5 53

1.3 2.0 67

1.5 2.1 69

0.4 1.6 73

69.0

11.3

1.7

–

52 49 60.0 924 194.9 47

70.8 54 93 1919 140.5 53

73 65 93 330 91.0 74

81.5 66 100 100 517.3 82

4.17 64.2 46.4 568.50

3.83 78.0 165.0 888.50

3.13 24.5 93.8 326.90

3.00 62.8 561.6 1410.40

115 911 515 3300

58 673 870 3524

333 1900 4287 11,049

106 1711 11,947 27,970

8.0 1.6 1.9 8.2

7.9 6.1 4.2 5.5

7.4 5.3 7.0 4.9

9.5 9.4 6.2 4.0

1.7 3.3 3.4 7.9

4.3 3.4 2.0 3.7

– 3.8 0.3 3.1

3.0 2.8 1.6 1.4 (continued)

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Table 3.3 (continued)

Industry 1965–1980 1980–1990 1990–2000 2000–2014 Services 1965–1980 1980–1990 1990–2000 2000–2014 GDP composition by sectors % Agriculture % of GDP 1965 1980 2000 2014 Industry % of GDP 1965 1980 2000 2014 Services % of GDP 1965 1980 2000 2014 Gross domestic investment % of GDP 1965 1980 2000 2014 Foreign direct investment ($million) 1970 1980 2000 2014 Total exports $million 1980 1990 2000 2014

Nigeria

Indonesia

Malaysia

South Korea

13.4 1.1 0.9 3.1

11.9 6.9 5.2 4.4

– 7.2 8.6 2.9

16.5 12.1 6.0 5.1

8.8 3.8 3.1 11.6

7.3 7.0 3.8 5.3

– 4.2 7.3 –

9.3 9.0 5.6 3.7

53 21 26 20

56 24 16 14

28 22 9 9

38 15 4 2

29 34 22 59

31 34 38 43

47 40 43 50

37 45 58 59

29 34 22 59

31 34 38 43

47 40 43 50

37 45 58 59

19 21 23 15

8 24 17 35

20 30 24 25

15 32 27 29

205 588 1140 4656

83 1093 4550 26,349

94 2333 3787 10,609

66 788 9283 9899

27,071 5627 8721 63,700

23,797 21,837 43,595 178,179

14,098 29,258 81,963 208,864

21,924 69,844 141,116 525,515 (continued)

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Table 3.3 (continued) Nigeria Total imports $million 1980 20,014 1990 5627 2000 8721 2014 63,700 Structure of merchandise exports 1990: 2014 % Food 1:5.1 Agricultural raw materials 1:3.2 Fuel 97:87.6 Ores and metals 0:0.6 Manufactures 1:3.4 Structure of merchandise imports 1990: 2014 % Food 6:17.8 Agricultural raw materials 1:2.8 Fuels 0:20.2 Ores and metals 21:8 Manufactures 67:57.3 Openness of the Economy exports + imports as % of GDP 1980 49 2014 28.4 Industrial indicators Manufacturing % of GDP 1965 7 1980 8 2000 4 2014 10 Manufacturing value added (MVA) 2014 $billion 54.78 MVA % of GDP 2014 9.64 Electricity production 2014 GWh 25,695 Electric power consumption kwh per capita 2014 144.5 Steel Production 2017 million tonnes Nil

Indonesia

Malaysia

South Korea

21,540 21,837 43,595 178,179

13,526 29,258 81,963 208,864

25,687 69,844 141,116 525,515

11:17.7 5:5.8 44:31.6 4:7.1 35:37.8

12:11.1 14:1.7 18:22.0 2:2.9 54:61.8

3:1.1 1:10 1:9.5 1:2.0 94:86.2

5:8.8 5:2.7 9:24.4 4:3.1 77:60.0

8:8.0 11:8 5:17.1 4:5.5 82:67.2

6:4.9 8:1.6 16:34.6 7:7.3 63:51.5

54 39.9

113 131.0

74 77.9

8 13 28 22

9 21 31 24

18 28 29 30

187.74 21.08 216,200 811.9 4.8

77.33 22.9 131,600 4596.0 2.8

387.95 27.5 517,800 10,496.5 71.0

Source: World Bank, World Development Indicators, various issues

agriculture. As can be observed from Table 3.3, in 1965 the GDPs of the four countries were in the same ballpark, with Nigeria’s GDP estimated at $4.17 billion being the biggest, followed by Indonesia at $3.83 billion, Malaysia at $3.13 billion with South Korea in the last position with a GDP of only $3.00 billion. In terms of natural resources, Nigeria, Indonesia, and Malaysia are all richly endowed with a variety of resources including sizeable deposits of oil and gas,

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abundant food and cash crops, livestock, and forestry. On the other hand South Korea is not as well endowed as the other three countries and had to make good with its limited resources. In terms of population, Indonesia and Nigeria have consistently been ranked amongst the 10 most populous nations of the world. Based on 2014 estimates Indonesia is currently the fifth most populous nation on earth with a population of 254.5 million whilst Nigeria is in the eighth position with a population of 177.5 million. On the other hand South Korea with a landmass of only 100,000 square kilometres has a population estimated at 50.4 million in 2014 but with a high density of 517.3 per km2 as compared to Indonesia and Nigeria with population densities of 140.5 and 194.9 per km2 respectively. The fourth comparator country, namely Malaysia with a land mass of 330,000 km2 has a population of 29.9 million in 2014 with a density of 140.5 per km2. Against the background of the human and natural resource endowments of each of the four countries, an attempt is made here to uncover some of the underlying reasons responsible for the varying levels of economic progress achieved as between the four countries over the 50 year period, from 1965 to 2015. For this purpose we turn to the facts and figures contained in Table 3.3. As earlier pointed out, all the four countries were more or less at the same level of economic development in 1965, with Nigeria having the biggest GDP of over $4.00 billion. However, in terms of per capita income Nigeria ranked second in 1965 with $115 as compared to Malaysia with a capita income of $333. South Korea ranked third with $106 and Indonesia came last with a capita income of $58. However, over the next 50 years (i.e. 1965–2015), there has been spectacular changes in the economic fortunes of the four countries with South Korea outperforming all the other countries with a GDP, estimated in 2014, at $1410.40 billion and a per capita income of $27,970. Thus South Korea has emerged from being a poor third world country to join the ranks of industrialized countries with an economy ranked 13th in the world. Malaysia also recorded impressive gains over the 50 year period attaining a GDP of $326.90 billion in 2014 and a per capita income of $11,049. Indonesia has also performed fairly well a GDP of $888.50 billion in 2014 and a capita income of $3524 to join the ranks of middle income developing economies. In the case of Nigeria the growth of the GDP has been less impressive, with the country recording only a GDP average annual growth rate of less than 2% over the period 1980–2000 as compared to over 8% for South Korea, over 6% for Malaysia, and over 5% for Indonesia, respectively, during the same period. Thus by the year 2000 Nigeria’s GDP was the lowest amongst the four countries and amounted to only $46.4 billion as compared to South Korea with $561 billion, Malaysia with $93.8 billion and Indonesia with $165 billion. Following the rebasement of the national accounts in 2010, and the capturing of more activities in the national account series, it was discovered that Nigeria’s GDP had been grossly understated. Based on the new series, Nigeria’s revised GDP was estimated at $369.10 billion in 2010 and this grew to $568.50 billion in 2014 as compared to South Korea, Malaysia and Indonesia, each with GDP of $1410.40

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billion, $326.90 billion and $888.50 billion, respectively in the same year. With the rebasement of GDP, Nigeria’s economy surpassed that of South Africa to become the largest in Africa. However, the economy is still very much dependent on crude oil exports which continue to provide over 90% of foreign exchange earnings and the bulk of government revenue. Thus the economy remains undiversified and vulnerable to wild swings in the price of oil in the international market. As a result Nigeria’s GDP declined to $375.8 billion in 2017. As compared to South Korea, Malaysia, and Indonesia, Nigeria’s lacklustre economic performance over the 50 year period from 1965 to 2015 can be attributed to a number of factors which can be inferred from the statistics contained in Table 3.3 These are discussed under the following sub-headings.

6.2

Demographic Indicators

Under demographic indicators a number of important developments are worth highlighting. First is the absolute size of the population in relation to the size of the GDP. As can be observed from the table, between 1980 and 2014 all the four countries experienced rapid population increases. Both Nigeria and Malaysia doubled their population within the 34 year period. Nigeria’s population rose from 73.5 million in 1980 to 177.5 million in 2014 whilst that of Malaysia rose from 13.8 million to 29.9 million. On the other hand Indonesia’s population grew from 147.5 million in 1980 to 254.5 million in 2014, an increase of over 70% and that of South Korea rose from 38.1 million in 1980 to 50.4 million in 2014, an increase of about 30%. A major factor influencing the size of population is its rate of growth in each country. For example, between 1980 and 2000, the population of Nigeria, Indonesia, Malaysia, and South Korea grew by 3.5, 2.0, 2.1, and 1.6%, respectively, hence the high population level recorded by these countries especially Nigeria which has the highest growth rate. However, it is gratifying to note that by 2015, population growth rate in each of the countries have declined significantly with South Korea recording a rate of only 0.4%, a rate which corresponds to those of advanced industrialized countries such as Germany, France, Japan, and United Kingdom. However, Nigeria’s population growth rate of 3.1% is still very high and incompatible with the goal of rapid economic development. Indeed it is projected that if the present trend continues, by 2050, Nigeria’s population will exceed 450 million and will surpass that of the USA, making her the third most populous nation in the world after India and China. To achieve the goal of rapid economic development Nigeria can learn from China which adopted the one child per family policy to control exploding population growth in order to raise the standard of living of its teeming population. It is also instructive to observe that Indonesia which has the largest Muslim population in the world has managed to reduce population growth to a more manageable rate of 1.3%.

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There is therefore an urgent need for Nigeria to adopt a policy which seeks to limit its population growth rate. Apart from limiting its population growth rate, Nigeria needs to tackle the following related issues. As a result of the high fertility rate in Nigeria, the country has to support a higher proportion of people below working age, estimated in 2014 at 44% of the total population. This means that a higher proportion of the output of the working population has to be diverted to support people below working age. It should also be noted that the percentage of people in working age bracket 15–64 years is only 53% in Nigeria as compared to 67%, 69%, and 73% in Indonesia, Malaysia, and South Korea, respectively. In terms of the incidence of poverty which is based on proportion of the population living on less than $2.0 per day, Nigeria has the highest number of people in this category estimated at nearly 70% of the total population. This is indeed woeful when compared to Indonesia with only 11.3% and Malaysia with a mere 1.7% of their population classified in this category. On the other hand, South Korea, now classified as an industrialized country, has managed to eliminate extreme poverty. When attention is shifted to life expectancy at birth, Nigeria is also at the bottom of the four countries with a figure of only 52 years as compared to 70.8 years in Indonesia, 73 years in Malaysia, and 81.5 years in South Korea Thus a higher proportion of the population in Nigeria die before or in their prime. As for adult literacy, Nigeria is in the bottom position with only 60.0% of the adult population being literate. South Korea on the other hand has eliminated illiteracy, whilst in Indonesia and Malaysia, respectively, adult literacy is at a high of 93%. Beyond that all the three countries have invested heavily in basic and vocational education as well as in science, engineering and technology to meet the needs of commerce and industry. From all the foregoing it is quite apparent that Nigeria has some catching up to do in terms of population policy and human capital development if she is to attain the rate of economic growth recorded by the comparator countries.

6.3

Economic Indicators

As earlier pointed out earlier, all the four countries were more or less at the same level of economic development in the 1960s, with Nigeria having the biggest GDP of over $4.00 billion and South Korea the smallest GDP of just $3.0 billion in 1965. However, by 2014, South Korea’s GDP of over $1410 billion dwarfs those of the other three comparator countries. What then are the economic factors responsible for the varying degree of growth rates achieved by the four countries over the period 1965 to 2014. In seeking answers to this question we turn again to Table 3.3 with particular reference to the items listed under economic indicators. One of the main reasons responsible for the varying level of economic progress recorded by the four countries over the period under review can be seen from

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73

differences in the average annual growth rate of the GDP of each country. Between 1965 and 1980 all the four countries recorded impressive GDP growth rates with the annual growth rate averaging 7.4% in Malaysia and 9.5% in South Korea. During that period Nigeria’s GDP annual growth rate averaged 8%, whilst that of Indonesia was 7.9%. Thus by 1980 Nigeria’s GDP of $64.2 billion compared favourably with South Korea’s GDP of $62.8 billion. However, following the collapse of the international crude oil market in 1981/82, the Nigerian economy was on the verge of collapse owing to poor economic management and the fact that crude oil exports accounted for over 95% of foreign exchange earnings and the bulk of government revenue. The rapid decline of the economy led to the adoption of the Structural Adjustment Programme in 1986 with the stated objectives of reviving the economy by lessening of government dominance in the economy through the privatization and/or commercialization of public owned enterprises as well as diversification of the economy to make it less susceptible to the oil sector. Although some measure of success was achieved in arresting the downward spiral of the economy, generally the reform programmes were not fully implemented, hence the performance of the economy remained uninspiring over the next 20 years. For example, the annual GDP growth rate for Nigeria averaged just 1.6% and 1.9% over the periods 1980 to 1990 and 1990 to 2000, respectively. This level of performance was very poor indeed when compared to Indonesia, Malaysia, and South Korea which recorded annual GDP growth rates of over 5%, 6%, and 7%, respectively, during the 20 year period. As a result Nigeria’s GDP was the lowest amongst the four countries in 2000, amounting to only $46.4 billion as compared to $165 billion, $93.8 billion, and $561 billion for Indonesia, Malaysia, and South Korea, respectively. One of the main reasons responsible for the superior performance of Indonesia, Malaysia, and South Korea was that they all implemented reforms of their economies following the oil shocks of the early1980s. For example, Indonesia an OPEC member and major oil exporter like Nigeria was able to restructure and diversify her economy away from oil such that by 1990, crude oil accounted for only 44% of total exports as compared to Nigeria with 97%. Similarly manufactured exports accounted for 35% of Indonesia’s merchandise exports as compared to 1% for Nigeria. Both Malaysia and South Korea outperformed Nigeria during this period with the share of manufactured exports in total merchandise exports accounting for 54% and 94%, respectively, in the two countries. It should also be pointed out that Indonesia, Malaysia, and South Korea were able to diversify their economies significantly over the 50 year period such that by 2014 the agricultural sector’s contribution to the GDP had declined to 14%, 9%, and 2%, respectively, in the three countries. Indeed the structure of South Korea’s GDP by 2014 compares favourably with those of industrialized countries where agriculture usually accounts for between 1% and 2% of GDP. Other underlying factors responsible for the different rates of economic growth recorded by the four countries are attributable to varying levels of Gross Domestic Investment and Foreign Direct Investment. Between 1980 and 2015, Indonesia,

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Malaysia, and South Korea all achieved higher levels of gross domestic and foreign direct investment as compared to Nigeria. For example, in 2014, Gross Domestic Investment as a proportion of GDP was only 15% in Nigeria as compared to 35%, 25%, and 29% in Indonesia, Malaysia, and South Korea, respectively. Similarly, the amount of FDI recorded in Nigeria in 2014 was only $4.65 billion as compared to $26.35 billion, $10.61 billion, and $9.90 billion in the other three countries, respectively. In the area of international trade it is quite apparent that Indonesia, Malaysia, and South Korea all pursued outward oriented economic policies which stimulated the growth of exports and imports thereby enabling these countries to reap from the benefits of trade arising from globalization and trade liberalization. Thus the value of exports from Indonesia, Malaysia, and South Korea had risen from $25.68 billion, $29.26 billion, and $65.02 billion in 1990 to $176.29 billion, $234.14 billion and $572.67 billion, respectively, in 2014 as compared to Nigeria where the value of export trade rose from $13.60 billion in 1990 to a mere $63.70 billion in 2014. Similarly the value of imports into Nigeria rose from a mere $5.6 billion in 1990 to $63.7 in 2014 as compared to Indonesia, Malaysia, and South Korea where imports rose from $21.8 billion, $29.3 billion, and $69.8 billion in 1990 to $178.2 billion, $208.9 billion and $525.5 billion, respectively, in 2014.

6.4

Industrial Indicators

The evidence of industrial progress in the four countries is captured in Table 3.3 under the selected indices of Industrial Indicators. As can be observed from the table, in 1965 the share of manufacturing in GDP for Nigeria, Indonesia, and Malaysia stood at 7%, 8%, and 9%, respectively, with the exception of South Korea which stood at 18%. However, by 2000 the corresponding figure for Nigeria was a miserable 4% as compared to Indonesia, Malaysia, and South Korea with 28%, 31%, and 29%, respectively. Thus whereas the other three countries transited from being agricultural and commodity based economies by developing their manufacturing sectors Nigeria was left behind in a position worse than where the country was in 1965. However, some improvements had been recorded such that by 2014 the share of manufacturing in GDP amounted to about 10% in Nigeria as compared to 22%, 24%, and 30% for Indonesia, Malaysia, and South Korea, respectively. Furthermore given the size of the GDP in 2014 in each of the four countries and the share of manufacturing in the GDP for each country, it did not come as a surprise that Nigeria recorded the lowest manufacturing value added of $54.78 billion as compared to $187.74 billion, $77.33 billion and $387.95 billion for Indonesia, Malaysia and South Korea, respectively. Also Manufacturing Value Added (MVA) as a percentage of GDP was only 9.64% in Nigeria in 2014 as compared to 21.08% in Indonesia, 22.9% in Malaysia and 27.5% in South Korea, respectively.

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75

One of the major indicators of industrial progress, namely power supply, indicated that Nigeria lagged far behind the other three countries when it comes to electricity production capacity which stood in 2014 at just 25,695 GWh in a country of over 180 million as compared to 216,200 GWh, 131,600 GWh, and 517,800 GWh for Indonesia, Malaysia, and South Korea, respectively. Similarly electricity consumption per capita was a mere 144.5 kwh in Nigeria as compared to 811.9 kwh, 4596.0 kwh and 10,496.5 kwh in Indonesia, Malaysia and South Korea, respectively. Thus electricity power generation and consumption remain binding constraints to industrial progress in Nigeria. It is also worth pointing out that in the African continent, electricity production in South Africa and Egypt is estimated at 255,100 GWh and 193,300 GWh, respectively, in 2017 as against a mere 28,000 GWh in Nigeria with a population of over 180 million. Another notable measure of industrial progress relates to steel production. Nigeria at the moment does not produce any liquid steel as the Delta Steel Complex which catapulted Nigeria into the league of steel producing countries in 1983 when the plant was opened has ceased operations since 1996 when the plant was shut down. Thus, Nigeria is still to achieve the status of a major steel producing country on a permanent basis. This situation compares very unfavourably with that of the other three comparator countries which have become permanent members of major steel producing countries in the world with output in 2017 of 4.8, 2.8, and 71.0 million tonnes each for Indonesia, Malaysia, and South Korea, respectively. Indeed, South Korea has emerged to become the sixth largest producer of steel in the world. Looking back at the 50 year period from 1965 to 2015, one can only conclude that this was a period of lost opportunity for Nigeria brought about by an inept, incompetent, and corrupt political leadership and the squandering of national resources. Whereas the other three comparator countries continue to record spectacular progress in their march to industrialization and modernity, Nigeria continues to wallow in retrogression and stagnation. Only a major national reorientation under a visionary political leadership supported by a disciplined bureaucracy and followership can salvage the country from the prevailing situation. Time will tell if the new leadership which emerged in the country in 2015 is any different from the previous ones.

7 Summary and Conclusion In this chapter, a general review of the industrial development policies and strategies pursued by succeeding governments in Nigeria since 1960 to the present time was undertaken. The overriding objective was to stimulate a faster rate of industrial development in Nigeria through the implementation of policies and strategies designed to achieve this goal. However, achievements have fallen far below expectations owing to several factors, amongst which were leadership failures, poor economic policies, large scale mismanagement of the national economy and endemic corruption. Thus the country lags far behind comparator countries such as

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South Korea, Malaysia, Indonesia, and Singapore all of which were more or less at the same level of development with Nigeria in 1960. Whilst the other comparator countries have made significant progress in their industrial development efforts with the manufacturing sector contributing 22%, 24%, and 30% to the GDP in Indonesia, Malaysia, and South Korea, respectively, in 2014, that of Nigeria remained at below 10% of national output. Also when it comes to export of manufactured goods the other countries are far ahead of Nigeria. For example, in 2014 the proportion of manufactured goods in total merchandise exports in the three comparator countries were 37.8%, 61.8%, and 86.2% in Indonesia, Malaysia, and South Korea, respectively. In contrast the corresponding figure for Nigeria was only a miserable 3.4% in that year. Thus, Nigeria has remained an exporter of primary commodities which in 2014 accounted for over 95% of merchandise exports. In contrast as a result of progress made in their industrial development efforts, the comparator countries have diversified their economies such that primary commodities now account for a diminishing proportion of exports. For example, in South Korea primary commodities accounted for less than 15% of their total merchandise exports in 2014 and about 38% in the case of Malaysia in the same year. For Nigeria to catch up with countries such as South Korea, Malaysia, and Singapore, the country has to redouble her industrial development efforts. For this desirable goal to be achieved the country has to confront boldly the major impediments hindering her industrial development efforts and make the hard choices necessary to drive industrialization. Some of the major impediments identified in this area include amongst others, absence of a leadership class dedicated to the goal of rapid transformation of society, endemic corruption at all levels of government and large scale mismanagement of the national economy. In addition the country suffers from massive deficits of infrastructural facilities needed to support industrial development effort such as inadequate power supply, transport systems, and basic municipal services as well as poor industrial development planning, lack of executive capacity to drive plan implementation and inadequate pool of engineers, technicians, and artisans. There is also the need to tackle explosive population growth rate currently at over 3.00% per annum as this puts additional strains on the growth in per capita income. To the foregoing are to be added uncertainties arising from constant political tensions and turmoil as well as banditry, kidnapping, and religious strife prevalent in different parts of the country. Given the abundance of human and material resource endowment of Nigeria and the envisaged emergence of a visionary and dedicated leadership class, there is no reason why Nigeria cannot overcome all the obstacles which have hitherto hindered her industrial development efforts in particular and overall economic development in general. The primary goal of the envisaged new political leadership that will hopefully emerge in Nigeria should be the achievement of industrial takeoff anchored on a realistic blueprint within a time span of about 20 to 30 years. Such a blueprint should be prepared within the framework of a comprehensive national development strategy based on Nigeria’s unique peculiarities and drawing on

References

77

lessons of experience from the other countries that have achieved demonstrable measures of success in their industrial and overall economic development efforts.

References 1. Federal Ministry of Economic Development, 1962, First National Development Plan 19621968, Lagos 2. Federal Ministry of National Planning 1970 Second National Development Plan 1970- 1974, Lagos 3. Federal Ministry of National Planning , 1975. Third National Development Plan 1975 -1980, Lagos 4. Federal Ministry of National Planning , 1981. Fourth National Development Plan 1981-1985, Lagos 5. Federal Government Printer 1986 Structural Adjustment Programme, Lagos 6. Federal Ministry of Industries, 1988. Industrial Policy of Nigeria, Abuja 7. Federal Ministry of Industry, Trade and Investment, 2012.Nigeria Industrial Revolution Plan, Abuja 8. Paul Harrison, 1979 Inside the Third World, Penguin Books, London , p.387 9. Adebayo Adedeji, ed.1981. Indigenisation of African Economies, Hutchinson & Co, London , pp 29-30 10. W.F. Stopler, 1966.Planning Without Facts: Lessons in Resource Allocation From Nigeria’s Development, Harvard University Press

Chapter 4

The Nigerian Steel Industry: Retrospect and Prospect

1 Introduction The development of a viable domestic steel industry had been a major pre-occupation of successive governments in Nigeria since the end of British colonial rule in 1960. The steel industry was seen by government as a major catalyst to galvanizing and accelerating the pace of industrial development in the country, hence the core role assigned to the sector in the various national development plans starting from the 1962–1968 national development plan. Furthermore, it was considered to be a matter of national pride and a reflection of industrial progress for Nigeria to join the league of the steel producing nations of the world. Sadly, however, as at 2017 Nigeria is still to feature amongst the major steel producing nations of the world as highlighted in Table 4.1. As can be observed from the table only two countries from Africa, namely South Africa and Egypt feature on the list. On the other hand South Korea, Malaysia, and Indonesia which were more or less at the same level of economic development with Nigeria in 1960 have all made it to the list of steel producing countries. Indeed South Korea has emerged to become the sixth largest producer of steel in the world after China, Japan, India, USA, and Russia, respectively. Meanwhile the Nigerian steel industry remains comatose after nearly five decades of development with little or nothing to show for it in spite of the huge capital expenditure and effort committed to the sector. The perception of the core role of the steel industry to Nigeria’s industrial development was based on the fact that the sector has important linkages with virtually all the other sectors of the economy ranging from building and construction, engineering, transport, and communication to agriculture and agro-allied industries. Thus in the quest for rapid industrialization huge capital allocations estimated be in excess of $10 billion (U.S.) had been made over the past five decades aimed at developing the steel sector in Nigeria. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5_4

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Table 4.1 Ranking of world steel producing countries in million tons 2017 S. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18 19 20 21. 22. 23. 24. 25 26.

Country People’s Republic of China Japan India USA Russia South Korea Germany Turkey Brazil Italy Taiwan Ukraine Iran Mexico France Spain Canada Vietnam Poland Austria Belgium United Kingdom Egypt Netherlands South Africa Australia

2017 831.7 104.7 101.4 81.6 71.3 71.0 43.4 37.5 34.4 24.1 22.4 21.3 21.2 19.9 15.5 14.5 13.6 11.5 10.3 8.1 7.8 7.5 6.9 6.8 6.3 5.3

S. No. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51.

Country Slovakia Pakistan Saudi Arabia Indonesia Sweden Argentina Czech Republic Thailand Kazakhstan Finland Romania United Arab Emirates Malaysia Qatar Belanus Luxembourg Portugal Oman Hungary Serbia Switzerland Greece Colombia North Korea Others Total

2017 5.0 5.0 4.8 4.8 4.7 4.6 4.6 4.5 4.5 4.0 3.4 3.3 2.8 2.6 2.4 2.2 2.1 2.0 1.9 1.5 1.5 1.4 1.3 1.3 13.4 1689.4

Source: World Steel Association

However, in spite of these huge commitments, achievements have fallen far below expectations such that today the steel sector rather than boosting industrial development has become a drain pipe on the national treasury with the two integrated steel complexes at Ajaokuta and Ovian-Aladja as well as the inland rolling mills in a state of suspension with no significant output since 1996. The purpose of this chapter therefore is to take a critical look at the evolution and current status of the steel industry in Nigeria with a view to coming up with viable options for its future development. For this purpose the chapter is divided into eight parts as outlined below. Following this introduction, Sect. 2 reviews the historical evolution of the steel industry in Nigeria. Section 3 contains an overview and current status of the Nigerian steel industry. In Sect. 4 the focus is on market size for steel products in Nigeria and projections for future demand. Section 5 reviews the organization and management of the major government owned steel companies before the rolling mills were

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privatized. Section 6 examines the problems and constraints affecting the development of a viable steel industry in the country. Section 7 focuses on the options and prospects for the future development of the steel industry in Nigeria followed by Sect. 8 which contains the conclusion.

2 Historical Evolution of the Steel Industry in Nigeria The steel industry in Nigeria has a chequered history dating back to 1958 when preliminary market surveys were undertaken to examine the feasibility of setting up rolling mills for merchant products to meet domestic demand. This was followed by more extensive surveys in the early 1960s including that by UNIDO to determine market size and projected demand to guide future development. In 1967, the first detailed feasibility study for establishing a 0.57 million tons per year blast furnace plant was undertaken by Russian experts on behalf of the Federal Government of Nigeria. Thus, since the early 1960s the development of a viable domestic steel industry had been a major plank of government policy in the quest for rapid industrialization. This is the more so as Nigeria is blessed with several of the natural resources needed for steel production such as iron ore, limestone, dolomite, and refractory clay. From this modest beginning, the history of the modern Nigerian steel industry can be said to have begun in earnest in 1970 when Messrs Tiajpromexport of the former USSR was commissioned by Government to undertake detailed geological surveys for development of an integrated domestic steel industry. Subsequently the evolution of the Nigerian steel industry has passed through important milestones as highlighted in Table 4.2. From the table it will be observed that the contract for the Delta Steel direct reduction plant was signed in 1977 and the one for Ajaokuta blast furnace steel plant was signed in 1979. The contracts for the three rolling mills at Oshogbo, Jos, and Katsina, respectively, were also signed in 1979 with a consortium of European and Japanese firms. This was followed with the formal commissioning of the Delta Plant and the three inland rolling mills, all of which commenced operations in 1982/1983 with Nigeria joining the league of steel producing countries. However, since these initial achievements it has been a mixed bag of fortunes. The lowest point was reached in 1996 following the suspension of budgetary allocation to all the government owned steel companies. This resulted in the cessation of operational activities in all the companies. This was the situation on the ground until 2001 when a study was commissioned by the Bureau of Public Enterprises to undertake a strategic assessment of the Nigerian steel industry and provide parameters for the privatization and/or commercialization of all the steel companies. This effort resulted in the privatization of the steel rolling companies at Oshogbo, Jos, and Katsina over the period 2002–2005. It proved more difficult to privatize the Ajaokuta and Delta Steel Complexes. As a result government had to concession the two plants to private investors. However the

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Table 4.2 Milestones in Nigeria’s steel development Year 1970 1971 1973 1975 1976 1977 1978 1979

1982 1983 1984 1987 1988 1996 2001 2002– 2005 2004– 2010

Milestones Commissioning of Tiajpromexport of the former USSR to undertake detailed geological surveys Establishment of the National Steel Development Authority under decree 19 to coordinate steel development projects in the country Discovery of iron ore at Itakpe and commissioning of preliminary project report Acceptance of preliminary project report, selection of Ajaokuta site and the commissioning of detailed project report on Ajaokuta blast furnace based steel plant Decision to build a direct reduction based steel plant and the setting up of a Steel Implementation Council Award and signing of contract for direct reduction Delta Steel Plant with Consortium of German and Austrian firms Acceptance of detailed project report for Ajaokuta Global contract for Ajaokuta Steel Plant signed with Ttajpromexport of USSR Contract for the three Inland Rolling Mills at Oshogbo, Jos and Kastina signed with Consortium of European and Japanese firms Formal commissioning of Delta Steel Plant at Ovwian-Aladja Formal commissioning of Kastina Steel Rolling Mill Formal commissioning of Jos and Oshogbo Steel Rolling Mills Formal commissioning of Light Section Mill at Ajaokuta Formal commissioning of Wire Rod Mill at Ajaokuta Major study on Nigerian Steel Industry commissioned by Federal Government of Nigeria and the World Bank Abandonment of works at the Ajaokuta site Suspension of funding for all steel projects and partial closure of operations Study commissioned by Bureau of Public Enterprises (BPE) to provide parameters for commercialization and/or privatization of all government owned steel plants Privatization of the Steel Rolling Mills in Jos, Katsina, and Oshogbo Failed attempts at concessioning of Ajaokuta Steel Company and Delta Steel Company to private investors

concessionaires were not able to bring to the table the required capital and expertise required to rescussitate the plants, hence the contractual arrangements were terminated. Thus the two plants continued to remain in limbo. This was the state of affairs as at the end of 2010. Over the next decade, between 2010 and 2020, further attempts were made by government to resuscitate the two steel complexes. This resulted in the privatization of the Delta Steel Plant to Messrs Premium Steel and Mines Limited. However, despite this development the Plant is yet to roar into full production after over 5 years of its privatization. As for the Ajaokuta Plant, this remained in limbo until 2020 when the Federal Government of Nigeria reached a bilateral agreement with the Government of the Russian Federation to assist in completing the plant. From the foregoing review it is apparent that despite all the efforts and huge investments made by government to develop the steel industry in Nigeria,

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achievements have fallen far short of expectations. The reasons for this failure will be explored in subsequent sections of this chapter.

3 Overview of the Nigerian Steel Industry The Nigerian steel industry is still at its infancy despite all the efforts made by government over the past 50 years to develop a viable domestic steel industry capable of meeting most of the nation’s requirements. As at 2019, based on industry sources the country’s demand for steel products, both long and flat, was estimated at between 3.00 and 4.00 million tons per annum out of which domestic output, mostly from private sector rolling mills account for about 10%, the balance being imported. The current status of the industry as well as the key players are outlined below.

3.1

Ajaokuta Steel Company Limited (ASCL)

ASCL was designed as an integrated blast furnace/basic oxygen furnace (BF/BOF) steel plant with a capacity of 1.3 million tons of cast blooms per annum. However, the plant which has been under construction under a contract agreement with Tiajpromexport of the former USSR since 1979 is still to be completed. Although most of the facilities (about 98%) required by the plant have been in place for several years but the coke ovens, blast furnace, and BOF are still to be completed. Thus at the moment the plant has no liquid steel making capability. Under the first phase of the project, the plant is expected to produce bars and light medium sections with the product mix as highlighted in Table 4.3. The light section and wire rod mills were commissioned in 1983 and 1984, respectively, based on imported billets. These mills only operated for a while before being shut down due to lack of working capital and associated logistics problems. Thus in spite of the extensive facilities currently in place and the huge capital investments already made, the goal of setting up an integrated steel plant is yet to be realized. Among the problems which impeded the completion of the project were huge indebtedness to project contractors who have abandoned site, lack of working capital to operate completed sections, inability to meet monthly wage bills and other Table 4.3 Product mix of ASCL

Product Wire rods (5.5–12 mm) Bars (16–32 mm) Light section Medium section Billets (for sale to third parties) Source: Ajaokuta Steel Company

Tons per annum 130,000 200,000 200,000 560,000 95,000

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overheads. The plant also suffered from the slow pace of the development of required infrastructural facilities without which it cannot be operated efficiently. It is currently estimated that about $1.00 billion will be required to complete the plant under the first Phase of the project. In addition, all associated infrastructural support facilities such as rails, ore mines, bulk handling equipment, etc. will need to be completed before the plant can operate on a continuous basis. It was also estimated in a study undertaken in 2001 that a period of between 3 to 5 years will be required to complete all outstanding works before the plant can operate optimally, assuming proper programming and sequencing of key activities. After two failed attempts aimed at concessioning the Ajaokuta Complex to private investors, it has now been reported that the Federal Government in early 2020 reached an agreement with the Government of the Russian Federation to assist in the completion of the project under a bilateral arrangement. The plant currently remains moribund after nearly 40 years of project implementation.

3.2

Delta Steel Company Limited (DSC)

DSC is an integrated producer of billets and bars with a designed capacity of 1.0 million tons per annum of liquid steel. The plant, based on the midrex direct gas reduction technology was commissioned in 1982 under a turnkey contract agreement with a consortium of German and Austrian companies. The designed product mix of the plant is as presented in Table 4.4. On completion it was envisaged that the plant would produce 320,000 tons per annum of light sections, including flats, channels, angles, 1-beams, and square bars as well as plain and ribbed reinforcement bars. The remaining output, 630,000 tons per annum of billets, was expected to serve as raw materials for Jos, Kastina, and Oshogbo Rolling Mills each with a projected capacity of 210,000 tons per annum of bars and rods working on a two crew shift operation. However, the Delta plant has been shut down since 1996 owing to a backlog of problems arising mainly from inadequate working capital and the non-allocation of funds to the plant in the 1996 government budget. The closure of the plant also adversely affected the three inland rolling mills which depended on DSC for the supply of billets. Thus the Delta Steel Plant which was well conceived at its inception based on proximity to the sea ports for imports and exports, abundant natural gas for operations, and up-to-date midrex technology for steel making coupled with a highly Table 4.4 Product mix of DSC plant

Product Bars Light section Billets Source: Delta Steel Company

Tons per annum 200,000 120,000 630,000

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trained and motivated work force has been out of production since 1996 when all production activities stopped at the site. It was estimated in 2001 that a sum of over $500 million will be needed to replace and/or refurbish needed machinery, upgrade run down facilities, provide adequate working capital, and retrain the labour force. Previous attempts by Government to concession the Delta Plant to private investors all ended in fiasco with no change in the prevailing situation until 2015 when the plant was finally sold to Messrs Premium Steel and Mines Limited. However the plant is yet to roar into production.

3.3

Inland Rolling Mills

Before their privatization, there were three public sectors owned rolling mills in the country as indicated below. • Oshogbo Steel Rolling Mills Limited. • Jos Steel Rolling Mills Limited. • Katsina Steel Rolling Mills Limited. The mills were built under turnkey arrangements with a consortium of international contractors from Western Europe and Japan. Each mill has a designed capacity of 210,000 tons per annum working two shifts. The Katsina Mill was commissioned in 1982, followed by the mills in Jos and Oshogbo in 1983. The envisaged product mix of each of the rolling mills is 80,000 tons of wire rods and 130,000 tons of bars per year. As earlier indicated the mills are expected to be fed by billets produced from the Delta Steel Plant. This arrangement worked only up to a point as DSC, even in the best of times produced only at about 25% of its installed capacity. As a result the volume of billets supplied by DSC was limited and this severely constrained capacity utilization at the rolling mills. It should also be pointed out that the three mills were handicapped from inception by inadequate working capital and none operated beyond 30% of installed capacity. The Oshogbo and Jos mills were shut down in I996 and the Kastina mill in 1998 owing to non-release of funds by the Government to meet recurrent expenditure. Based on the condition of the mills, in a 2001 study commissioned by Government, it was estimated that between $15 and $20 million U.S. dollars will be needed to reactivate and modernize each of the mills to make them viable and competitive.

3.4

Installed Capacity of Public Sector Owned Companies

From the foregoing review of public sector projects, the designed output of the five steel companies is summarized in Table 4.5.

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Table 4.5 Installed rated capacity in tons per annum Company Jos Oshogbo Katshina Ajaokuta Delta Total

Products Billets – – – 95,000 630,000 725,000

Wire rods 80,000 80,000 80,000 130,000 – 370,000

Bars 130,000 130,000 130,000 200,000 200,000 790,000

Light sections – – – 200,000 120,000 320,000

Medium section – – – 560,000 – 560,000

Source: Hatch/ECG Report 2001

From the table it will be observed that the combined theoretical output from the five companies when completed and/or fully reactivated and operating at their designed capacities is about 2.7 million tons per annum of finished products. It should be noted that the figure of 725,000 tons for billets indicated in the table has been converted into rolled products at a factor of 0.9 per ton and added to the total finished products. However, as these mills have been effectively shut down for several years no significant output has been recorded since 1996. Consequently domestic consumption has been met largely through imports and the limited production of about 300,000 tons per annum from private sector rolling mills.

3.5

Private Sector Rolling Mills

It is reckoned that there are about 30 mini mills in Nigeria with a combined installed capacity estimated at between 1.0 and 2.0 million tons per annum. Some of these have electric arc steel making facilities, but most of them roll imported billets and crops to produce bars. Some of the well established private mills included the following: • • • • • • • • • • • •

Universal Steel. Federated Steel Mill. Major Engineering. Kew Metals. Nigerian Spanish. General Steel Mill. Sankyo Steel. Brollo Nigeria. KAM Industries. African Steel Mills. WEMPCO Group. Sumo Steel.

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However, the total output from all the private mills is estimated at between 300,000 and 400,000 tons per annum because of several constraints. Some of the limitations constraining increased output by the private mills include inadequate power supply and constant disruptions from the national power grid, funding problems, and high cost of funds, as well as stiff competition from cheaper imports coupled with lack of patronage by the big time civil engineering contractors who prefer to import their steel requirements.

3.6

Flat Steel Production

So far attention has been focused on long products. However, from the review of government owned companies and the private sector mills, it is apparent that Nigeria is only able to produce long products from the existing steel plants. At the moment none of the existing steel plants in Nigeria is designed to produce flat products. Flat products are currently estimated to account for about 35–40% of total steel market demand. However, it should be noted that the second phase of the Ajaokuta Steel Plant is designed to produce flat products at some point in the future. It is also on record that recently a couple of private investors, such as WEMPCO Group, Sumo Steel, etc., have ventured into the setting up of cold rolling plants in Nigeria based on imported hot bands to meet the need of downstream flat steel users. From the review of the development and current status of the steel industry in Nigeria, it will be observed that the Federal Government had taken major steps to develop the domestic steel industry over the past four decades because of the perceived role the sector is expected to play in the country’s industrialization programme. However, in spite of the promise of the early 1980s when most of the government owned steel companies were in operation, it is a matter for regret that virtually all the gains of earlier years have been significantly eroded with all the plants in a comatose state begging for urgent resuscitation.

4 Market Size and Demand Projections In order to build a viable and efficient steel industry anywhere in the world, the project must by and large, be market driven, otherwise expectations are likely to remain unfulfilled. In this context the Nigerian government had over the years taken steps to ascertain the level of current market demand for steel products and projected future demand. Since 1980 three major studies have been commissioned by Government to ascertain the market size for steel products in Nigeria as well as make projections for the future. The first study commissioned in 1980 at the height of the oil boom estimated the market for finished steel products at about 2.8 million tons per year.

88 Table 4.6 Nigerian market for steel products 1988

4 The Nigerian Steel Industry: Retrospect and Prospect Product type Long products Flat rolled products Tubular products Total

Tons per annum 550,000 375,000 75,000 1,000,000

Source: Hatch/ECG Report Table 4.7 Market projections for steel products 1989–1995

Long products Public mill products Private mill production Essential imports (alloys, shapes) Sub total long products Flat rolled products Tubular products Total domestic demand

1989

1995

325,000 175,000 50,000 550,000 375,000 75,000 1,000,000

500,000 235,000 65,000 800,000 550,000 110,000 1,460,000

Source: Hatch/ECG report

With 1981 as base year and a very optimistic demand growth rate of 8.9% per year the Nigerian market for steel products was projected to rise to about 9.2 million tons by 1993. However this optimistic projection did not materialize. Following the crude oil market crash of 1981/1982, the Nigerian economy nosedived and the projected economic growth rate fuelled by the oil boom of the 1970s did not take place. Indeed the economy contracted so much that the government was forced to adopt a structural adjustment programme in 1986. In 1988, the government commissioned another major study on the Nigerian steel industry under World Bank funding aimed revitalizing the steel sector which had been grounded for over 5 years owing to lack of funds to complete the on-going Ajaokuta Project and of working capital to operate completed units at Delta Steel, Oshogbo, Jos, and Katsina. The 1988 study [1] was undertaken by the Consortium of Messrs Hatch Associates of Canada and Enterprise Consulting Group of Nigeria. Based on the detailed work carried out by the Consultants the Nigerian market for steel products was in 1988 estimated at only 1.00 million tons broken down as presented in (Table 4.6). With 1989 as base year and on the optimistic assumption of a demand growth rate of 6.50% per annum the total market for steel products in Nigeria was projected to rise from 1.00 million to 1.46 million tons by 1995 broken down as indicated in Table 4.7. Based on the findings of the study, several far reaching recommendations and strategic options were made to the government including an implementation development strategy. However, not much was achieved by government in the steel sector over the next 10 years owing to the prevailing economic situation and lack of political will to carry out recommended action plans.

4 Market Size and Demand Projections Table 4.8 Market for steel products in Nigeria in 2001

Long products Flat rolled products Tubular products Total

89 Tons tpa 660,000 620,000 100,000 1,380,000

Source: Hatch/ECG Report

By the year 2000 all government projects in the steel sector had come to a complete standstill with all the public sector owned mills in comatose or partially shut down. Under World Bank prompting and based on the on-going privatization programme of government, the Bureau of Public Enterprises decided to invite Consultants to carry out a strategic assessment of the steel sector and make recommendations to guide commercialization and/or privatization of the public sector owned steel companies. After a review of the tenders, Messrs Hatch Associates/ Enterprise Consulting Group Consortium was selected to undertake the exercise. As part of the agreement for the new study [2], the Consultants undertook extensive surveys in order to determine current market size for steel products in Nigeria to guide policy formulation and map out options for future development of the steel sector. Based on the detailed surveys undertaken, the market for steel products in Nigeria was estimated at about 1.38 million tons per year in 2001 broken down as presented in Table 4.8. Out of the estimated total consumption of 1.38 million tons, only about 300,000 tons of long products were produced in Nigeria, all by private owned mills with little or no production from the public sector mills. As a result, the balance of over 1.00 million tons of long and flat rolled products and tubes have to be imported at significant foreign exchange loss to the country. With 2001 as base year and on the assumption of a growth rate of 5% per year the market demand for steel products in Nigeria was projected to rise from 1.46 million to 2.25 million tons per year by 2010. Out of this long products were projected to account for about 930,000 tons. Since 2001, no major definitive studies had been undertaken to ascertain the size of the market for steel products in Nigeria. However, based on industry sources the current market size for steel products, both long and flat, is estimated at between 3.00 and 4.00 million tons per annum with long products accounting for about 60% and flat products at 40% of total market demand. It should be noted that despite the huge expenditure by government aimed at developing a viable steel sector, there is very little to show for it as most of the mills are grounded for lack of funds. Consequently the country is still heavily dependent on imports to meet its requirements as the private sector mills are only able to meet about 10% of market demand. It is expected that after the privatization programme of government owned enterprises is completed, a more realistic and proactive approach will be taken to meet the challenge of developing a virile domestic steel industry.

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5 Organization and Management of the Steel Companies This section of the chapter reviews the organization and management of the five government owned steel companies prior to their privatization. First, the organizational arrangements put in place for the coordination and supervision of the steel companies are reviewed. This is followed with an overview of the management and labour situation in the five companies. Thereafter pertinent comments are made on the observed situation and the implications for the future of the companies. The coordination and management of the five steel companies were vested in the then Federal Ministry of Power and Steel, the supervising Ministry for all the steel projects. In this regard the Ministry is charged amongst others with the following duties: • Coordination and general oversight responsibilities for all the public owned steel companies. • Formulation and implementation of government policies as they affect the steel industry. • Appointment and removal of the Board of Directors on behalf of Government or acting in place of the Board when not constituted. • Appointment and removal of top management staff including the Chief Executive and all divisional/departmental managers. • Setting of operational guidelines for all the steel companies. • Sourcing of funds from the Treasury for recurrent and capital expenditure under the annual and 3 year rolling plans. • Oversight responsibilities and/or approval of all capital expenditure decisions in accordance with government guidelines. • Coordination and harmonization of annual and 3 year rolling plans within the Federal Government Planning and Budgeting System. • Final approving authority for all major decisions including product prices, conversion costs, as well as selection of major suppliers and vendors. From the foregoing, it is apparent that the Supervising Ministry played a crucial role in virtually all critical areas of management decision making especially as it relates to planning, budgeting, staffing, procurement, and marketing. Given this scenario, it is not surprising that the public owned steel companies operated more or less as appendages of the Supervising Ministry with all the attendant bureaucratic malaise. Consequently the companies, unlike their private sector counterparts, were not commercially focused to run as profitable market driven enterprises. As for Management and Employment at the Plant level, each of the steel companies was expected to be governed by a Board of Directors. However, for several years no boards were put in place with the Supervising Ministry performing this role leading to long delays in commercial decision making as Management must seek approval from the Ministry in all major decisions. Below the board is the management team headed by a Managing Director/Chief Executive. The Chief Executive in turn is assisted by departmental managers who

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are responsible for designated line functions such as production, engineering services, finance, commercial, estate management, etc. Below this level and arranged in hierarchical order are deputy general managers, assistant general managers, sectional managers, assistant managers, supervisors and foremen down to the shop floor. Overall the structure in each plant consisted of five broad groups designated as Top Management, Management, Senior Staff, Intermediate Staff, and Junior Staff with corresponding salary and grade levels. As at 2001, the total number of staff employed in the five steel companies was 8590. Out of this Ajaokuta accounted for 4200, Delta Steel 3105, and each of the rolling mills had between 400 and 440 employees. As at that time most of the personnel have stayed with their respective companies on average for about 20 years. This has resulted in ageing of the labour force with limited operational experience in steel production as these plants have only operated intermittently for short periods since their inception. Furthermore, given that the plants operated only intermittently the personnel have become disillusioned resulting in low morale and productivity. Indeed some of the very brilliant staff trained at enormous cost have since left for greener pastures. For example, at Ajaokuta Steel Company out of the over 2000 workers trained in Russia and India at costs calculated to be in excess of $300 million (U.S. dollars), over 75% have been lost to other organizations. Furthermore, the workforce in the various plants is characterized by general inertia as a result of the fact that they have been receiving salaries for several years without actually performing any work directly related to steel production arising from the periodic shut down of the plants over the years. Motivating and retraining of all personnel will need to be given special attention when the plants are fully reactivated.

6 Problems and Constraints Affecting Development of a Viable Steel Industry From the review and analysis undertaken in the previous sections of this chapter it is apparent that the development of the steel industry in Nigeria had faced and continues to face a number of daunting problems and constraints which have to be tackled vigorously. It is only after these outstanding problems have been resolved that the sector can begin to operate optimally and make the envisaged contribution to rapid industrialization in particular and socio-economic development in general. The major problems and constraints hindering the development of a viable steel industry in Nigeria are discussed as outlined below.

6.1

Lack of Political Will and Corruption

By far the greatest obstacle to the dream of establishing a viable domestic industry in Nigeria is the lack of political will and committed leadership dedicated to achieving

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this goal. After the initial enthusiasm of starting construction works at Ajaokuta and the commissioning of the Delta Steel Plant and rolling mills in the early 1980s, subsequent administrations since 1985 have only paid lip service to sustaining the implementation of the steel development programme. Thus, funding for the various steel projects was suspended in 1996 under the administration of General Sani Abacha. As at that time a sum of less than $2.50 billion was all that was required to complete Ajaokuta and rehabilitate Delta Steel and the three inland rolling mills. Sadly, as revealed by subsequent investigations, General Abacha between 1993 and 1998 diverted billions of dollars of public funds into his private accounts with various international banks and financial institutions. This and many other acts of bare face brigandage and undeserved entitlements by the political leadership, whether civilian or military, have robbed the nation of realizing not only the goal of a vibrant domestic steel industry but also several infrastructural development projects such as power supply, roads, railways, hospitals, and human capital development, all of which have been starved of needed funds. Thus, the country remains underdeveloped relative to its potentials.

6.2

Finance

As indicated above, a major constraint to the development of the steel industry in Nigeria is the inadequate funding of the various steel companies, both in terms of equity capital as well as working capital. In respect of Ajaokuta, it is a matter for regret that the government has not been able to complete a project which has been ongoing for a period of nearly 40 years starting from 1979 when the initial contract for execution of works was signed with Messrs Tiajpromexport of the former USSR. Since 1990 it has been claimed that the project was 98% complete, yet over the past 30 years it has not been possible to raise the money required to complete the remaining 2.00% as well as the required associated facilities without which the plant cannot be operated efficiently. To date it is estimated that the government had spent over $5.00 billion on the project with several components of the plant and associated infrastructure completed including the lime plant, light section and wire rod mills, engineering works (machine and forge shops and the foundry) as well as several critical units of the main plant at different stages of completion. However, the plant is yet to have a liquid steel making capability as the coke ovens, blast furnace and BOF, are still to be completed. Furthermore, several support infrastructural facilities without which the plant cannot operate efficiently are still to be completed. These include the ore mines, rails, bulk handling equipment, ocean terminals, etc. It was estimated in 2001 that about $500 million will be required to complete the steel plant. This figure excludes the funds required to complete infrastructure support facilities as well as working capital, all of which will run into several million dollars.

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In all, it was estimated that over $1.00 billion will be required to complete and operate the plant on a sustainable basis. In respect of Delta Steel Company and the three inland rolling mills there was also an urgent need to provide funds for the rehabilitation and/or refurbishment of worn out equipment and parts as well as working capital to operate at about 50% of installed capacities. The funds required were estimated in 2001 at $500 million for Delta Steel Plant alone and between $15 million and $20 million for each of the three inland rolling mills. Sourcing for funds to complete and operate the steel plants remain a major challenge to Government, given other competing demands and dwindling revenue accruing to the national treasury. Thus there is an urgent need to review the strategy for resuscitating the steel plants within the context of the privatization programme of state owned enterprises.

6.3

Infrastructure Support Facilities

In order for the steel plants to operate efficiently and effectively there is a need for the required infrastructural support facilities to be in place. These include the following. • • • • •

Rail lines. Roads. Water ways. Bulk handling equipment. Power supply.

The critical role of an efficient transport system to the development of the steel sector in Nigeria can best be appreciated when due cognisance is given to the volume of materials to be moved around the country when all the steel plants are operational. These were estimated to be of the order of over 11.00 million tons per annum broken down as per Table 4.9. Transporting such huge volumes of material by road is not by any stretch of imagination a viable option. Thus the rail and water transport systems have to be developed to an appreciable level before the steel industry can operate efficiently. In the light of the foregoing, Table 4.9 Movement of raw materials and output from the steel plants tons/year

Ajaokuta Delta Jos Oshogbo Kastina Source: Hatch/ECG report

To 4,960,000 2,220,000 230,000 230,000 230,000

From 2,000,000 975,000 210,000 210,000 210,000

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current efforts being made to connect all the steel plants to an upgraded railway network as well as complete the Itakpe-Ajaokuta-Warri new rail line will help to ameliorate the situation. Also the steps being taken to dredge relevant portions of the waterways and make them navigable throughout the year from the coast up to Ajaokuta as well as deepen the Warri channel are all steps in the right direction. The completion of the Onne Ocean Terminal along with associated facilities will ensure regular delivery of needed raw materials and supplies for onward transportation inland. In terms of power supply, this must be available in the right volume and on a consistent basis because of the nature of steel production which requires power for continuous operations. The total power requirement of the five public steel plants when in full operation was estimated at 630 MVA. However, as at the end of 2000, the total installed capacity of the defunct National Electric Power Authority for the entire country was less than 10,000 MW, out of which less than 4000 mW was generated and transmitted on an irregular basis with several periods of daily power outages. Meanwhile arising from the failure of Power Holding Company to guarantee power supply on a regular and consistent basis, all the steel companies have dedicated stand by power plants. Of course this adds to the cost of establishing and running the plants.

6.4

Raw Materials

For the steel plants to operate on a continuous basis regular supply of all needed raw materials must be guaranteed. In the case of the rolling mills the billets required for rolling must be supplied as and when needed before the mills can operate at their designed capacities. However, because the Delta plant which was designed to supply billets to the rolling mills had operated far below capacity or only intermittently before being completely out of production, the operations of the rolling mills have been adversely affected, resulting in partial or total shutdowns. As for the Delta Steel Company, the major raw materials required are iron ore, limestone, and scrap. At full capacity this translates to the annual requirements indicated in Table 4.10. In the absence of domestic supplies, the major raw material, namely iron ore have to be imported. However, limestone of the required grade is available from domestic

Table 4.10 Delta steel major raw material requirements

Iron ore Limestone Scrap Source: Hatch/ECG report

1.60 million tons 0.20 million tons 0.20 million tons

6 Problems and Constraints Affecting Development of a Viable Steel Industry Table 4.11 Ajaokuta major raw material requirements

Iron ore Coking coal Limesone

95 2.2 million tons 1.30 million tons 650,000 tons

Source: Hatch/ECG Report

sources at Mfamosing mine, via Calabar. To ensure local availability of scrap iron, there was an export ban on the commodity. For the future it is expected that superconcentrates of the right quality will be produced from the Itapke iron ore mines to meet the requirements of Delta Steel Plant. In respect of Ajaokuta Plant, the three major raw material requirements under Phase 1 of the project operating at its designed capacity of 1.3 million tons per annum are highlighted in Table 4.11. It is expected that the iron ore from Itakpe mines will be beneficiated into sinter concentrates suitable to meet the requirements of Ajaokuta Plant. However, in the absence of suitable domestic supplies coking coal will have to be imported and transported from the coast to site. Limestone is available from local sources but will require transportation to factory site. Other raw material requirements expected to be met from local sources include the following: Dolomitic limestone, dolomite, magnesite, foundry sand, refractory clays, and quartzites. The cost of developing suitable local sources of raw materials and the logistics of transporting such to the steel plants at reasonable cost have to be fully factored into overall development plan of the steel industry.

6.5

Public Ownership and Management

A major obstacle affecting the development of the steel industry in Nigeria was the negative impact of government ownership in the operations and management of the steel companies. As pointed out earlier, the steel companies were being run more or less as departments of the supervising ministries with all the attendant red tape and bureaucratic ineptitude. Consequently the companies, unlike their private sector counterparts, were not sufficiently commercially focused to run as profitable market driven enterprises. Another area of concern arising from government ownership was the impact on the day-to-day management of the companies. This affected virtually all important areas of management decision making, especially in the following areas: • • • •

Board level policy formulation. Planning. Budgeting. Staffing.

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• Procurement. • Marketing. Given this state of affairs it was therefore not surprising that these companies were not sufficiently proactive in managerial decision making and executive action.

6.6

Manpower

A critical element required for the successful operations of the public sector owned steel companies is the human resources required to run these enterprises. These must be available in right number and quality for the mills to run efficiently. Recognizing this need, the government invested heavily in training the manpower required for the steel companies both within and outside the country. Unfortunately several of the high level manpower trained at enormous cost in Russia, India and elsewhere have resigned from their appointments to seek better opportunities. Another area of concern is the ageing of the labour force in the mills. Many of the workers, employed in the 1980s, are now in their fifties/sixties and have remained with their respective companies for periods of over 20/30 years with very limited job experience. Furthermore, because the mills have only operated intermittently for most of their existence the workers have been idle most of the time. Thus they have not acquired sufficient on-the-job experience to run these companies as profitable enterprises. This state of affairs had also resulted in disillusionment and low staff morale, leading to high staff turnover.

6.7

Ageing Plant and Machinery

Most of the plant and equipment in the steel companies were installed in the 1980s. Thus many have become worn out and are in need of rehabilitation and refurbishment, especially the facilities at Delta Steel, Oshogbo, Jos, and Kastina. It was estimated in 2001 that between $15 and $20 million will be required to refurbish and rehabilitate each of the steel rolling mills, whilst the figure for Delta Steel was estimated at $500 million. Significant refurbishment and upgrading will also be required at Ajaokuta before the completed units can be operated efficiently. Beyond that, given the rate of advancement in product and process technology over the last 40 years the existing technology in place at Ajaokuta, Delta and the rolling mills will have to be re-evaluated to ensure operational efficiency and competitive advantage.

7 Options and Prospects for Future Development

6.8

97

International Competition

To justify the huge investment on the steel industry in Nigeria, the plants must in the long run be able to withstand international competition. In addition in order to realize the dream of exporting Nigerian steel products to the ECOWAS/African regional markets, such products must be price competitive. Meanwhile in the short to medium term, domestic steel producers have to contend with cheaper imports from Russia, Ukraine, and Brazil. Given the foregoing and to maximize the economic benefits accruable from steel industry development, urgent steps need to be taken to formulate action plans aimed at reducing the high cost of steel production in Nigeria as the industry cannot be shielded for too long behind high protective tariff walls

6.9

Weak Project Management

With proper project management, Delta Steel and the three inland rolling mills were completed more or less as scheduled under turnkey arrangements with international contractors. However, the same cannot be said of Ajaokuta as the project remains uncompleted after 40 years of implementation. In particular the required associated infrastructural support facilities without which the plant cannot be operated effectively and efficiently have not been adequately factored into project implementation and scheduling. As a result the plant cannot go into production even if all the structures at the site were fully erected until all outstanding issues related to uninterrupted operations are fully resolved. These issues include rail links, ocean terminal, waterway transport, raw material deliveries and of course, uninterrupted power supply. All these must be well programmed and executed in their proper sequence for effective project results.

7 Options and Prospects for Future Development Against the background of the current reality on the ground, here an attempt is made to suggest some viable options to guide the future development of the domestic steel industry in Nigeria. Planning for the future development of the steel industry in Nigeria must take into account the following incontrovertible facts: 1. Current market size and projected demand into the foreseeable future. 2. Existing and planned domestic capacity for steel production. 3. Capital expenditure outlays required to complete outstanding works as well as refurbish and/or rehabilitate the steel plants including estimated working capital requirements.

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4. Financial outlays versus expected returns for each proposed course of action, including cost/benefit analysis as well as level of subsidy(if any) to be provided. 5. Funding requirements for all associated infrastructure support facilities, such as railways, ocean terminal, waterways, power, iron ore mines, etc. 6. Source, cost, and availability of required major raw materials, whether from domestic or foreign sources, especially iron ore and coking coal. 7. Logistics and cost of moving raw materials and finished products in and out of the steel plants. 8. Skilled manpower required to operate the mills. 9. Private sector participation in steel industry development and the role of government. 10. Global context and international competitiveness. Within the context of the foregoing parameters, it is possible to develop several options to guide the future development of the steel industry in Nigeria. However, these options must be objectively assessed based on the present realities and all relevant factors impacting on sound investment decision making, whether by government or private investors. To start with, since 2001 there has been a major shift in government policy regarding ownership of the steel companies. This change of policy has led to the full privatization of the three inland rolling mills at Oshogbo, Jos, and Kastina, respectively. This exercise had been completed by 2004. As for the two integrated steel complexes, namely Ajaokuta Steel Company Limited and Delta Steel Company Limited, these continued to be under government ownership. However, at some point it was decided to concession them to private investors under terms to be mutually agreed. To date Ajaokuta Steel remains moribund as attempts to concession the plant to private investors have all ended in failure. The new government which came into power in 2015 has taken a number of steps to resolve the logjam and chart new paths for the future development of the steel industry. This effort has yielded a ray of hope with a bilateral agreement reached with the government of the Russian Federation to complete the Ajaokuta steel plant. Meanwhile the Delta Steel Company which had been privatized, albeit under some controversy, is yet to be fully reactivated. Given the foregoing reality, what then are the options and prospects for the future development of the steel industry in Nigeria? It should be emphasized from the onset that in order to have a viable domestic steel industry the process must be market driven otherwise it will become a white elephant project and a drain on the Treasury. However, no recent studies have been undertaken to ascertain the current size of the Nigerian steel market. Thus only rough estimates of the market size are available. As indicated earlier, based on industry sources the market size for both long and flat products is estimated at between 3.00 and 4.00 million tons per year of which flat products account for between 35 and 40%. Within the context of the prevailing economic climate this is expected to grow at no more than about 5% per annum in the near to medium term. Projecting this scenario over the next decade gives an indication of what the overall market size will be 10 years from now.

7 Options and Prospects for Future Development

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In assessing the options and prospects for the future development of the steel industry in Nigeria, the approach taken is to undertake the assessment at three levels as outlined below.

7.1

Options at Individual Enterprise Level

The options facing the inland rolling mills and the two integrated steel complexes are evaluated at the individual enterprise level as follows.

7.1.1

The Inland Rolling Mills

Following the full privatization of the three inland rolling mills, it is up to the new owners to map out strategies and action plans for their future development in order to ensure long run profitability. However, given that billets are not yet available from the two steel complexes at Delta and Ajaokuta to feed the rolling mills there are two options open to the new private sector owners. First, in order prevent a situation whereby the mills will continue to remain idle, billets may have to be imported to be rolled into merchant products. This is the quickest route to make the mills operational. However, since the mills have been idle for a long period there will be a need for funds to undertake refurbishment and rehabilitation of plant and machinery. As pointed out earlier, funds required for this purpose were estimated in 2001 to be of the order of between $15 and $20 million for each rolling mill. The viability of the project in the light of the needed fresh investments will have to be assessed within the context of the current economic situation, projected market demand and competition from other domestic producers as well as imports. The second option which will take some time to actualize is for the mills to integrate backwards by erecting facilities to make their own billets to roll into long and other related products. This course of action will definitely require substantial capital injection running into millions of dollars and a higher order of technical and managerial expertise to run an increasingly more complex operation. In addition the technical and commercial viability of this course of action will have to be fully assessed in the light of prevailing conditions. Whichever course of action is taken it should be realized that the mills are no longer in the public domain but must operate under the same set of rules and conditions as other private sector steel companies. At this juncture, it is worthy to point out that the operations of the privatized companies will spread steel making capabilities across different locations within the country which hopefully will have multiplier effects and make for a more vibrant steel industry in Nigeria. At a future date the mills might even expand their operations into the making of downstream flat products by setting up cold rolling mills to produce flat products based on imported hot bands to start with and eventually from Ajaokuta or Delta whichever one is

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4 The Nigerian Steel Industry: Retrospect and Prospect

selected to produce flat steel. Appropriate incentives should therefore be given by government to make the goal of a vibrant domestic steel industry realizable. However, for the moment it is a matter of great concern that the privatized mills are still to roar into action after over 10 years of privatization thereby frustrating the high expectations placed on them in terms of output, employment and productivity.

7.1.2

Ajaokuta and Delta Steel Complexes

The three options open to government in respect of the two integrated steel companies are as follows. 1. to remain in the public domain as 100% state owned enterprises, 2. to divest majority of the equity with the government remaining a minority shareholder with not more than 30% equity interest, 3. to privatize 100% to private investors. Given that the government has not been able to raise funds to complete Ajaokuta since 1988 when erection works stopped at the site and Delta Steel ceased to operate as an on-going concern since 1996 when government withheld further funding of the plant, it is inconceivable to recommend that the two complexes should continue to remain under public ownership. Consequently this option should not be contemplated, especially in the light of the current economic situation with dwindling revenue accruing to the Treasury and past history of poor public sector management of the steel plants. Option 2, whereby government retains some equity (say not more than 30%) as a minority shareholder merits further consideration provided such minority equity is held for a limited period before being disposed to the public. At the same time the prospective private majority shareholder must secure water tight agreement of non-interference in day-to-day operations and management. In addition such a private majority investor must be a well known international corporation with a track record in steel production and is prepared to make the required capital injection into the company. Option 3 which envisages full privatization of the two steel complexes at Ajaokuta and Delta is highly recommended, given woeful performance under government ownership. However, for the full privatization route to succeed, the companies must be sold to well known international steel producers who have the track record, financial resources, and capability to develop and run the companies as viable on-going concerns. For this option to succeed government will have to come up with a well articulated long term vision for the steel sector as well as a package of robust incentives to woo interested international investors. Of the two integrated complexes, Delta Steel should be easier to dispose off, given that it demonstrated some level of commercial viability at its inception. With proximity to a seaport for imports and exports, modern midrex technology for steel production and availability of abundant energy from gas deposits in the area, it should be possible to run Delta as a successful steel enterprise. At the time of writing

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this chapter, it is understood that the government has finally privatized the Delta Steel Plant to private investors operating under the name of Messrs Premium Steel and Mines Limited. However, the plant is yet to show any significant output under the new ownership. On the other hand Ajaokuta will definitely require more hard work to convince prospective foreign investors as the plant is yet to be operational and the liquid making facility has not been erected. Also of great concern is the sourcing and availability of required raw materials (especially coking coal), the logistics of moving raw materials and finished products in and out of the plant as well as the non-completion of all required associated infrastructure without which the plant cannot be operated on a continuous basis. All the foregoing will not only require significant capital outlays but also a high level of expertise which only a well known international steel producer can bring to the table.

7.2

Options at the National Level

In planning for the future development of a viable domestic steel industry in Nigeria, horizons will have to be shifted from the level of the individual enterprise to that of the nation as a whole as what may look as smart business at the enterprise level may be sub-optimal from the viewpoint of the entire steel industry. Of particular concern for the future development of the domestic industry is the likelihood of excess capacity vis a vis current and projected market demand were all the planned and existing production capacity to be fully operational. As earlier indicated, the current market size for both long and flat products is estimated at between 3.00 and 4.00 million tons per annum, out of which long products account for about 60% and flat products 40%. Using the lower base of estimated market demand, this translates to about 1.80 million tons per annum of long products and 1.20 million tons of flat products. Furthermore, this market size is projected to grow at no more than at an optimistic rate of five per cent per annum into the foreseeable future. Given this scenario it is apparent from the foregoing that there will be some excess capacity of long products in the domestic market were all the mills to be completed and operated at their designed capacities. As indicated earlier in Table 4.5 the combined capacity of the five public sector mills is 2.7 million tons per annum of long products. To this must be added the available capacity from private sector mills estimated at between 1.00 and 2.00 million tons per annum. From this realization a phased development plan of the two steel complexes at Ajaokuta and Delta over the medium to long term is called for in order to avoid excess capacity in the industry. This phased development plan might involve deferring the completion of the liquid making facility at Ajaokuta for the time being whilst Delta Steel is fully reactivated to produce long products. In addition all existing mills, both private and public, including those at Delta and Ajaokuta continue to produce long products.

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Under this scenario, flats products will continue to be imported in the absence of local production. This leads to the consideration of second option. Under the second option, consideration is given to the local production of flat products which account for about 40% of the market for steel products at either Ajaokuta or Delta. Indeed the production of flat products in Nigeria has been incorporated under the second phase of the development plan for Ajaokuta. From this perspective Ajaokuta might be the logical choice for this purpose. However, Delta Steel should not be excluded from consideration as this is a major investment decision which must be justified in terms of commercial viability.

7.3

Options at the International Level

Lastly it must be pointed out that steel production rather than being an isolated domestic industry as was the case in an earlier period in the past is now a global business from which Nigeria cannot isolate itself as current events in world global steel trade demonstrate. From available statistics, it is apparent that there is an excess capacity in the global steel industry with accusing fingers being pointed at the People’s Republic of China for dumping its excess capacity into the world market thereby causing upheavals in several countries. In addition to China, Nigeria has to contend with other low cost steel producers such as Russia, Ukraine, and Brazil all of which currently export their products into Nigerian market. In order to meet this international challenge Nigeria must seek to establish a viable domestic steel industry able to withstand competition in terms of cost and quality of products. Furthermore, to address the concern of potential excess capacity in the domestic industry, Nigeria should itself actively consider the possibility of exporting its steel products across the African Common Market. In ending this discussion on the future of the Nigerian steel industry, it should be pointed out that all the options stated above are not mutually exclusive and could be implemented in sequence or simultaneously based on a well articulated development plan spanning a period of 10–15 years, with the plan being updated and amended in the light of unfolding realities which take into account all the relevant factors earlier highlighted. Above all, as developments unfold, government must provide a stable policy environment for private sector operators to be able to make rational investment and strategic decisions.

8 Conclusion The country has made some strides since 1960 in trying to develop a viable domestic steel industry. However, the gains of earlier years have been significantly eroded in the face of unprecedented economic crisis leading to the adoption of the structural adjustment programme in 1986. Since then all the steel projects have been more or

References

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less abandoned in the face of dwindling government revenue and lack of political will to do what was required to save the situation. Not only have the plants been abandoned for a long time, it will now require substantial funds to rehabilitate and refurbish all the steel plants as well as an amount estimated to be in excess of one billion dollars to complete the Ajaokuta plant and all the associated infrastructure. This is against the background of dwindling government revenues, downturn of the economy in general, excess capacity in the global steel industry, as well as weak projected market demand versus existing and planned capacities in the domestic steel industry. Consequently, a more pragmatic approach based on the realities of the prevailing situation must be followed with hard choices having to be made within the context of a short, medium, and long term development plan spanning a period of about 10–15 years. Given the failure of government sponsorship and ownership, privatization of the entire steel industry appears to be the only logical route to achieve a vibrant domestic steel industry. Within this context, it is possible for Nigeria to achieve the goals set for a viable domestic steel industry which hopefully will serve as a catalyst for rapid industrial development as envisaged in the various national development plans.

References 1. Federal Ministry of Power, Mines and Steel, 1989, Hatch/ECG Report on Nigeria Steel SubSector Study, 2. Bureau of Public Enterprises, Abuja, 2001. Hatch/ECG Report on Strategic Assessment of the Nigerian Steel Industry

Chapter 5

Resources and Opportunities for Competitive Industrial Systems in Nigeria’s Agro-allied and Forest–based Industries

1 Introduction As Nigeria enters into the third decade of the twenty-first century with a population estimated to be in excess of 200 million people, it is considered a most opportune time to take a critical look at the country’s industrial development policies and strategies with a view to coming up with a more robust industrial master plan to meet the yearnings and aspirations of its people. It is expected that such a master plan will hopefully launch the country on the path of self-sustaining growth with the goal of achieving industrial take off over the next two decades. Within this context, the focus of this chapter is on the agricultural and forest resources of Nigeria and the prospects for the development of a competitive agro-allied industrial sector based on the resources and potentials available in the country. It should be pointed out, ab initio, that in order to keep the discussion of issues within manageable proportions the scope of coverage has been limited to agro-allied industrial sub-sectors at the 4 digit International Standard Industrial Classification (ISIC) level, thus excluding from consideration product lines at a more disaggregated level. However, the intention is not to diminish the importance or potential of such product lines in the country’s drive towards a more competitive agro-allied and forest based industrial sub-sector. In addressing the various issues raised in this chapter, there are eight broad sections. Following this introduction, Sect. 2 contains a general survey of Nigeria’s agricultural sector and the contribution of the sector to the GDP as well as the development of agro-allied and forest based industries. Section 3 focuses on the rich agricultural and forest resources available in the country as a prelude to Sect. 4 which reviews the status of the various agro-allied and forest based industries in Nigeria as well as the potential and opportunities for future development. Section 5 examines the supply and demand balance for selected agricultural commodities, whilst Sect. 6 highlights the efforts being made to achieve self-sufficiency in selected agricultural © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5_5

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5 Resources and Opportunities for Competitive Industrial Systems. . .

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commodities. Section 7 zeroes in on the policies and strategies necessary for the emergence of a competitive agro-allied industrial sub-sector in Nigeria, leading to Sect. 8 which contains the synthesis and conclusion.

2 Agriculture and Agro-based Industries in the Nigerian Economy Before proceeding to a more detailed review of the agro-allied and forest based industrial sub-sectors, a general survey of Nigeria’s agricultural sector is undertaken in order to relate subsequent analysis within the overall context of national development. Since colonial times until the advent of oil boom era of the 1970s, the agricultural sector had occupied the pride of place as the leading sector of the economy accounting in 1960 for about 65% of GDP and over 70% of total employment. The sector also accounted at that time for the bulk of foreign exchange earnings derived from the export of a variety of agricultural commodities such as cocoa, palm produce, groundnuts, rubber, cotton, hides and skins, logs, and sawn timber and a host of other agro-based commodities. The importance and evolution of the agricultural sector in the Nigerian economy since independence in 1960 to the present time are captured in Tables 5.1 and 5.2 as demonstrated below. From Table 5.1, it will be observed that Nigeria’s GDP grew from a base of N2489 million in 1960, to N31,547 million and N329,179 million in 1980 and 2000, respectively. Thereafter it rose to a high of N69,028,930 million in 2015 before declining to N68,496,920 million in 2017. These are spectacular increases even when allowance is made for inflation and the massive devaluation of the Naira during the period under review. Correspondingly the contribution of the agricultural sector to the GDP rose from N1600 million in 1960 to N6502 million, N117,945 million, and N17,179,500 million in 1980, 2000, and 2017, respectively.

Table 5.1 Contribution of Nigeria’s agricultural sector to GDP for selected years 1960–2017

1960 1970 1980 1990 2000 2010 2015 2016 2017

Total GDP (N millions) 2489 4219 31,547 267,550 329,179 54,612,260 69,028,930 67.931.240 68,496,920

Contribution of Agricultural Sector (N millions) 1600 1888 6502 84,345 117,945 13,048,890 15,852,220 16,607,340 17,179,500

Source: National Bureau of Statistics

Agricultural share (%) 64.27 44.74 20.61 31.52 35.83 24.44 23.11 24.44 25.08

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Table 5.2 Percentage contribution of agricultural sub-sectors to total agricultural production for selected years 1960–2017 1960 1970 1980 1990 2000 2010 2015 2016 2017

Total agriculture 100 100 100 100 100 100 100 100 100

Crop production 80.25 76.12 60.67 81.12 83.42 89.07 89.49 89.68 89.86

Livestock 8.75 7.62 23.95 11.34 9.71 6.39 7.22 7.14 7.01

Forestry 8.25 6.85 4.17 2.55 2.17 1.26 1.04 1.04 1.03

Fishing 2.75 9.41 11.21 4.99 4.70 3.28 2.25 2.14 2.10

Source: National Bureau of Statistics

However, as a proportion of the GDP, the share of the agricultural sector underwent remarkable changes during the period under review as demonstrated in Table 5.1. Thus,the contribution of the sector declined from 64.27% in 1960 to 20.61% in 1980 as a result of the oil boom years of the 1970s and the creeping neglect of the agricultural sector. Following the reforms made under the structural adjustment programme which prevailed from the second half of the 1980s into the 1990s, the agricultural sector recovered such that by 2000, its share of the GDP had risen to 35.85%. By 2017, in spite of increase in the output of the agricultural sector, its share in the GDP has again declined to 25.08% following a rebasement of the national account series in 2010, which revealed that several other sectors, especially in services were either undervalued or not included in the GDP. As demonstrated in Table 5.2, in terms of the contribution of the different sub-sectors of agriculture, crop production is by far the most significant consistently accounting for over 80% of agricultural output, except for a few years when drought prevailed. In the second position is livestock whose contribution averaged less than 10%, followed by Fishing in the third position with average of just over 2.00% and lastly the Forestry subsector whose contribution in the last 10 years averaged 1.00% of agricultural output. Given vast arable land suitable for cultivation, extensive grassland for grazing, vast variety of forestry resources and plenty of coastline, brackish water, lakes, and rivers for fishing, tremendous opportunities exist for boosting output from the different sub-sectors of agriculture. This can be achieved through mechanization and the application of science and technology in all fields of agriculture. Regardless of all the foregoing, agriculture remains a dominant sector in the national economy in terms of contribution to GDP, employment, rural livelihood as well as a source of food for the country’s teeming population and raw materials for industry. The sector also has a major role to play in the country’s quest to diversify her economy and sources of foreign exchange earnings as well as the promotion of domestic resource based industrialization.

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5 Resources and Opportunities for Competitive Industrial Systems. . .

Table 5.3 Contribution of agro-allied industrial sub-sectors to the GDP, 2010–2017 N billion Food, beverages, and tobacco Textiles, apparel and footwear Wood and wood products Pulp, paper and paper products Rubber and plastic products

2010 2299.0

2011 2466.5

2012 2628.3

2013 2938.6

2014 3104.0

2015 2937.1

2016 2752.9

2017 2817.6

352.5

571.9

815.3

1096.4

1438.3

1423.0

1407.5

1419.1

123.4

130.3

157.3

171.3

193.1

205.2

196.9

198.2

24.4

28.5

30.4

44.0

50.2

53.7

51.4

51.5

33.9

76.1

106.4

138.5

180.4

212.6

220.3

222.4

Source: National Bureau of Statistics

As it relates to the development and promotion of agro-allied and forest based industries, these have occupied a very important position in Nigeria’s industrial development right from colonial times arising from the rich agricultural and forest resources endowment of the nation. Indeed the first set of manufacturing establishments in Nigeria were in food, beverages, and tobacco, as well as textile, leather, and wood based industries. However, as a proportion of the Gross Domestic Product, the manufacturing sector is still relatively small. For example, as at the end of 2015 out of a total estimated Gross Domestic Product of N69,028,930 million (at 2010 constant basic prices) the contribution of the manufacturing sector in absolute terms was only N6,586,620 million (i.e. 9.54% of the GDP). However, since 1960, the growth of the manufacturing sector has been remarkable considering the very low base from which Nigeria started. In spite of the growth and changes in the structure of the Nigerian economy over the past 60 years, the agricultural sector remains a major player in terms of output and employment. Given the contribution of agricultural sector to the GDP, it is not surprising that agro-allied industries currently dominate the manufacturing sector. For the purpose of this chapter, the major agro-allied and forest based industrial sub-sectors to be covered include the following: • • • • •

Food, beverages, and tobacco. Textiles wearing apparel and leather. Wood and wood products. Pulp, paper, and paper products. Rubber products.

The contribution of each of the foregoing sub-sectors to the GDP is summarized in Table 5.3. Thus in terms of output as at 2017, the contribution of the food, beverages, and tobacco sub-sector amounted to N2.82 billion, followed by textile, apparel, and footwear at N1.42 billion. During the same period the contribution of wood and wood products to the GDP was N0.20 billion, pulp, paper, and paper

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109

Table 5.4 Percentage contribution of agro-allied industrial sub-sectors to the GDP, 2010–2017 Food, beverages, and tobacco Textiles, apparel and footwear Wood and wood products Pulp, paper and paper products Rubber and plastic products

2010 4.21 0.64 0.22 0.07 0.01

2011 4.30 1.00 0.23 0.05 0.14

2012 4.39 1.37 0.27 0.08 0.05

2013 4.65 1.74 0.27 0.06 0.22

2014 4.62 2.14 0.29 0.07 0.27

2015 4.26 2.06 0.30 0.08 0.31

2016 4.05 2.07 .0.29 .0.08 0.32

2017 4.11 2.07 0.29 0.08 0.32

Source: Derived from Table 5.3

products was N0.05 billion whilst rubber (including plastic) products stood at N0.22 billion. In terms of percentage contribution to the GDP, as revealed in Table 5.4, in 2017, the food, beverages, and tobacco sub-sector accounted for 4.11%, textiles, wearing apparel and leather products 2.07%, wood and wood products 0.30%, pulp, paper, and paper products 0.08%, rubber (including plastic) products 0.32%, respectively. Despite the agricultural resources available in the country, the potential for a virile agro-allied industrial sector has not been fully exploited given the large scale importation of several products that could be produced internally such as sugar, wheat, rice, fish, dairy products, vegetable oils, fruits, and vegetables and a host of such products currently being imported at great costs to the economy. As will be demonstrated later in the chapter, it is apparent that the rate of importation of these products into the country is unsustainable, given rising population, dwindling government revenue, and limited foreign exchange earnings. However, the thrust of current government policy is to correct this anomalous situation. In the context of the foregoing, Nigeria’s rich and diverse agro-allied and forest resources are reviewed in the next section with a view to highlighting the current status and potential that exists for the development of a self-sustaining agro-allied and forest based industrial sub-sector in the country.

3 Agro-Allied and Forest Resources in Nigeria In this section a review of the rich agricultural and forest resources of Nigeria is undertaken. For this purpose attention is focused on resource availability and potential that exists to support a viable and competitive agro-allied and forest based industrial sub-sector.

3.1

Agro-Allied Resources

Despite the era of oil boom, Nigeria remains basically an agricultural country. The country is bountifully endowed with several agro-allied resources spread across all

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110

the main agro-ecological zones of the country. The range of agro-allied resources covers vast arable land, food crops, tree crops, industrial fibres, livestock, fishery, and forestry as summarized below:

3.2

Land

Nigeria has a total land area of 923 million square kilometres, out of which over 90 per cent are estimated as cultivable. However roughly less than half of the potential agricultural land is at present utilized. Thus there remains tremendous opportunity to bring more land under cultivation in order to boost domestic production. Virtually all types of tropical crops are grown on account of the varied climatic and ecological conditions of the country ranging from the moist tropical forest in the south to the savannah grassland in the middle belt and the semi-arid zones of the far north.

3.3

Food Crops

The food crops grown in Nigeria cover the following major categories: Cereals: Maize, millet, sorghum, rice, wheat. Roots and Tubers: cassava, sweet potato, irish potato, yam, cocoyam. Grain Legumes: Groundnuts, cowpeas. Oil Seeds and Nuts: melon seeds and others. Vegetable and Fruits: Oranges, tomatoes, pine apples, mangoes, leafy vegetables. Sugar: Sugar cane. These crops provide food for human consumption and raw materials for industry. Over 90% of output is produced by peasant farmers using simple agricultural implements and employing traditional manual technology. Table 5.5 contains the area planted for the major agricultural commodities in Nigeria over the period 2010–2017 at the current level of technology. From the table it will be observed that several more hectares could be brought under cultivation given that less than half of available cultivable land is currently being planted mostly under extensive farming practices by peasant farmers. As at 2017 about 188,000 million hectares are under crop production producing a wide variety of staples such as maize, millet, guinea corn, rice, beans cassava,cocoyam,yam, etc. Additionally, a further 12,196 million hectares are under cultivation for a range of other crops such as groundnut, soyabean, cocoa, and cotton as illustrated in Table 5.5 On the other hand, Table 5.6 contains the estimated output of the major agricultural commodities produced in Nigeria over the period 2010–2017. From the table it will be observed that there has been an upward trend in the output of the major agricultural commodities produced in Nigeria. This is as a result of government intervention with measures to boost output through the supply of fertilizers, farm credit, rural infrastructure, extension services, irrigation, and above all favourable

Item Crop production Staples Maize Millet Guinea corn/Sorghum Rice Wheat Acha Beans/Cowpea Cassava Potatoes Yam Cocoyam Plantain Vegetables Other Crops Melon Groundnut/Peanut Benniseed/sesame Soyabean Cotton Palm Oil Cocoa Rubber Sugar cane

2010 145,037.51 135,422.96 8950.30 6100.90 9352.30 33,124.20 17.52 238.69 11,504.48 5049.19 274.28 3833.67 55,268.07 131.33 1578.14 9664.55 437.67 3807.68 88.36 2813.04 929.20 108.21 1165.00 5.41 162.49

2011 146,644.46 136,709.39 8102.00 5930.30 9139.72 32,756.63 18.36 246.02 11,900.94 5361.62 286.64 4000.13 57,155.43 137.27 1674.31 9935.07 450.93 3913.04 92.29 2887.81 957.70 113.98 1192.00 5.68 169.72

2012 164,433.47 154,203.47 8102.20 5996.80 9042.87 47,701.23 19.17 253.87 12,313.33 5654.47 298.83 4115.17 58,797.97 142.93 1764.63 10,230.00 466.97 4028.63 96.17 2970.73 982.40 124.43 1221.50 5.93 176.87

2013 172,422.38 160,280.08 8392.15 6167.41 9332.38 50,056.79 20.02 266.86 13,122.51 5829.00 310.33 4365.38 59.077.27 148.02 1864.57 11,142.30 483.70 4230.09 98.20 3091.42 999.80 136.80 1327.83 6.05 189.57

Table 5.5 Area planted for major agricultural commodities 2010–2017 (in million hectares) 2014 176,215.68 164,806.20 8443.30 6286.30 9402.40 53,456.50 23.10 298.36 13,325.00 7041.70 322.58 4394.27 59,737.60 160.48 1914.60 11,409.50 535.33 4399.10 99.20 3294.00 1104.10 143.60 1403.30 6.40 252.20

2015 180,009.0 169,332.3 8392.1 6167.4 9472.4 56,856.2 26.2 329.9 13,522.5 8254.4 334.8 4423.2 60.397.9 172.9 1964.6 11,676.7 483.7 4230.1 98.2 3091.4 999.8 136.8 1327.8 6.1 189.6

2016 183,802.3 173,585.4 8403 6263 9542.5 60,255.9 29.3 361.4 13,720.0 9467.1 347.1 4452.0 61,0583 185.4 2014.7 11,943.9 536.3 4399.1 99.2 3294.0 1104.1 143.6 1403.3 6.4 252.2

(continued)

2017 187,680.5 177,526.8 8621.5 6418.9 9743.8 61,527.3 29.9 369.0 14,009.5 9666.9 354.4 4546.0 62,346.6 189.3 2057.2 12,195.9 546.6 4491.9 101.3 3361.5 1127.4 146.6 1432.9 6.5 257.5

3 Agro-Allied and Forest Resources in Nigeria 111

2010 124.67 9.50 6.39 1.63 5.31

Source: National Bureau of Statistics

Item Kola nut Ginger Cashew Pineapple palm produce

Table 5.5 (continued) 2011 128.17 9.90 6.61 1.66 5.58

2012 131.50 10.30 6.86 1.88 5.83

2013 138.39 11.29 7.12 2.00 6.25

2014 144.90 11.80 7.30 2.00 6.30

2015 138.4 11.3 7.1 2.0 6.3

2016 144.9 11.8 7.3 2.0 6.3

2017 148.0 12.0 7.5 2.0 6.4

112 5 Resources and Opportunities for Competitive Industrial Systems. . .

Item Crop production Staples Maize Millet Guinea corn/sorghum Rice Wheat Acha Beans/cowpea Cassava Potatoes Yam Cocoyam Plantain Vegetables Other crops Melon Groundnut/peanut Benniseed/sesame Soyabean Cotton Palm oil Cocoa Rubber Sugar cane Kola nut Ginger Cashew

2010 167,795.50 155,064.50 14,240.80 9882.00 13,849.60 5420.20 79.60 133.60 6146.0 53,056.10 2218.90 37,653.40 3455.90 1651.10 7277.30 12,731.00 673.81 4728.50 168.00 2090.10 787.50 294.60 289.90 329.40 3106.90 107.10 116.10 28.50

2011 177,307.42 163,845.45 15,160.89 10,400.76 14,599.59 5690.19 84.61 140.63 6546.02 56,256.12 2368.91 39,693.44 3585.91 1757.93 7580.47 13,441.97 710.46 4982.43 179.62 2230.72 797.65 319.12 304.05 348.84 3292.63 110.85 123.70 30.48

2012 183,680.24 170,000.23 16,199.51 10,899.24 15,398.57 5971.90 87.03 145.29 6960.60 58,980.39 2511.15 41,599.35 3754.56 1892.17 7817.38 14,060.26 810.21 5263.76 188.93 2442.03 829.23 356.13 342.15 369.42 3486.12 126.17 132.23 32.57

2013 188,680.24 173,880.71 16,798.50 11,177.23 15,904.57 6209.90 89.02 149.29 7180.60 61,249.38 2611.15 42,998.35 3864.56 1932.17 8097.38 14,665.39 835.21 5463.76 192.93 2552.03 850.34 364.13 358.15 378.42 3586.12 130.17 137.23 33.58

2014 196,445.00 181,086.00 16,998.12 11,297.71 16,103.88 6464.73 91.30 151.07 7300.13 63,961.00 2693.00 43,038.00 3868.50 1982.17 8102.38 15,359.00 864.86 5592.52 199.58 2636.34 879.66 379.14 370.50 390.34 3719.60 137.48 141.02 34.80

2015 203,300.93 187,496.44 17,240.8 11,388.0 16,359.5 6725.6 93.60 155.4 7517.4 66,257.6 2718.1 44,660.5 4007.8 2029.3 8342.8 15,875.06 896.5 5755.3 208.1 2720.5 909.0 395.2 385.9 405.3 3857.1 144.8 147.8 36.0

Table 5.6 Estimated output of major agricultural commodities for selected years, 2010–2017 (000 tons, except otherwise stated) 2016 212,851.16 195,032.07 18,097.5 11,455.2 17,109.0 6971.0 98.60 168.3 7787.2 68,947.9 2905.0 45,409.8 4064.8 2514.3 9503.3 16,819.09 966.17 6054.56 382.88 2807.96 938.31 409.16 395.20 488.18 3988.57 168.11 158.60 44.75

(continued)

2017 220,598.94 203,413.48 18,570.26 11,761.40 17,600.83 8277.73 102.00 170.12 8112.01 71,200.45 3023.87 46,912.65 4522.18 2723.67 10,436.31 17,185.45 1,002.30 6217.30 339.20 2829.70 969.30 426.60 412.50 522.20 4004.70 171.50 163.80 48.20

3 Agro-Allied and Forest Resources in Nigeria 113

Source: National Bureau of Statistics

Item Pineapple palm produce Livestock products Poultry Goat meat Mutton Beef Pork Milk Eggs Fishery (1) Artisanal costal and brackish water catches (2) Artisanal inland rivers and lakes catches (3) Fish farming (4) Industrial (trawling) coastal fish and shrimps Forestry (000 cu. metres) Roundwood Sawnwood Wood Based Panels Papers and paperboards('000 MT)

Table 5.6 (continued) 2011 5.20 6.13 4666.98 175.15 775.72 709.60 375.31 89.21 1744.82 797.18 804.22 315.52 304.39 119.41 64.90 174,809.02 170,981.59 3534.04 248.01 45.38

2010 4.80 5.70 4385.00 166.50 726.70 663.60 345.30 84.80 1648.80 749.20 759.20 305.00 286.40 107.20 60.60 165,085.60 161,886.20 2948.04 215.01 36.37

185,132.19 178,971.68 4191.48 269.67 49.36

130.56 68.78

319.65

2012 5.54 6.57 4933.40 185.18 810.26 750.31 396.84 94.08 1851.48 849.25 851.94 330.96

195,590.40 185,971.68 4501.49 289.67 51.37

140.56 70.78

340.65

2013 5.73 6.87 5222.90 194.18 830.26 781.31 411.84 99.08 1941.48 896.25 928.03 355.96

204,484.41 199,256.38 4861.00 312.67 54.36

155.01 76.78

371.15

2014 6.04 7.11 5506.17 208.80 872.32 831.68 435.21 105.50 2092.71 959.95 990.25 387.31

211,988.99 205,999.1 5552.6 369.0 68.4

162.5 80.8

392.7

2015 6.3 7.4 5832.69 218.4 940.4 892.2 470.6 114.0 2331.9 1083.7 1048.58 412.7

213,413.41 208,257.0 4709.2 388.9 58.3

163.91 76.79

390.35

2016 7.85 8.80 5853.16 224.1 915.2 884.3 459.8 113.0 2232.5 1024.2 1042.05 411.01

220,477.39 214,997.18 4974.21 444.40 61.60

168.56 77.89

396.45

2017 8.45 9.70 5947.40 226.00 920.89 892.90 463.80 116.70 2242.50 1084.61 1056.01 413.11

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weather conditions. Based on the CBN estimated figures contained in Table 5.6, crop production output rose from 167,795,500 tons in 2010 to 220,598,940 tons in 2017. Similarly, the output of other crops rose from 12,731,000 tons in 2010 to 17,185,450 tons in 2017.

3.4

Tree Crops

The major tree crops in Nigeria include cocoa, oil palm, and rubber. Other tree crops of lesser significance are coconut, coffee, and cashew. Virtually all the tree crops are grown in the southern part of the country where the ecological and climatic conditions are most suitable. In the days gone by, Nigeria used to be the second largest cocoa exporter, first in oil palm and third in rubber. However, during the oil boom era of the 1970s, Nigeria lost her pride of place in the major cash crops, and indeed became a net importer of palm oil. However, government policies, especially since the abolition of the Commodity Boards and other reforms introduced since 1987, and more recently the Agricultural Transformation Agenda by the previous government and the new Agriculture Promotion Policy by the current government, are all likely to help in boosting domestic production of these crops. The estimated production figures for some of the tree crops over the period 2010–2017 are contained in Table 5.6. For example, the production of cocoa rose from 289,900 tons in 2010 to 412,500 tons in 2015, and rubber from 329,900 tons to 522,200 tons during the same period.

3.5

Industrial Fibres

The main industrial fibres cultivated in Nigeria are cotton and kenaf. Of the two, cotton is the predominant one, and is widely cultivated in Kaduna, Katsina, Kano Sokoto, Bauchi, Borno, Adamawa, and Niger States with over 1.0 million hectares under cultivation in the 2017 cropping season and an output of 970,000 tons in that year.

3.6

Livestock

The livestock sub-sector consists of a variety of farm animals including cattle, pigs, sheep, goats, and poultry birds. However, cattle account for about 50% of the capital value of the Nigerian livestock industry and this is concentrated in the northern parts of the country. Sheep and goats account for about 35% and are widely spread throughout the country. Table 5.6 contains the estimated livestock production in Nigeria over the period 2010–2017. From the table it will be observed that poultry

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production rose from 166,500 tons in 2010 to 226,000 tons in 2017. Also goat meat, mutton, beef, and pork recorded impressive gains in output during the period under review. For example, goat meat production rose from 726,700 tons in 2010 to 920,890 tons in 2017. However, there is still a big shortfall in the supply of livestock products especially poultry products. This shortfall is being met through importation and large scale smuggling to meet rising domestic demand. In order to boost output there is an urgent need to expand the livestock population in the country especially of poultry birds.

3.7

Fisheries

Nigerian waters abound in various types of fish, shrimps, and other crustaceans. The fishery sub-sector is made up of two major categories, namely the artisanal and the industrial or commercial. The artisanal sector consists of thousands of fishermen spread all over the country using simple fishing gear. Their activities cover coastal and brackish water, as well as inland rivers and lakes. As at the end of 2017, the artisanal sector accounted for about 810,000 tons out of the total domestic production estimated at over 1,000,000 tons. The industrial fishing sector is dominated by a handful of fishing companies which trawl for fish and shrimps in coastal and distant waters using sophisticated fishing equipment. However, their output is still relatively small compared to the artisanal sector. This was estimated at less than 80,000 tons in 2017. There is therefore considerable scope for future development in both the artisanal and industrial fishing sectors, especially given the large scale importation of fish into the Nigerian market.

3.8

Forestry Resources

Out of the total land area of Nigeria which is put at 923 million square kilometres, roughly about 10% constitute the forest estate (reserves) of the country. Of these, commercial forest estate (reserved high forests) account for about 2.0 million hectares, whilst the non-commercial forest estate (mostly savannah woodlands) account for 7.2 million hectares and the derived savannah the balance. It is estimated that there are more than 600 tree species in Nigeria out of which about 100 are known to be usable under current practices and level of technology. Currently, it is reckoned that only about 30 species have been tested and are being exploited commercially. Thus a great potential still exists for the exploitation of the species that are not at present commercially exploited. This can be achieved through the application of advances in science and technology as well as further research and development effort.

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The moist tropical forest are the main source of industrial timber with major concentrations in Ogun, Oyo, Ondo, Edo, Delta, Cross Rivers, and Akwa Ibom States. The main components of industrial forest demand are sawnwood, plywood, particle board, fibre board, pulp, and paper. However, fire-wood still constitutes the major core of forest products and account for over 80% of the total wood demand. The major threat to the forestry sub-sector is the rapid depletion of the country’s forestry reserves as a result of indiscriminate felling of trees, rapid urban expansion, and other competing uses for land. Indeed, it is speculated that Nigeria might face a wood crisis in the not too distant future if urgent steps are not taken to encourage afforestation and better management of wood resources. As at the end of 2017, total roundwood production in Nigeria amounted to about 215 million cubic metres, sawnwood 5.0 million cubic metres, wood based panels 444,000 cubic metres, and paper and paperboards 62,000 metric tons. From the foregoing review of the agro-allied and forest resources of Nigeria, it is apparent that the unique array of agricultural resource endowments of the nation are yet to be fully exploited and these present opportunities for the future.

4 Supply and Demand for Selected Agricultural Commodities In spite of the variety of agricultural resources found in the country, the situation since the 1970s up to the present time is that Nigeria has been unable to meet her requirements for agricultural commodities in terms of food for human consumption and raw materials for industry from domestic sources. Consequently there is a need for massive import of a wide variety of commodities that could ordinarily be produced in Nigeria. Indeed the food import bill for Nigeria is currently estimated at over $30 billion per annum, a figure which is certainly unsustainable. The range of food products imported into the country covers virtually all the main categories including meat products, vegetable oils, wheat, maize, rice, malted barley, sugar, etc. Thus in 1987/1988, as part of the structural adjustment programme the government banned the importation of a range of agricultural products such as wheat, rice, and maize into Nigeria. This was part of government policy aimed at making the country to be self-sufficient in food production by stimulating domestic output. However, this policy was not implemented to its logical conclusion as the policy was reversed within 5 years. As a result, Nigeria is still a long way off from achieving self-sufficiency in food products. Thus there is still a pressing need to import sizeable quantities of rice, wheat, sugar, milk products, fish, etc., to supplement domestic supply. Looking at the supply/demand balance for food products, the findings of a study [1] commissioned by the Federal Ministry of National Planning on the “Food Balance Sheet of Nigeria 1985 to 1995” is very revealing in terms of the

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Table 5.7 Food demand growth rates 1985–1995

Food category Cereals Starchy roots, tubers, and fruit Grain legumes Oil seeds and nuts Vegetables and fruits Vegetable oils Sugar Livestock products Beverages

Base year (1985) demand in ‘000 metric tons grain equivalent) 10,426.88 5395.65

Annual demand growth rates under population growth scenarios (percent per annum) 2.5 3.0 3.2 3.5 4.5 5.0 5.2 5.5 3.7 4.2 4.4 4.7

1469.02 277.12 602.34 2007.60 895.59 1004.38 48.16

4.3 3.7 4.5 3.8 5.7 6.3 4.5

4.8 4.2 5.0 4.3 6.2 6.8 5.0

5.0 4.4 5.2 4.5 6.4 7.0 5.2

5.3 4.7 5.5 4.8 6.7 7.3 5.5

Source: Food Balance Sheet of Nigeria, Federal Ministry of National Planning 1986

gargantuan nature of the task of producing enough foodstuffs to satisfy not only the requirements for human consumption but also raw materials for industry. Although the study was conducted in 1985, its findings are very much relevant to the prevailing situation in Nigeria today as the problem appears to have gotten worse. Because of the continuing relevance of the study its findings are summarized below as a general background to the current situation. Under the study and using 1985 as base year, the country’s gross food supply and net food supply were estimated at 24.4 million and 22 million metric tons of grains equivalent, respectively. From these figures, the net domestic food supply was then projected up to the year 1995. Similarly based on a number of parameters the annual rate of growth in demand for various categories of food over the 1985–1995 period was also projected under different population scenarios as presented in Table 5.7. On the average, given the expected rates of growth in the net demand for various commodities, Nigeria's agricultural sector will have to face the challenge of providing an average of between 53% and 68% more food in 1995 than 1985, just to cater for additional human consumption requirements, i.e. excluding non-human needs especially raw materials for the industrial sector. Indeed by 1995, based on prevailing trends, historical and other relevant factors and assuming a population growth rate of 3% per annum, the percentage share of domestic net food supply in total net demand was estimated at only 62.90%. This declines to 60% if the rate of population growth is 3.5% per annum. This means that to satisfy food demand for human consumption, about 40% of Nigeria’s food requirement may have to be imported in 1995. Moreover to attain complete selfsufficiency in food production by 1995 for both human consumption and non-food requirements, the target rates of growth in food production as compared with recent

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Table 5.8 Growth rates in food production Food category Cereals Starchy roots, tubers, and fruit Grain legumes Oil seeds and nuts Vegetables and fruits Vegetable oils Sugar Livestock products Beverages

Target growth rates 8.5 4.4 4.4 4.6 5.1 4.3 45.1 9.2 5.5

Trend based growth rates 1.26 1.79 2.81 1.12 3.33 1.17 3.06 3.33 3.30

Source: Food Balance Sheet of Nigeria, Federal Ministry of National Planning 1986

trends in growth rates were estimated for the various food categories as illustrated in Table 5.8. From the target growth rates indicated above, it would have been near impossible to attain self-sufficiency for some of the food stuffs unless demand was suppressed. The greatest challenge was in cereals, sugar, and livestock products. This continues to be the case up to the present time with billions of dollars being spent on the importation of a wide variety of foodstuffs to meet ever increasing demand. Of particular interest to this discussion was how to satisfy the requirement of the industrial sub-sector for selected agricultural raw materials over the period 1985–1995, under the various population scenarios as highlighted in Table 5.9. The overall policy implication of the foregoing is that the nation has to declare the moral equivalent of war in boosting domestic food production in order to attain some measure of self-sufficiency in food supply to feed its expanding population and the increasing demand of industry for raw materials. In spite of the findings as revealed by this study, no spectacular measures or sustained initiatives were undertaken to avert the impending crisis as government policy and action fell far short of the urgency required. Thus, the problem has been compounded over the last 30 years judging by the increasing quantity/volume and cost of food products imported into the country as illustrated in Table 5.10. As would be observed from the table, over the period 2006–2010, Nigeria spent billions of Naira in importing wheat, fish, milk/dairy, sugar, prepared cereals, prepared vegetables and fruits, vegetable oils, and oil seeds at considerable cost to the economy. This situation arose largely as a result of inadequate investment and incentives to stimulate agricultural production as well as ballooning population now estimated to be in excess of 200 million. As revealed in Table 5.11 more recent statistics on the import of the above food commodities into Nigeria indicate that there is no appreciable improvement in the situation as the food import bill continues to be high and unsustainable. The only

Commodity Maize Millet Sorghum Rice Cassava G. Nut Beans Maize Millet Sorghum Rice Cassava G.Nut Beans

Industrial 180.71 170.25 336.00 33.75 770.25 157.50 90.00 230.49 217.10 428.49 42.98 982.20 200.84 114.77

Others 60.25 56.75 112.00 11.25 256.75 52.50 30.00 76.83 72.36 142.83 14.32 327.40 66.95 38.25

r ¼ 3.2% p.a Non-food requirement 279.07 262.98 518.74 52.11 1189.17 243.16 1138.95 380.71 358.77 706.66 71.09 1622.29 331.73 189.55 Industrial 209.30 197.24 389.06 39.08 891.88 182.37 104.21 285.53 269.08 529.99 53.32 1216.72 248.80 142.16

Others 69.77 65.74 129.68 13.03 297.29 6.04 34.74 95.18 89.69 176.67 17.78 405.57 82.93 47.39

r ¼ 3.5% p.a Non-food requirement 296.43 279.21 551.04 55.35 1263.21 258.3 147.6 418.96 327.43 790.70 78.23 1785.37 365.08 208.60

Industrial 222.32 209.21 413.28 41.45 974.41 193.73 110.70 314.22 279.32 790.70 58.67 1339.03 273.81 156.45

Others 74.11 69.80 137.76 13.84 315.80 64.75 36.90 104.74 93.11 593.03 19.56 446.34 91.27 52.15

Note: Non-food requirement, which is the difference between Domestic Gross Production and Total Net Supply, is made of (a) Industrial Non-food uses and (b) Others (i.e. seed, waste, etc.). Source: Nigeria Food Balance Sheet 1985–1995, Federal Ministry of National Planning Lagos

1995

1985

r ¼ 2.5% p.a Non-food requirement 241.00 227.00 448.00 45.00 1027.00 210.00 120.00 307.32 289.46 571.32 57.30 1309.60 267.79 153.02

Table 5.9 Selected agricultural raw material needs of industries (000 tons) 1985–1995

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Table 5.10 Ranking of major food imports into Nigeria over five years, 2006–2010 Commodity 1. Wheat 2. Fish 3. Milk/diary 4. Rice 5. Sugar 6. Prepared cereals 7. Prepared vegetables and fruit 8. Oils 9. Oil seeds 10. Cocoa

Total import (Nbillion) 823.84 568.17 312.57 271.19 193.07 159.60 111.98 104.82 25.51 3.31

Average import/year (Nbillion) 164.77 113.63 62.51 54.24 38.61 31.92 22.40 20.96 5.10 0.66

Source: Central Bank of Nigeria Table 5.11 Value of selected food imports into Nigeria, 2010–2015 NBillion Wheat Rice Sugar Milk/dairy products Vegetable oils Fruits and vegetables Fish Poultry products

2010 126.2 74.4 62.2 43.7 35.4 0.3 136.9 4.1

2011 537.5 255.6 240.6 244.7 60.6 0.2 300.2 4.9

2012 233.8 301.1 160.0 66.9 29.5 0.6 222.2 7.8

2013 204.0 6.0 150.0 60.9 41.6 38.6 188.0 7.0

2014 276.0 80.1 152.0 125.0 90.3 13.0 200.0 9.2

2015 94.1 95.9 133.0 85.6 74.2 15.8 228.0 9.3

Source: National Bureau of Statistics

exception is rice where government policy over the period 2016–2020 has yielded significant result in terms of increased domestic output with prospects for the elimination of imports in the near future.

5 Agro-Allied Industries in Nigeria and Prospects for Future Development The agro-allied and forest resources of Nigeria provide or ought to provide a solid foundation for the development of a wide variety of agro-based industries as discussed in this section. For this purpose, an attempt will be made to review the position of each of the sub-sectors earlier identified at the 4-digit ISIC level by highlighting the current status, problems, and constraints as well as the potential for future development as outlined below.

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5.1

5 Resources and Opportunities for Competitive Industrial Systems. . .

Food, Beverages, and Tobacco Industries

The food, beverages, and tobacco sub-sector cover a wide variety of food products as listed below.

5.1.1

Food Manufacturing

Meat products. Dairy products. Fruit and vegetable processing. Fish Products. Vegetable oil. Grain mill and cereal products. Bakery products. Sugar. Cocoa products. Sugar confectionery. Miscellaneous foodstuffs (e.g. tea and coffee). Animal feeds.

5.1.2

Beverages and Tobacco Industries

Distilling, rectifying, and blending spirits. Wine industries. Malt liquors. Soft drinks and carbonated waters. Tobacco. In all the above areas, Nigeria by virtue of resource endowment and other natural factors is well placed to develop a broad range of agro-based industries relying mainly on raw materials from the agricultural sector. However, a closer appraisal of the food manufacturing sub-sector reveals that Nigeria still has a long way to go in developing her food industries as highlighted in the brief review on each of the sub-sectors as follows:

5.2

Meat Products

The main activities in this sub-sector are slaughtering, preparing, and preserving meat. As earlier indicated, Nigeria has a fairly well developed livestock sector consisting of cattle, goats, sheep, pigs, and poultry which ought to support a thriving meat processing industry to meet domestic requirements for meat products.

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However, this sub-sector has experienced persistent deficits over the years necessitating the need for importation. For example, in 2015, the value of live animals and animal products imported into the country amounted to about N540 billion. In order to boost the livestock sector and the meat processing industry in particular a number of commercial cattle ranches were started in the 1980s as well as the establishment of a livestock and meat production company. However, all these projects were badly executed and did not make any appreciable impact on the situation. On the other hand the poultry industry had expanded very rapidly reaching over 150 million birds in 2015. The sub-sector is dominated by private small scale businesses, but there is also a growing number of medium/large scale poultry enterprises. The meat processing industry in Nigeria remains largely undeveloped with only a handful of big companies such as UAC Foods and UTC Foods Division, being active in the sub-sector. Opportunities therefore exist in this sub-sector especially in the following areas: 1. Abattoirs and meat packing plants for killing, dressing, and packing of cattle, sheep, goats, and poultry. 2. Manufacturing of sausages, meat soups, meat puddings, and pies. 3. Integrated piggeries with facilities for pork dressing, packing, picking, salting, and bacon production. 4. By-products plants for the production of bone meal, blood meal, etc., as animal feed inputs.

5.3

Dairy/Milk Products

The dairy industry in Nigeria is still relatively underdeveloped consisting mainly of facilities for reconstituting and packaging of imported milk products. Current domestic production consists of evaporated milk, milk powders, ice cream, yoghurt, and other milk based drinks. As an indication of supply gap, the country spent over N60 billion on the average per year on the importation of milk/dairy products over the period 2006–2010. Domestic production of milk was estimated at 400 million litres in 2015 as against a demand figure of 1.1 billion litres, leaving a supply gap of 700 million litres per annum. The major problem in developing a viable domestic dairy industry lies in the inability to organize the livestock sector to supply fresh milk to the dairy processing industry on a daily basis. Preconditions for such a development will involve the establishment of dairy farms, centralized milk collection systems under extensive production conditions, availability of cheap feed all the year round and a dairy market for the produce. Other required supporting infrastructure will include adequate transport facilities and refrigeration systems. In spite of the foregoing, the potential for the future development of a viable dairy industry in Nigeria is there if only the major bottlenecks could be eliminated coupled

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with the establishment of ranches/dairy farms. Opportunities in the sub-sector include the following: 1. 2. 3. 4.

Fresh and preserved cream. Manufacture of creamery and processed butter, natural and processed cheese. Manufacture of condensed, powdered, and evaporated milk. Manufacture of ice cream and other frozen milk desserts as well as edible milk products. 5. Processing, including pasteurizing, homogenizing, and bottling of milk for wholesale or retail distribution.

5.4

Fruits and Vegetables Processing

The fruit and vegetable processing industry remains largely undeveloped despite the favourable ecological and climatic conditions of the country for growing a wide variety of fruits and vegetables such as oranges, mangoes, guava, pine apple, tomato, watermelon, etc. Only a handful of firms are currently active in this sub-sector and produce mango and tomato fruit juices, tomato puree, and miscellaneous items like melon seed (Egusi) and chilies. Information is not readily available on total domestic production. Furthermore, very little is known about the size of the domestic market for processed fruits and vegetables, the overwhelming preference being for fresh ones. However, the fact that the country spent on the average N22.40 billion per year over the 5 year period 2006–2010 gives an indication of the growing demand for processed fruits and vegetables. The major problems facing the sub-sector are the difficulty of securing regular and adequate supply of raw materials, seasonally of production and the unstable structure of prices. The future development of the sub-sector lies in major processing factories establishing their own plantations to guarantee raw material supplies as well as encouraging out grower schemes amongst small holders. Opportunities exist in this sub-sector not only to supply the growing home market, but also for exports, especially in the following areas. 1. 2. 3. 4.

Canning (i.e. packing in air tight containers) of fruits and vegetables. Canning and bottling of fruit and vegetable juices. Manufacture of raisins and other dried fruits. Production of preserves, jams, and jellies, as well as vegetable soups.

5.5

Fish Products

Nigeria is well endowed with marine and fresh water fishery resources comprising an extensive coastline, brackish water lagoons, and creeks, as well as several inland rivers and lakes. However, the potentials offered by these resources have not been

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properly harnessed as evidenced by the persistent supply/demand gap for fish and fish related products. For example, in 2017 total domestic production amounted to only 1,056,010 tons, the balance of demand estimated at over 700,000 tons had to be imported at considerable cost to the economy. This was reckoned to be in excess of $60 million annually. The fishery sub-sector in Nigeria consists of two broad categories, namely the artisanal and the industrial. The artisanal sector, made up of thousands of fishermen, account for over 75% of domestic production. The industrial fishing sector which is the more well organized consists of a handful of fishing companies operating between them a total of less than 500 vessels A third emerging fishery sub-sector is fish farming (aquaculture) with output growing from only 55,770 tons in 2004 to 168,560 tons in 2017. The industrial activities in this sub-sector consist mainly of trawling, refrigeration, and sale of ice-fish in the home market and export of shrimps abroad. The output from this sub-sector amounted to only 78,000 tons in 2017. At the artisanal level, beyond meeting subsistence needs, some of the catches are dried or smoked for sale in rural and urban markets. Fish canning is a recent development with only a few companies engaged in this activity. The major problems and constraints facing the sector include inadequate capital and infrastructure, lack of trained fishery manpower, shortage and cost of inputs and the largely unorganized artisanal sector which ironically accounts for the bulk of domestic output. In view of the high level of fish imports, there is an urgent need to boost domestic production especially given that a significant proportion of the animal protein consumed by the average Nigerian comes from fish and fish related products. Opportunities for downstream activities in this sub-sector include the following: 1. Salting, drying, dehydrating, smoking, curing, and pickling of fish and other sea foods. 2. Canning of fish and related products. 3. Quick freezing and packing of fish and other crustaceans. 4. Production of fish and sea-food soups and other specialties.

5.6

Vegetable Oils

Nigeria is traditionally one of the world’s largest producers of vegetable oils and oil-bearing materials chiefly in the form of palm oil, palm kernels, cotton, and groundnuts. However, since the late 1960s and early 1970s the industry has suffered disastrously to such an extent that the country had become a net importer of vegetable oils. In the oil palm sector, over 90% of the processing is done under rudimentary manual processing methods by small holders, harvesting from natural wild grooves. However, there are also in operation many integrated operations featuring

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plantations and modern processing mills. The well known integrated producers are Presco Plc, Okomu Oil Palm, Okitipupa Oil Palm, and PZ Wilmar. Total domestic production from both smallholders and the processing plants was estimated in 2015 at about 1,000,000 tons as against a demand figure of 1,400,000 tons. The palm kernel oil industry consists of about six major companies with a combined capacity of less than 500,000 tons per year. The main products are palm kernel oil, cake, and pellets. Some of the output, especially palm kernel oil is sold to local soap manufacturers, but most of the palm kernel products are exported. Total domestic output of palm produce was estimated at 7400 tons in 2015. The drastic fall in the production of groundnuts from a peak of over one million tons in 1967 to less than 250,000 tons during the 1970s adversely affected the groundnut processing industry in Nigeria. However, there has been a revival of groundnut production in the country with domestic output rising from 3,350,000 tons in 2004 to 6,217,300 tons in 2017. There are over a dozen groundnut oil mills currently operating in the country with a combined processing capacity of 3000 tons per day. The major problem facing the oil milling industry in Nigeria is insufficient production of raw materials to feed the mills. Consequently, in order to boost production, there will be a need to encourage small holders as well as establish commercial plantations for integrated processing operations. In the production of downstream vegetable oil products, Nigeria is still at a relatively early stage of development. This covers vegetable oil refining, vegetable oil fractionating, production of margarine, non-edible products including soap and soapy detergents. At the moment, only a few companies have significant vegetable oil refining and processing capacity, although there are a number of palm oil and palm kernel refining and processing projects in the pipeline. Opportunities in the vegetable oils sub-sector therefore include the following: • • • •

Production of crude vegetable and nut oil, cake, and meal. The rendering of edible animal oils and fats. Refining and hydrogenation of oils and fats. Production of margarine, compound cooking fats, blended table salad oils.

5.7

Grain Mill Products

The major raw materials for the grain mill products include wheat, rice, maize, sorghum, and millet all of which are cultivated in Nigeria. However, the major problem facing the sub-sector is inadequate local production to meet growing demand for grains as evidenced by the fact that the country currently spends huge sums of money estimated to be in billions of dollars on the importation of rice and wheat products

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For example, over the period 2006 to 2010, Nigeria spent over N1.1 trillion on the importation of rice and wheat. In order to encourage domestic production and conserve limited foreign exchange earnings, the government in 1987/88 under the structural adjustment programme placed a complete ban on the importation of wheat, rice, and maize, especially given the favourable climatic and ecological conditions of the country for their cultivation. However, this policy was not carried to its logical conclusion as the ban was lifted after a few years. Currently there is tremendous pressure on the grain sector not only to meet human consumption requirements but also to provide raw materials for industry, especially in the brewing, grain milling, and pharmaceutical industries. The grain mill industry is at present mainly confined to simple milling of the various products, primarily for domestic consumption. However, the country can boast of over 20 medium-large flour milling plants, one of which is reputed to be amongst the largest flour mills in the world. These mills rely on wheat imports estimated at over four million tons per annum as local production account for less than five per cent of supply. In addition to the milling plants, there is a growing number of relatively new factories producing such breakfast cereals as corn flakes and related products. Opportunities in this sub-sector still exist in the following areas: 1. Grain milling, especially small-medium mills for rice and maize. 2. Husking, cleaning, and polishing of rice. 3. Preparation of breakfast foods from rice, wheat, and corn flakes.

5.8

Bakery Products

The bakery products considered here include bread, cakes, doughnuts, pies, pasteries, and similar perishable bakery products. Others include biscuits and related dry bakery products, macaroni, spaghetti noodles, and similar products. Thus this food sub-sector is closely related to and dependent on the grain mill products considered in the previous section, especially for inputs such as flour. The industry, particularly the bakery sub-sector is fairly well developed as bread became a staple food in the urban areas during the 1970s and early 1980s. There are over 1000 bakeries of varying sizes spread all over the country, using wheat flour and of recent some use a combination of wheat and cassava flour. In the last 25 years a few companies have pioneered the emergence of fast foods including cakes, pies, doughnuts, and pasteries. With the import ban on wheat products in 1987 and the consequent rise in the price of bread, the bakery industry in Nigeria passed through a difficult phase with several of the bakeries closing down due to non-availability and cost of flour. Some of the bakeries that remained in operation adapted to the use of a mixture of wheat, maize, and cassava flour. However, with the lifting of the wheat import ban, the bakery industry has rebounded, especially with the growing fast food segment of the market.

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The major challenge facing the manufacturers of bakery and biscuit products is to find locally sourced flours and other materials for their inputs. Closely tied to this is the need to boost the domestic production of grains of all types to meet ever increasing demand. Given ready availability of raw materials, there is tremendous scope for future expansion of the bakery industry in Nigeria, especially with the growth of urban centres.

5.9

Sugar Products

In spite of public policy since the mid-1970s aimed at self-sufficiency in sugar production, the country produces just about 10% of its total sugar requirements, the balance being imported. Total consumption for industrial uses and household consumption was estimated in 2015 to be about 1.50 million tons out of which domestic production amounted to only 10% of demand. Until recently when the four major government owned sugar companies were privatized, the industry was in a comatose state with little or no production. However, following the privatization of the Savannah Sugar Company Limited in Numan to Dangote Group, the Sunti Sugar in Mokwa to Flour Mills Group, and the Lafiagi Sugar to ABUA Group, there has been a flurry of activities in the sector with millions of dollars of new investment The fourth sugar company at Bacita, though privatized is currently in limbo due to management, financial and related problems. The combined output of the plants currently in operation is estimated at about 15,000 tons per annum of refined sugar. Thus Nigeria still has a long way to go before it can attain self-sufficiency in sugar production. Previous studies conducted on the sugar cane production potential in Nigeria confirmed that there are several areas suitable for sugar cane cultivation to meet the cane requirements of sugar factories. The absence of a well articulated sugar policy and strategy coupled with inadequate funding have been the bane of the industry, frustrating growth and development. However, the National Sugar Development Council, an agency established by government, is currently overseeing a home grown strategy for boosting domestic output of sugar through a programme of privatization of state owned sugar companies, backward integration, and investment incentives. The main outputs of the existing factories are refined sugar and associated by-products, principally molasses. Opportunities for future development in this sub-sector lie in the establishment of several integrated small-medium sugar factories with their own plantations to guarantee regular supplies of cane, encouragement of outgrower schemes and a stable policy environment conducive to investment in the industry.

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Cocoa Products, Chocolate, and Sugar Confectionery

Nigeria has for a long time been one of the major producers and exporters of cocoa beans and intermediate cocoa products. The industry as presently structured in Nigeria consists of the following: 1. Intermediate Cocoa products. 2. Cocoa based beverage industries. 3. Other cocoa based end uses. In terms of the production of raw cocoa beans, Nigeria has lost her pride of place of the 1960s as the No 2 world cocoa producer/exporter when annual output averaged over 220,000 tons. In the late 1970s output declined to less than 140,000 tons arising from the neglect of the industry and the abandonment of farms for better paying jobs. However, the abolition of the Nigerian Cocoa Board in 1986 has led to a resurgence of interest in the business, with output rising to over 370,500 tons in the 2014 cropping season. Currently there are four cocoa processing plants with a grinding capacity of over 100,000 tons of cocoa beans per annum producing, in the main, cocoa intermediates such as cocoa butter, cake and powder, a high proportion of which is exported. The cocoa based beverages industry, producing mainly for domestic consumption, made appreciable progress over the years. The four brands based on local cocoa powder previously marketed by three different companies are Bournvita, Pronto, Milo and Vitalo, with Bournvita and Milo being the market leaders. Vitalo, marketed by the defunct Cocoa Industries, is no longer in the market. Local packaging of Ovaltine also occurred. In addition to the foregoing, there is a small but growing domestic demand for cocoa powder from a number of manufacturers in the sugar confectionery and biscuit industry. Furthermore, there is growing interest in the use of cocoa by-products, especially as animal feeds and in wine making. The major challenge facing the cocoa industry in Nigeria is that of maintaining the current level of high production and intensifying efforts at local processing into intermediate and final products in order to increase value added, especially in export markets. As for chocolate products there is at the moment only limited local manufacture because of inadequate demand, but opportunities exist in the export market. In the sugar confectionery sub-sector, significant developments have taken place over the years, especially in the manufacture of boiled sweets, toffee, and chewing gums. However, most of the raw materials such as glucose and sugar are imported. For the future development of the sub-sector, there will be a need to rely more on locally sourced materials in order to ensure a competitive growth of the industry to satisfy not only the domestic market but exports as well.

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5.11

Manufacture of Miscellaneous Food Products

The major food products in this sub-sector include starch and its products, baking powder, flavouring extracts, yeast, condiments, mustard and vinegar, spice grinding, coffee roasting, processing of tea, salt refining, and the manufacture of ice (except dry ice). Only a few of these food products are of current importance to warrant further consideration. A few examples are reviewed below.

5.12

Starch

The demand for starch products is growing rapidly, especially for use in the textile and pharmaceutical factories. Local production is mainly by small scale operators and the sub-sector remains largely undeveloped due to difficulties of obtaining raw materials (mainly cassava and maize). However, over the past 10 years the production of cassava had been on the increase rising from 33.3 million tons in 2004 to nearly 71 million tons in 2017. In order to take advantage of this development, there is a need for medium- to large-scale integrated starch producers to enter the industry. Indeed some integrated medium sized cassava factories have since been established to take advantage of the emerging situation

5.13

Tea

Until recently most of the materials for tea production were imported as the local operation consisting of blending and packaging came from imported tea. However, during the late 1980s and early 1990s when emphasis shifted to local sourcing of raw materials, a project was initiated by government to grow tea in commercial quantities on the Mambilla plateau. The tea plantation, managed by the Nigerian Beverages Production Company Limited was able to supply some of the raw material required by the industry until it ran aground. Additional plantations were also established by some of the private tea producing companies such as Lever Brothers Nigeria Limited (now Unilever). Overall the attempt aimed at boosting domestic supply of raw materials required by the industry has not been successful in spite of the favourable environment for production of tea. Operations in the industry are still based by and large on imported inputs.

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Coffee

The Nigerian coffee industry consists of less than 100,000 hectares under cultivation producing mostly the robusta type, and to a lesser extent arabica and liberica. Domestic output of coffee was estimated at about 240,000 tons in the mid-2000s. Until recently most of the output was exported whilst internal demand for the product was met by imported instant coffee. However, emphasis is now shifting to increasing local production and processing of coffee, to satisfy both the domestic and export markets. The Nescafe brand produced by Nestle is the market leader.

5.15

Salt Refining

Despite the fact that extensive rock salt deposits have been reported in one or two locations in the country, and the opportunities for the development of solar salt, Nigeria's two salt refineries (with only one in production) import salt for processing and packaging locally. Given the huge domestic demand for salt, efforts ought to be intensified to source locally all the requirements of the Nigerian salt industry. National Salt Company Plc a state owned enterprise now privatized to the Dangote Group is making serious effort at local sourcing of raw materials to meet the needs of the industry.

5.16

Other Food Products

Other opportunities for the manufacture of miscellaneous food products based on local raw materials include the following: • • • • •

Garl processing (cottage based). Nut and spice grinding and packing. Peanut butter manufacturing. Potato and plantain chips production. Soya sauce manufacturing.

5.17

Livestock Feeds

The livestock feeds requirement of Nigeria is estimated at over five million metric tons per annum. However, less than 50% is met from local production. The poultry industry takes over 80% of the animal feeds produced. Local producers rely on imported concentrates and other micro-ingredients because of their longer shelf life. Nevertheless the major raw materials such as

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maize, groundnut cake and soya beans are obtained from domestic sources. Because of the inadequacy of local production, some of the required materials are imported. However, there is no reason why Nigeria cannot meet most of her requirements for animal feeds from domestic sources. Indeed opportunities for the manufacture of prepared animal feeds exist using locally sourced raw materials available from the following sources: • • • •

Bone meal. Ground oyster shell. Fish meal. Cocoa by-products.

5.18

Beverage and Tobacco Industries

The beverage and tobacco industries in Nigeria are fairly well developed and date back to the pre-independence era. However, the most spectacular developments in the sub-sector took place during the oil boom era of the 1970s. In reviewing the status of the sub-sector and the prospects for the future the format earlier adopted in the preceding section on food industries is followed.

5.19

Distilleries and Wine Industries

Activities in this sub-sector cover the production of ethyl alcohol, distilling, rectifying, and blending of alcoholic liquors such as whiskey, brandy, rum, gin, liquors, and prepared mixed drinks (cocktails). Also included are the manufacture of wines, cider, perry, and other fermented beverages except malt liquors. There are about 10 major distilleries in the country with an estimated installed capacity of less than 200,000 hecto litres per annum. However, current capacity utilization is reckoned to be less than 40 per cent. In the Nigerian context, most of the distilling and wine companies undertake blending of liquors based on imported concentrates marketed under well known international brand names. However, portable alcohol was obtained from the Nigeria Yeast and Alcohol Manufacturing Company Limited at Bacita. In recent times, significant advances have been made in the bottling of palm wine. In addition there is a sizeable production of locally brewed gin (otherwise known as Ogogoro) which is mostly produced by small scale operators under traditional methods. However, one or two indigenous companies have succeeded in establishing medium scale wine plants based entirely on local raw materials (e.g. Debee wine) and marketed under patents duly registered in Nigeria and the U.K. In addition, virtually all the existing distilleries have developed local brands based on domestic supply of gin.

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The major challenge facing the industry is to develop plantations in suitable ecological zones of the country which will provide the basic raw materials (mostly fruits such as grapes) required by the distilling and wine industries in Nigeria.

5.20

Malt Liquors (Beer)

The major activities in this sub-sector include the manufacture of malt and malt liquors such as beer and stout. The beer industry in Nigeria is well developed dating back to 1948 when the first brewery was established in Lagos. Following the rationalization of the brewing industry since the late 1980s, the number of operating breweries has fallen from 32 to less than 20 with an installed capacity of over 18 million hectolitres per annum. However, capacity utilization in 2015 was estimated at less than 50% arising from lower patronage by consumers due to dwindling purchasing power and the harsh economic environment. Until 1987 over 90% of the raw materials such as malted barley and hops used to be imported. However, when the ban on importation of malted barley was imposed in 1987/1988 the brewing industry was compelled to look inwards for local substitutes such as maize and sorghum. Thus the goal of R and D efforts undertaken by the brewing companies was to produce a Nigerian beer based entirely on local raw materials. However, some of the gains made in that period have been partially reversed when the government lifted the import ban on malted barley. As part of the backward integration strategy, some of the brewing companies support large scale cultivation of maize and sorghum to ensure local supplies. The challenge therefore is how to organize the agricultural sector to cope with the demand for grains not only for human consumption but also to meet the expanding requirements of Industry.

5.21

Soft Drinks

The soft drinks business in Nigeria has grown rapidly over the years with installed capacity now estimated to be in excess of 30 million hectolitres per annum. However, current production is less than 10 million hectolitres. Two companies dominate the market, namely the Nigerian Bottling Company which markets the Coca Cola brand and the Seven Up Bottling Company with the Pepsi brand. Coca Cola is the market leader followed by Pepsi in a distant second. However, the major raw materials required by the industry, namely concentrates and sugar are imported. Since the formulation of the ingredients is a secret known only to the multinational soft drink companies, only limited opportunities exist for undertaking research into the supply of local raw materials for existing brands. On the other hand efforts can be directed at producing local competing substitutes based entirely on local raw materials as India did in the late 1970s. Furthermore, the

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multinationals can be encouraged to buy some of their raw materials, e.g. kolanuts and citrus fruits equivalent to the value of imported concentrates. Other major soft drinks which could be developed based entirely on local resources include the following: • Fruits flavoured and carbonated fruit drinks. • Bottling of spring and mineral waters.

5.22

Tobacco Manufactures

Nigeria has a well developed tobacco industry dating back to the 1950s. The industry used to be dominated by two major manufacturers who pioneered a strategy of backward integration since their establishment. Thus virtually all the tobacco leaves are obtained from local sources under a very extensive outgrower scheme and co-operative system in the tobacco growing areas of the country. The British American Tobacco (BAT) is the industry leader whilst Phillips Morris has closed down its factories and now exports its products to Nigeria. The major problem facing the tobacco industry in Nigeria is the large scale smuggling of imported brands which has forced a rationalization of operating plants in the country.

5.23

Textiles, Wearing Apparel and Leather Industries

The textile and leather industries constitute another major industrial sub-sector which relies to a significant extent on local agro-allied raw materials as input, e.g. cotton, in the case of textiles and hides and skins for leather industries. These raw materials provide the basic inputs for a range of industrial activities covered in this sub-sector as indicated below:

5.24

Textile Industries

The textile sub-sector covers the manufacture of textiles and related products as highlighted below: • • • • •

spinning, weaving, and finishing textiles. made up textiles goods (except wearing apparel). knitting mills. manufacture of carpets and rugs. cordage, rope, and twine industries.

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• miscellaneous textiles. • manufacture of wearing apparel. As earlier stated, Nigeria is well favoured by climatic and ecological conditions to produce industrial fibres such as cotton and kenaf, especially in the northern parts of the country. However, the local cotton product is mainly short staple, thus necessitating the importation of long staple cotton fibre by some of the mills. Total domestic production of raw cotton was estimated in 2014 at about 880,000 tons which is more than the industry's requirement at the current level of production. Thus the excess is exported. In the early 1990s when conditions were most favourable total production capacity of the textile industry was estimated at between 700 and 800 million square metres of finished fabrics as against an estimated potential demand of 800–900 million square metres. At that time the industry comprising over 180 textile companies had the potential to meet all domestic requirements. However, actual production is now estimated to have declined from that peak to under 300 million square metres by 2015 as a result of massive factory closures arising from the harsh operating environment, cheaper imports and smuggling. Many of the mills were fully integrated with facilities for spinning, weaving, and finishing their textiles. However, following massive factory closures the number of textile factories is now less than 30 still in operation. Printed cotton fabrics are the most important product, accounting for some 50% of total output, but there is also sizeable production of dyed cotton goods, cotton/synthetic blends, and 100% synthetics. The major problems facing the textile industry include obsolete equipment, high cost of funds, inadequate infrastructure, and large scale smuggling of textile products. However, government efforts are now directed at resuscitating the sector by creating a special textile development fund to provide loans at concessional rates for the capital investment needed to revive and expand operations. A review of each component of the textile industry is briefly summarized below in order to throw more light on the development potential of each of the sub-sectors.

5.25

Spinning, Weaving, and Finishing Textile

This is the dominant sub-sector in the Nigerian textile industry accounting for over 70% of the work force and of gross output. The main raw material is cotton and the industry is well established. Most of the companies in this sub-sector are vertically integrated combining spinning, weaving, and finishing textiles, usually in the same premises. However, as pointed out earlier, several of the factories have closed down because of smuggling and cheaper imports.

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Made-up Textile Goods (Except Wearing Apparel)

With one or two exceptions, (e.g. Northern Textile Manufacturers Limited, Kano) this sub-sector consists mainly of small scale establishments making a wide range of products based on cotton or cotton waste and are of average quality. The main product lines are towels, blankets, and household linen. However, there is also some production of finishing and upholstery products, often using synthetic fabrics.

5.27

Knitting Mills

Knitting is a method of producing textiles alternative to the weaving process, thus modern knitting mills are particularly suitable to synthetic yarns. The knitting mills in Nigeria generally specialize in producing synthetic fabrics (although some combine with cotton yarn) relying on imports for its raw materials. Opportunities for local sourcing of synthetic yarns will only materialize when the country’s petrochemical industry and artificial fibre plants are developed. At the moment there are about half a dozen companies producing synthetic yarn based on imported chemicals. However, their combined output falls far short of demand. Domestic production of knitted fabrics is estimated at over 100 million square metres. Most of the knitting mills are vertically integrated producing knitted textiles and manufacturing garments from them. Following the indigenization decrees of the 1970s restricting garment making to Nigerians most of the knitting mills (then owned by foreigners) sold out their garment making activities, although some still maintained management links with such local companies. Currently there are no longer such restrictions on foreign owned textile companies, some of which have taken advantage of the new situation.

5.28

Carpets and Rugs

This sub-sector has made appreciable progress since the 1970s supplying carpets and rugs for household, institutional, and office uses. However, about 70% of the required raw materials, mostly yarn, have to be imported. It was estimated that local production of carpets reached about 882,000 square metres in 2005, the balance of demand being met from imports coupled with large scale smuggling, mostly from South East Asian countries.

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Cordage, Rope and Twine

This is a very small industry in Nigeria, producing a wide range of fibre products such as ropes, mats, nets, and packaging materials. The major raw material available locally is kenaf. However, there is great difficulty in obtaining kenaf on a regular basis due to the un-organized nature of the kenaf industry in Nigeria. As a result of this, some of the major companies involved in this sub-sector have closed down. Thus if the cordage, rope and twine industry in Nigeria is to survive, government assistance will be required in boosting domestic output of kenaf. This could be accomplished through a combination of plantations and small holders under outgrower schemes. The other natural fibres that are used by industries in this sub-sector include coconut husks and sisal. Husks used to be available from the Coconut Industries Limited at Badagry whilst there is no local production of sisal. However, a number of the companies in this sub-sector use imported synthetic materials such as nylon and polypropylene which are products of the petro-chemical industries.

5.30

Wearing Apparel

This sub-sector is still largely underdeveloped in spite of the opportunities for making a wide variety of wearing apparel such as suits, trousers, shirts, local attire (e.g. babariga). Other important products of the sub-sector include underwear, outerwear, millinery, hats, accessories and trimmings, gloves and related products, robes and dressing gowns, raincoats, handkerchiefs, academic caps and gowns, etc. Most of the companies in the industry are small scale, employing less than ten persons. However, there are few medium-large scale enterprises producing safari suits, continental suits, shirts, and underwear. Some of the raw materials are available locally. Suiting materials, though available locally, are mostly imported or smuggled due to the alleged poor quality of local output. Opportunities in this sub-sector lie in mass producing the various product lines to cater for different market segments and/or income levels.

5.31

Leather Industries

The leather industry in Nigeria has a chequered history dating back to the pre-colonial times, arising from the local availability of hides and skins from the country's livestock industry such as cattle, goats, and sheep. The range of activities in this sub-sector covers tanning, the processing of hides and skins into leather, and the manufacture of footwear and travel goods from leather and leather substitutes.

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Raw hides from cattle and skins from goats and sheep are obtained mainly from the savannah area of the North with the main tanneries located in Kano, Sokoto, Kaduna, and Borno States. However, human consumption of these products as well as rinderpest, indiscriminate exportation and smuggling reduce their availability to the tanneries. Furthermore, cycles of drought and disease have also contributed to a drop in the production of cattle hides. Consequently the major constraint to the future growth of the leather Industry is the inadequate supply of hides and skins. In order to protect the footwear industry, the importation of leather products is prohibited. However, there is large scale importation of second hand shoes and smuggling, especially at the upper segments of the market. A review of current status of the two major sub-sectors and prospects for the future are undertaken below:

5.32

Tanneries and Leather Finishing

The leather tannery industry is concentrated in Northern Nigeria with the main centres being at Kano and to a lesser extent in Kaduna, Maiduguri, and Sokoto. In all there are over 36 tanneries in the country, with Kano alone accounting for about 50 per cent. However, only six of the largest tanneries are capable of producing finished leather. As a result most of the industry’s output of goat and sheep skin is exported in a semi-finished state known as wet blue. On the other hand, the raw cattle hides are processed for use by the domestic leather industry consisting of over 10,000 small, medium, and large scale leather goods manufacturers. The 36 tanneries are reckoned to be able to process about 25 million pieces of goat skins, 7 million pieces of sheep skin, and 1.2 million pieces of cattle hides per annum. The major problem faced by the tanneries is insufficient supply of raw materials, principally hides and skins due to the problems earlier highlighted. It is reckoned that less than 40% of available hides and skins are actually processed. Consequently, the local leather industry is faced with shortages in the supply of suitable raw materials for processing. To ensure greater supplies of suitable leather in the future will involve the expansion of livestock population (goats, sheep, and cattle) as well as discouraging human consumption and smuggling of hides and skins.

5.33

Manufacture of Footwear

The footwear industry in Nigeria which developed as a cottage industry has expanded rapidly since the mid-1960s. Today it is reckoned that the industry consists of about 24 medium-large scale establishments. In addition it is estimated that there are over 25,000 small scale operators spread all over the country. In a survey carried out in the mid-2000s it was discovered that many of the shoe manufacturing

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companies were having a hard time arising from inadequate infrastructure facilities, large scale importation of second hand shoes, smuggling, and falling disposable personal income. As a result many of the companies in the sub-sector were operating at less than 40% of their installed capacities. Based on the survey and industry sources, the total annual production of the shoe manufacturing companies was estimated as follows. • • • •

Leather footwear 10.00 million pairs. Canvass Footwear 3.00 million pairs. Plastic Footwear 65.00 million pairs. Bathroom Slippers 48.00 million pairs.

As already indicated, the domestic market for leather is almost entirely represented by the footwear industry. However, the output of leather is grossly inadequate, hence what is available is shared amongst all producers. As a result the industry is starved of leather. Given the scarcity and high cost of leather, footwear production by the shoe companies is dominated by cheap plastic shoes based on imported raw materials with low local value added. In spite of the import ban, there is large scale smuggling of leather shoes and leather products into the country in general.

5.34

Miscellaneous Leather Products

In addition to the leather tanning and footwear industries, opportunities also exist for the manufacture of the following items based on leather: • • • •

production of leather bags and belts. manufacture of travel goods such as luggage and trunks of leather. production of leather aprons. manufacture of miscellaneous leather products such as watch straps, key cases, leather balls.

5.35

Manufacture of Rubber Products

As earlier indicated rubber is one of the major tree crops in Nigeria whose output provides one of the basic raw materials for a range of rubber products such as tyre and tubes as well as other rubber products as outlined below.

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Tyre and Tube Industries

The tyre and tube industry is one of the sub-sectors which depends on agro-allied resources, namely natural rubber for a significant part of its raw materials. Before their closure due to the harsh operating environment and smuggling there were two major automotive tyre manufacturers in Nigeria, namely Dunlop and Michellin, and four smaller establishments producing bicycle/motorcycle tyres and tubes. These companies produced not only for domestic consumption but also achieving some exports as well. Before the collapse of the industry, local production was sufficient to cope with demand for bicycle and motorcycle tyres and tubes. However, in the case of automotive tyres and tubes domestic output represented about 70–80% of demand estimated at between 3.50 and 4.0 million for all types of automotive tyres. Following the closure of the Dunlop and Michelin factories in the country, all automotive tyres and tubes are currently being imported at great cost to the economy. In terms of the supply of natural rubber, this was cultivated in 2017 on about 6.50 million hectares of land in southern Nigeria, mostly in Edo, Delta, Ondo, and some of the South-eastern states. Most of the cultivation is undertaken by small holders although there are some big plantations. Total domestic output in 2017 was estimated at 522,200 tons of natural rubber most of which were exported in their semi processed state. Since availability of rubber is not a constraint to the automotive tyre industry, this is an area awaiting future development subject to removal of all the constraints facing the sub-sector such as smuggling, inadequate power supply, and high cost of funds as the sub-sector can produce not only for domestic consumption but for exports as well. However, in order to do this successfully will necessitate the establishment of large scale rubber plantations to meet the requirements of the expanded industry. With carbon black and other related chemical products becoming available from the domestic petro-chemical industry, the tyre industry is likely to enjoy significant comparative advantages.

5.37

Miscellaneous Rubber Products

Opportunities for the manufacture of other rubber products exist in the following areas: • • • • •

Manufacture of rubber footwear. Manufacture of rubber mats (door, bath, etc.) and bathing caps. Manufacture of gloves, sponges, and other vulcanized articles. Manufacture of rubber hoses, erasers, etc. Manufacture of tiles, sheets, and other flooring materials.

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Forest Based Industries

Nigeria’s forest based industries can be classified into two broad categories, viz: the solid wood industries; and the pulp, paper, and paperboard industries, each of which can be sub-divided into primary and secondary sectors.

5.38.1

Solid Wood Industries

These are made up of a • Primary wood processing sector: covering sawmills, plywood and veneer factories, manufacture of poles and other wood based panels (particle board, etc.), and • Secondary wood processing sector, involving the manufacture of wooden furniture and components, building materials, wooden and cane containers, and other wood products. The primary wood processing sector is made up of over 2000 sawmills, both licensed and unlicensed, located mainly in the forest zone, and ranging from small units with few circular saw/horizontal bandmills using manual transfer of materials in process, to more advanced fully-conveyorized, semi-automated medium to large sawmills. Of these, about six are large sawmills integrated with factories for the manufacture of plywood, veneer, furniture, and other builders woodworks. At least one firm manufactures wooden telegraph and electric poles. However, some of the big integrated factories such as AT&P Sapele and Epe Plywood have been forced to close down owing to shortage of wood, high cost of operations and shortage of funds to replace and/or upgrade equipment. The secondary wood processing sector is itself highly fragmented, with units varying from those employing as few as three employees to factories with over 100 employees. Correspondingly, the technology in use varies from simple handtools in the furniture sheds to fully-mechanized factories, producing panel based type and solid wood furniture items, mouldings, beddings, and other forms. Recent output trends from the wood processing sector, according to the Central Bank of Nigeria annual report, are as stated in Table 5.12. Exports of roundwood and sawn timber are banned to protect the sector's raw materials supply base whilst imports of furniture and components are also banned, to protect the domestic market. The problems of the solid wood based industries are highlighted below: Potential shortage of timber supply, given the gap between the rate of forest depletion (estimated at 400,000 hectares per annum) and that of afforestation. It has been estimated that about 40,000 hectares of plantations need to be established annually to meet the demand for wood products. This projected shortage can be reduced if research and development efforts were to result in currently non-exploited tree species, estimated to account for about 20 per cent of trees above 40 cm diameter, becoming available to supplement the supply of usable timber.

2010 161,886 2948 215

2011 170,981 3534 248

Source: Central Bank of Nigeria Annual Reports

Roundwood Sawnwood Wood based panels

2012 178,971 4191 269

2013 185,971 4501 289

Table 5.12 Nigeria’s forest industries production 2010–2017 (in ‘000 Cu. metres) 2014 199,256 4861 313

2015 212,541 5220 336

2016 208,251 4709 389

2017 214,997 4974 444

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In addition, existing sawn timber recovery ratios in the sawmills are low, at about 50% of log input. Yields of up to 75% and higher are obtainable in the integrated sawmills with particle board plants, and this would suggest that a conscious effort be made to encourage the development of medium-large integrated plants that are able to utilize the residues developed in the woodwork and sawmilling plants. Discriminating in favour of such integrated plants in the granting of forest concessions will ensure more optimal use of the nation's forest resources. Other constraints include: a. Limited product specialization as a result of which most operations are batchbased, and line production of furniture, joinery and other woodworks is insignificant. Also related to this is the problem of inadequate technical skills, especially for wood treatment and furniture/woodwork design. Such skills will be essential if Nigerian-made furniture and woodworks are to compete in export markets. b. Domestic supply of glue and adhesives is inadequate both in terms of quantity and quality, and there is inadequate foreign exchange to import these items. The opportunities for the production of “knocked-down” furniture, cane furniture, and other wooden goods for export are yet to be exploited. The range of products currently available from the domestic industry also needs to be broadened to include such items as wooden television cabinets, kitchenware, rulers, educational toys, etc.

5.38.2

Pulp Paper and Paperboard Industries

Nigeria has 3 primary paper mills, over 300 downstream paper converters, about 400 publishers mainly of educational books and over 1000 printers. The primary pulp and paper mills, all government owed before their privatization, consist of the following. 1. The Nigerian Paper Mill at Jebba with a capacity of 65,000 per annum of various grades of paper,kraft and paperboard. 2. The Nigerian Newsprint Manufacturing at Oku-lboku with a capacity of 100,000 tons per annum of newsprint covering the range 45–75 grams per m2. 3. The Nigerian National Paper Manufacturing Company at Iwopin with a capacity of 112,000 tons per annum of fully bleached gmelina pulp (air dried weight) to be further processed into 68,000 t.p.a of finished cultural printing and writing paper and 25,000 t.p.a of long-fibred pulp. The mills depend on local plantations of Gmelina arborea, a short fibred tree specie, supplemented with import of long-fibered pulp. However Jebba had produced short-fibre pulp from a mixture of tropical hardwoods. All the mills were short down for several years owing to a number of operational problems. The three mills have since been privatized but are yet to resume full production. The secondary paper processing sector is made up of downstream converters engaged in the manufacture of:

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• packaging (corrugated cartons, cement bags, boxes and labels), • personal hygiene products (toilet rolls and tissue, paper napkins, sanitary pads, etc.), and • chemical stationery (carbon paper, stencils, etc.). In the absence of domestic supply of their major raw materials, the secondary paper converters depend on importation which is becoming increasingly difficult because of the scarcity of foreign exchange. The privatization of the three primary paper mills has not yielded the expected result as the mills still remain comatose. Meanwhile over 90% of paper and related products needed by the country are still being imported at great loss to the economy. The cost of import of paper and related products is estimated to be in excess of N300 billion per annum. The development of a fully integrated pulp and paper sector in Nigeria is critically dependent on availability of adequate stocks of wood for the production of both short and long-fibred pulp. The investments required to develop such plantations, which in the case of pinewood for long-fibred pulp require 15 years to reach maturity, are likely to be beyond individual mills, in the absence of specific incentives to encourage long term plantation development. Secondly, domestic production of caustic soda, will go a long way to reduce the problems of the industry. Other problems identified relate to high cost of funds and inadequacy of infrastructural facilities such as electricity, transport, etc.

6 Efforts Aimed at Self-Sufficiency in Selected Agricultural Commodities As would have been observed from the review of agro-allied and forest based industries in Nigeria, a recurring theme is the inadequate domestic supply of a wide variety of agricultural raw materials to meet the requirements of industry. Interestingly for most of the raw materials, such as rice, maize, sorghum sugar, cotton, etc. a state of self-sufficiency based on current demand can be achieved within a period of 5–10 years. For other commodities with longer gestation periods such as milk/dairy, vegetable oils, citrus fruits, coffee, and livestock, self-sufficiency could be achieved within a period of 10–20 years. Thus, given total commitment to clearly defined national goals, it should be possible within 20 years to witness the achievement of self-sufficiency in several agro-allied products as the necessary preconditions for such a development are already in place. However, to achieve a state of self-sufficiency for key agricultural commodities, the country has to set challenging but attainable goals based on realistic assumptions, timelines, budgetary allocations,and the full participation of all relevant stakeholders in the agricultural value chain. Indeed the government has over the years initiated policies aimed at boosting agricultural output. Some of these policies include Operation Feed the Nation, Green Revolution, Structural Adjustment Programme,

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Table 5.13 Gaps in Nigeria demand and supply across key crops and activities (2016 estimate) in tons Crops Rice Wheat Maize/ Corn Soya Beans Chickens

Fish Milk/ Dairy Tomato Yams Oil palm Cocoa Cotton Sorghum

Sugar

Demand 6.3 million 4.7 million 7.5 million 0.75 million 200 million birds

Supply 2.3 million 0.06 million 7.0 million 0.6 million 140 million

2.7 million 2.0 million 2.2 million 39 million

0.8 million 0.6 million 0.8 million 37 million 4.5 million 0.25 million 0.2 million 6.2 million

8.0 million 3.6 million 0.7 million 7.0 million 1.7 million

15,000

Observations Insufficient supply chain integration remains issue Driven by demand for various types of wheat (white, hard, durum), etc. for bread, biscuits, and semovita Limited imports required but can shift due to feed demand Animal feed and protein cost alt. driving demand Gap filled by illegal imports that enter market at lower price point than domestic producers; gap also a moving target based on fast food/QSR demand Fall off in ocean catch and weakness in aquaculture yields due to cost of fish feed a constraint on growth Driven by insufficient milking cows and low yields (~15–25 L/day versus norm of 35–40 L NZ/US) Actual production is 1.5 million tons but 0.7M ton is lost post-harvest Limited gap today but volumes expected to rise in planning period Refers to fresh fruit bunch (FFB) from which oil is extracted at a 10%–15% efficiency rate Demand is global demand which will rise to 4.5M by 2020 Demand is for seed cotton and could rise to 1.0–1.5 million tons subject to textile sector revival Demand will rise further as use in feed grows in 20162020. Import of malt extracts and glucose syrup is currently used to manage gap, hence a commercial threat for Nigerian farmers Demand expected to rise from 1.49 mt in 2016 to 1.7 mt in 2020

Source: The Agriculture Promotion Policy, 2016–2020, Federal Ministry of Agriculture and Rural Development Abuja 2016. Estimates for sugar are from National Sugar Development Council

Directorate of Rural Roads and Infrastructure, Agricultural Transformation Agenda and at a time the banning of the import of some commodities in order to stimulate domestic production. Unfortunately these policies/initiatives did not yield the desired results owing to poor funding, policy reversals, and lack of political will to pursue goals to their logical conclusions. Based on 2016 estimates by the Federal Ministry of Agriculture and Rural Development, it was discovered that there are still significant gaps in the demand and supply across key crops and activities as illustrated in Table 5.13. From the table it will be observed that the country has a lot of ground to cover if the goal of selfsufficiency in food production is to be achieved in the not too distant future. The greatest challenge is in cereals (rice, maize, and wheat), milk/dairy, sugar, fish, and

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vegetable oils on which the country currently expends billions of dollars on importation. Realizing the dire economic situation of the country and the unsustainability of high food import bill estimated to be in excess of $30.00 billion per annum, the current government in 2016 took a bold step to reverse this ugly trend by launching a new initiative tagged the Agricultural Promotion Policy (APP). Under the policy which is expected to run from 2016 to 2020 in the first instance, a number of specific objectives were set to guide strategy formulation and action in boosting agricultural output with a view to closing the supply/demand gaps. Steps to close the gaps identified in the food supply chain will focus amongst others, on enduring institutional reforms, enhancement of needed farm inputs, agricultural research and innovation, financing, storage, transport, market access, and all other related key issues in the agricultural value chain. At this stage it should be pointed out that the emphasis on boosting domestic output of required agricultural raw materials is not to under-estimate the need for local sourcing of the other related farm inputs that are essential for a thriving agricultural sector. These include chemicals, tractors, plant and machinery spare parts and accessories, as well as the supporting infrastructure and services, all of which will go a long way in promoting a competitive industrial system in the agroallied industrial sub-sector. In addition, there is need for concerted action to minimize the high level of post-harvest losses of the various agricultural commodities through better storage, processing, and marketing systems. This should be a joint effort between all the relevant stakeholders including government agencies, research institutes, and private sector organizations.

7 Polices and Strategies for a Competitive Industrial System in the Agro-allied Sub-sector Against the background of the agricultural and forest resources available in the country, the current status of the agro-allied and wood based industries and the potential for future development, an attempt will now be made at articulating the objectives, policies, and strategies which ought to be pursued in order to ensure the emergence of a competitive industrial system in the agro-allied industrial sub-sector. The starting point for the articulation of a well defined strategy is a clear statement of the objectives to be achieved in the agro-allied industrial sub-sector in particular and of overall industrial development in general. Here, we have as a general guide government policy statements as contained in the various national development plans. As it relates to the industrial sector in particular, two policy documents issued by government are of interest, namely the Industrial Policy of Nigeria [2] issued in 1987 and the Nigeria Industrial Revolution Plan [3] issued in 2012, respectively. The two policy documents gave pride of place to the development of the agroallied sub-sector with a view to stimulating the growth of agro-allied industries based

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on the availability of agricultural resources in the country. This is with a view to promoting value added exports, diversifying foreign exchange earnings, generating employment opportunities, and boosting national food output and security. Specifically, as it relates to the Industrial Policy of Nigeria document launched in 1987, the stated goal of government was to achieve an accelerated pace of industrial development in Nigeria. In this regard the industrial sector would be transformed into one of the leading sectors of the economy with the agricultural sector playing a leading role. The key elements and policy measures aimed at achieving this objective were earlier highlighted and discussed under Industrial Policies and Strategies as contained in Chap. 3 of this book. Although some measure of success was recorded in the implementation of this policy over the period 1987–1990 under the structural adjustment programme, however, the momentum was not sustained due to policy reversal, especially as it related to the banning of importation of selected agricultural commodities. There was also lack of political will to pursue goals to their logical conclusion. Under the Nigerian Industrial Revolution Plan launched in 2012, government restated its commitment to the development of the agro-allied industrial sub-sector with the sector being selected as one of the priority sectors identified for development. The selection was based on a number of parameters such as existing skills and installed capacity, natural endowments, competitive cost base, labour intensity, potential for linkages with other industries, local and regional demand, as well as ability to export to developed markets. On the basis of the foregoing parameters the undermentioned agro and agro-allied industries were selected for future development. • • • • • • •

Food processing. Sugar. Palm oil processing. Cocoa processing. Leather and leather products. Rubber products. Textiles and garments.

Earlier to the foregoing, the government had launched the Agricultural Transformation Agenda (ATA) under which it reaffirmed the commitment to make the agricultural sector one of the leading sectors for economic growth and development. In 2016, the government which came into power at the Federal level in the previous year in a newly released policy document [4] titled “Agricultural Promotion Policy” reiterated its commitment to make the policies of the previous government under ATA more effective by undertaking additional work with a view to significantly reducing food importation and also earning more foreign exchange from agricultural products. Under the new policy a pool of crops and related activities that would help Nigeria increase food production were identified. The policy of government will now focus on improving agricultural productivity of a number of crops and activities. The crops selected include rice, wheat, maize, fish (aquaculture), dairy milk, soya beans, poultry, horticulture (fruits and

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vegetables), and sugar. This is to be achieved by partnering private investors across farmer groups and companies to develop end-to-end value chain solutions. The value chains that will receive facilitated government support and commitments will include engaging a new generation of farmers, improving supply of specialized fertilizers, protection chemicals as well as wider use of high yielding seeds. Other activities to be targeted include improving the distribution system for fresh fruits, reducing post-harvest losses, deepening of support infrastructure to ensure quality standards, traceability of crops and market intelligence. Needless to say, the achievement of the goals enunciated under the various policy documents will to a large extent depend on a well articulated strategy from which appropriate programmes and action plans will emanate. Two basic conditions are necessary for this development as stated below. 1. The identification of resources, opportunities, and constraints, all of which will determine the strategic choices to be made. 2. The implementation of the agreed strategy through appropriate organizational and institutional framework. From the specific viewpoint of the agro-allied and forest based sub-sectors, the broad objectives contained in the industrial policy documents represent the context within which sub-sectoral goals should be set as well as the strategies and plans to be pursued. For this purpose, it can be safely assumed that the major goals for the agroallied and wood based industrial sub-sectors should be anchored on three basic pillars. 1. Within a reasonable time frame, to achieve a measure of self-sufficiency in food production to meet both human consumption and non-food requirements including raw materials for industry. A challenging, yet attainable time frame can be set at 10–20 years. 2. Based on locally available resources, a major goal should be the development of fully integrated agro-allied and wood based industries producing not only to meet domestic consumption requirements but also achieving (where possible) surpluses for exportation in order to increase foreign exchange earnings from the sector, where by virtue of resource endowment Nigeria has comparative and competitive advantages. 3. A third goal ought to be the full integration of the agro-allied and wood based industrial sub-sectors within the overall industrial development plan of the country such that within a reasonable time frame the requirements for all needed inputs, including intermediate and capital goods, can be met from domestic industries with a view to ensuring a self-sustaining and mutually reinforcing industrial growth. In order to achieve the broad objectives of industrial policy and the sectoral goals highlighted above, some key aspects of the strategies and policy measures which ought to be adopted are summarized below. Excluded from consideration, although of no less importance, are the specific programmes to be adopted.

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1. It goes without saying that a necessary precondition for making the agro-allied and wood based industrial sub-sector competitive depends to a large extent on the local sourcing of the raw materials needed. Presently most of the plants in this sub-sector are operating below their installed capacities partly as a result of the non-availability of local raw materials and the high cost of imported inputs. The solution to this problem is to increase domestic production of virtually all the agro-allied and forest commodities, be it food crops, tree crops, industrial fibres, livestock, fishery or forestry to meet the ever increasing requirements of industry. 2. The preparation of a time phased development plan (say over a 10–20 year period) for the local sourcing of most inputs required by the agro-allied industries, coupled with a monitoring system to measure performance in this direction. This should be a major concern of relevant government agencies (e.g. Research Institutes and the Raw Materials Research and Development Council) and private sector organizations. 3. The need to upgrade and expand research and development (R & D) efforts not only for the exploitation of raw materials but also in the areas of product and process innovations such that new products or substitute products for items currently being imported, become available in the market place. This is a task not only for the research institutes but also for industrial establishments themselves. Thus more funds need to be set aside for R & D purposes on a scale sufficient to guarantee major breakthroughs within the shortest possible time. A good example is the R & D effort of the brewing companies in the late 1980s aimed at producing a Nigerian beer based on available local grains. 4. The development of the requisite manpower and technological skills at all levels are of critical importance whether one is thinking of primary production, manufacturing or tertiary activities to meet the requirements of the agro-allied sub-sector. The educational system from primary and secondary schools up to the tertiary educational institutions must be fully geared for this purpose. 5. The need to re-orientate consumption habits away from imported food stuffs to locally produced ones cannot be over-emphasized. It is an irony that bread is now a Nigerian staple food based on imported wheat. In future no food stuff should qualify as a staple if the raw materials are not available locally. Given the country’s huge population and the wide variety of foodstuffs potentially available, tremendous market opportunities exist in this area. 6. To the extent permissible under World Trade Organization rules, there is need for a period of protection from international competition to allow the country to develop the potentials available in the agro-allied sub-sector. The banning of a number of agricultural commodities from being imported into the country in the 1980s such as wheat, maize, rice, and other related products in order to boost domestic production should have been viewed in this context. Unfortunately the policy was not followed through and abandoned after a few years on the altar of political expediency. 7. The efficient management of available natural resources is also crucially important in order to meet present and future requirements of industry. In this regard,

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the reckless exploitation of forest and other resources without due regard for eco-systems and future supply should be avoided in order not to create supply bottlenecks in the years ahead. 8. In view of the urgent need to diversify the country’s sources of foreign exchange earnings from crude oil to non-oil exports, and given the comparative advantage which ought to accrue from a well organized agricultural sector, a key aspect of strategy should be the promotion on a large scale of exports of semimanufactures and manufactures in the agro-allied and wood based industrial sub-sectors. The current practice of exporting unprocessed agricultural products with little or no value added should be discouraged as envisaged under the industrial revolution plan. 9. The streamlining and/or creation of appropriate institutional framework to translate goals into reality in the primary, secondary, and tertiary sectors has to be fashioned out. The institutional mechanisms so created must be mutually reinforcing with the component parts moving in the same direction, but within the context of the core objectives and goals clearly enunciated. In addition, those saddled with the responsibility for achieving results must be properly motivated and rewarded to achieve results or disciplined for non-performance within a system of recognized incentives and penalties. 10. Lastly but by no means the least, the urgent need to ensure stability in the policy environment cannot be over-emphasized as frequent policy shifts create uncertainties, especially in the private sector. The habitual practice of changing policies (for changing sake) with each change of government should be discouraged. This is a major challenge for the ruling elite, whether military or civilian. For the country to develop rapidly and occupy its rightful place in the comity of nations, there must be some measure of consensus on certain basic issues of development. Thus there should be certain policies which ought to remain in place (because of their intrinsic benefits to society) regardless of changes in government. The country’s experience at both the Federal and State levels over the past years leaves much to be desired. This sad situation has inevitably led to wasteful experimentation in policy formulation and decision making with all the attendant costs to the national economy.

8 Synthesis and Conclusion In this chapter an attempt has been made to undertake a general assessment of the agricultural and forest resource potential of the country with a view to isolating the necessary preconditions for the development of a viable and competitive industrial system with particular reference to the agro-allied and forest based industries. In the context of current economic realities and Nigeria's medium-long term objective of self-sufficiency in food production, it has become imperative that the agricultural sector be accorded the pride of place it rightly deserves. It is against the background

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of a thriving agricultural sector that a solid foundation can be laid for a selfsustaining agro-allied industrial sub-sector. In ending this chapter, a number of concluding observations and remarks (if only for purposes of emphasis) are made in the context of the overriding goals to be achieved and the structural weaknesses to be eliminated. First it must be accepted that in spite of resource potential, the agricultural sector is at present unable to meet the nation's food requirements for both human consumption and raw materials for industry. Thus, the achievement of short term targets and long term objectives in the agro-allied industrial sub-sector will require the articulation of a well defined strategy coupled with commitment to a time bound development plan which becomes the reference point for subsequent actions rather than the whims and caprices of over-zealous political actors. It is the contention in this chapter that most of the problems and constraints in the agro-allied and wood based sub-sectors can be eliminated within such a framework over a period of 5–10 years in many instances, and 10–20 years for the others. Second, the task of achieving self-sufficiency in food production to meet human consumption and raw material needs is not going to be an easy one, given the rate of population growth and existing domestic supply constraints. The real task facing the nation is to set challenging but attainable goals within the context of a master plan for the industrial sector. Such goals, consistent with national aspirations, should be based on clearly established priorities which hopefully should lead to a more ordered system of resource allocation in contrast to the unpardonable recklessness of the oil boom years. Third, it should be recognized that the agro-allied sub-sector is one where old habits, practices and other man-made barriers die hard. However, to ensure selfsustaining growth such old ways must of necessity give way to one of innovation, pragmatism, and enlightened national interest whether one is thinking of boosting primary production or the strategic choices to be made in ensuring self-sufficiency in food supplies for human consumption and industry. Fourth, the goal of creating a viable industrial system in the agro-allied sub-sector requires that the supporting infrastructure and services (e.g. electricity, rural roads, extension services, research and development, adoption of appropriate technology, water supply, working capital and credit facilities, etc.) be put in place. This is a pre-requisite not only for boosting domestic agricultural production but also a precondition for a cost-effective manufacturing sector able to compete in both domestic and foreign markets. Lastly, rather than engaging in the national pastime of blaming government for every conceivable problem in the body politic, the present situation, at least in the food and agro-allied sub-sector is one that calls for the joint effort of all stakeholders in both the public and private sectors in fashioning out strategic choices and new initiatives that will eventually lead to the attainment of national goals. This approach is highly recommended in order to achieve long run sustainability of predetermined goals.

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References 1. Federal Ministry of National Planning 1986. Nigeria’s Food Balance Sheet 1985-1995. 2. Federal Ministry of Industries: 1988, Industrial Policy of Nigeria. 3. Federal Ministry of Industry, Trade and Investment, 2012: Nigeria Industrial Revolution Plan. 4. Federal Ministry of Agriculture and Rural Development 2016, Agricultural Promotion Policy.

Chapter 6

A Hard Look at Industrial Estate Development in Nigeria

1 Introduction All over the world, industrial estates are now recognized as veritable instruments for promoting rapid industrial development. This is because such estates, amongst other socio-economic benefits, help to facilitate the quick takeoff of industrial establishments by making land readily available in suitable locations and with the required infrastructure such as good access roads, water, and electricity. Thus, in the quest for rapid industrialization, most developing countries (including Nigeria) have established several industrial estates with a view to accelerating the pace of industrial development. The first industrial layout in Nigeria was established at Apapa (Lagos) in 1957. This was followed by the Yaba Industrial Nursery that was opened in 1958. The Apapa Industrial Layout was aimed at promoting orderly development of industries around the Lagos ports whilst the Yaba Industrial Nursery was to stimulate indigenous entrepreneurship at the small and medium enterprise level. Since this modest beginning, successive Nigerian governments at the federal, regional, and state levels have made efforts to establish similar industrial layouts/ estates with a view to promoting rapid industrial development in particular, and accelerating the pace of socio-economic development in general. Thus, huge sums of money, some of which came from the World Bank and other multilateral agencies, have been committed to the development of industrial estates all over the country. At the last count in 1999, there were 105 functioning industrial layouts/estates in Nigeria, each one occupied by at least one firm, with a further 136 proposed or at various stages of construction. These estates are spread over all the 36 states of the Federation and the Federal Capital Territory. This chapter takes a critical look at the development and current operational status of industrial layouts/estates in Nigeria with a view to assessing the situation on the ground and drawing on lessons of experience as a guide to the future. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5_6

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At this stage, it is necessary to define the meaning of some of the key terms used in this chapter. Based on a review of the literature on industrial estates, the more widely accepted definitions are those provided by UNIDO [1] and writers such as Bredo [2] and Schatz [3]. These are summarized as follows: • Industrial Layouts are parcels of improved land provided with adequate infrastructure and subdivided into plots for sale or lease to industrialists but without unified or continuous management. Such layouts are aimed at the medium to large scale establishments. • Industrial Estates are tracts of land developed and subdivided into plots according to a comprehensive plan with roads, transport, and public utilities, for the use of a community of industrialists and having unified and continuous management. These estates are generally occupied by small and medium scale enterprises. From the foregoing definitions, it will be observed that a distinction can be made between an industrial area (or layout) on the one hand, and an industrial estate on the other. Whilst the former is essentially a piece of real estate with some utilities the latter has in addition unified and continuous management with or without built-up factory sheds and common facilities. In Nigeria, industrial areas or layouts usually occupy large tracts of land and are targeted at medium to large scale industrial establishments, whereas industrial estates occupy smaller areas of land (typically below 20 hectares) and are aimed at small scale industrialists. Whilst it is useful to bear the foregoing distinction in mind, it should be pointed out that the two terms, i.e. industrial layouts and industrial estates, are more or less used interchangeably in the country. This is the approach adopted in this chapter which is divided into six parts as outlined below. Following this introduction, Sect. 2 highlights the Industrial Policy of Nigeria and the Goals of Industrial Estate Development. Section 3 contains a review of Past Efforts at Industrial Estate Development. The findings of a major Survey of Industrial Estates in Nigeria are presented in Sect. 4 of the Chapter. In Sect. 5 a Critical Examination of the Industrial Estate Development Programme is undertaken, leading to Sect. 6 which contains the Conclusions and Policy Recommendations.

2 Industrial Policy and Goals of Industrial Estate Development The development of industrial layouts/estates is a major plank of government policy in the quest for rapid industrial takeoff of the country. Consequently, a useful starting point for any meaningful discussion on industrial estates in Nigeria is to review the country’s industrial development policy. Since the attainment of independence in 1960, a major preoccupation of successive governments in Nigeria has been the desire to transform the economy from its largely agrarian nature to a modern industrialized one within the shortest possible

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time. This is with a view to stimulating a faster rate of socio-economic development given the strong positive correlation between the level of industrialization and economic progress, especially in the more advanced societies of Western Europe and North America. Thus, the main objectives of industrial policy in Nigeria, based on public pronouncements and as enunciated in official documents, are to: • • • • • •

promote greater employment opportunities; increase the export of manufactured goods; encourage dispersal of industries; improve the technological skills and capability available in the country; attract foreign capital; and increase private sector participation in the manufacturing sector [4].

It is in the context of the foregoing that the federal and state governments have pursued their programmes for the development of industrial estates. These estates were intended to serve as catalysts for the promotion of industrial establishments by making serviced plots with unencumbered legal title readily available to business promoters/industrialists. It is also in this context that we enumerate the primary goals of the industrial estate development programme in Nigeria, namely, to: • accelerate the pace of industrial development; • encourage dispersal of industries and a more balanced national distribution of industries; • attract private investment, both local and foreign; • promote the development of small and medium scale enterprises as well as stimulate local entrepreneurship; • reduce the cost of initial capital investment by industrialists; • eliminate delays in business start-ups; • increase employment opportunities at regional and national levels; • encourage more effective exploitation of local resources; • check or prevent excessive concentration of industries in major metropolitan areas; and • promote good urban and regional planning. In pursuance of these goals, several industrial layouts/estates have been established throughout the country over the past 40 years whilst more are under construction or proposed for future development. It is worth highlighting that the Federal Government of Nigeria only plays a facilitating role in industrial estate development by articulating policies and making grants available to state governments whilst the actual physical construction and ownership of the estates are vested in the state governments.

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3 Review of Past Efforts at Industrial Estate Development The review covers over four decades from 1957, when the first industrial layout was established at Apapa in Lagos, up to 1999. The efforts and plans of both the federal and regional (later state) governments are reviewed and important developments highlighted. To start with, it should be pointed out that Nigeria was a colony of Britain for about 100 years. There was no policy for industrial estate development during most of this period until the late 1950s, due to the following reasons: • the British operated a colonial economy in Nigeria based on the exportation of agricultural commodities and the importation of manufactured goods and general merchandise, hence industrial development received little attention; • the small number of industrial establishments and the low level of industrial output in general at that time (about 0.4% of GDP in 1950) could not justify sufficient demand for industrial estates; and • manufacturing was regarded entirely as a private sector affair, whilst government was responsible for social infrastructure and public utilities. The 10-year Plan of Development and Welfare for 1945–1955, drawn up by the colonial government focused primarily on such things as better water supplies, nutrition, and health. It was not until 1957 that the Apapa Industrial Layout (located near the Lagos ports) was established by the colonial government to meet the requirements of mostly large scale foreign-owned enterprises. This was followed in 1958 with the setting up of the Yaba Industrial Nursery to promote small scale indigenous entrepreneurship. But following the attainment of internal self-government in the mid-1950s and the enactment of a number of legislations (e.g. the Import Duty Relief Act, Income Tax Relief Act, Dumped and Subsidized Goods Act, etc.) intended to protect and stimulate local industries, there was a burst of new manufacturing investments in the late 1950s and early 1960s. According to Kilby [5], these investments were made by multinational firms and foreign-owned enterprises that were anxious to secure a foothold in a promising market. To attract some of these investments, the three regional governments in the late 1950s took steps to establish industrial layouts (mainly for medium/large scale enterprises) in Lagos area and Ikeja in the Western Region, Port Harcourt and Aba in the Eastern Region, and Kaduna and Kano in the Northern Region. Thus, the first set of industrial layouts emerged in different parts of the country. This was the position of industrial layouts/estates in Nigeria until the attainment of independence in October 1960. Following the attainment of independence, the new Nigerian leadership was committed to the goal of rapid development. This led to the launching of the first national development plan covering 1962–1968. Under the Plan, the efforts begun in the late 1950s were intensified in the 1960s, leading to the completion of the various industrial layouts in Port Harcourt, Aba, Kaduna, Kano, and the Lagos Area. In

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addition, the Eastern Regional Government established an industrial nursery in 1964 for small scale industrialists at Uwani, in Enugu. The industrial nursery, occupying an area of about 1.35 hectares, consisted of two rows of workshops capable of accommodating 17 small scale industrial establishments. But because of the rather sluggish growth of the economy and the political crisis, which finally culminated in the civil war (1967–1970), not much was achieved during the second half of the 1960s. The 1970s coincided with the period of the second and third national development plans, spanning the periods 1970–1974 and 1975–1980, respectively. Early in the decade, efforts were made to reconstruct the war-damaged economy, hence no specific programmes on industrial estate development were initiated by the federal government during the period. The governments of the 12 newly created states, however, initiated plans and programmes for developing industrial layouts/estates in order to boost the level of industrial development. Virtually all the states budgeted substantial sums of money to pursue their industrial layout/estate development programmes. Actual disbursements fell far short of budgets owing to other competing demands for funds in the newly created states. The industrial estate projects were also badly executed as no detailed feasibility studies were undertaken in many instances before embarking on implementation. It should also be noted that most of the projects drawn up were industrial layouts targeted at large scale enterprises, and the sites selected were usually capitals of the new states. In the mid-1970s, the third national development plan (1975–1980) was launched. This period witnessed the height of the oil boom in Nigeria and the federal government resumed its efforts at facilitating and supporting the establishment of model industrial layouts/estates in all the states of the federation. To this end, the federal government voted the sum of N60.00 million (about $100.00 million at the time)1 for the establishment of model industrial estates in all states. The envisaged assistance to the states was expected to be in the form of electricity supply, access roads, water, etc., for the model estates. The 12 states (increased to 19 in 1976) budgeted a total of N62.60 million for the establishment of industrial layouts/estates throughout the country. But at the time of the second Comprehensive Progress Report in 1978, actual physical achievement for most of the estates varied between zero and 15% with the exception of Lagos and Kano States where implementation was better.

1

For the purpose of this chapter, an indication of the value of the Naira in terms of U.S. dollar over the period 1985 to 2000 is given as follows: 1985 N0.99 ¼ $1 1990 N9.00 ¼ $1

1992 N19.66 ¼ $1 1994 N21.88 ¼ $1

1996 N79.60 ¼ $1 2000 N109.55 ¼ $1

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Most of the projects were industrial layouts targeted at medium to large scale enterprises. The only exception in this regard was the Lagos State Government which, in 1977, established the Matori Industrial Estate, a nursery conceived along the lines of the Yaba Industrial Estate, for small scale industrialists. Covering approximately 2.0 hectares of land, the estate consists of fully built-up factory sheds subdivided into three different sizes and capable of accommodating 32 tenants. In 1979, the federal government, assisted by the European Economic Community (EEC), now European Union (EU), carried out a study to assess the feasibility of setting up model estates at Owerri and Zaria. The report on the Owerri study was out in 1980. A 100-hectare parcel of land was acquired and fenced. The estimated project cost for establishing the Owerri Estate, which was expected to accommodate a total of 151 built-up workshops, was put at N8.2 million in 1980, that is, about $16.00 million. But because of the declining fortunes of government, brought about by the collapse of prices in the international crude oil market, the project was not implemented. In addition, the idea of a model industrial estate in each state was not realized as emphasis continued to be placed on the establishment of industrial layouts. Following the collapse of prices in the international oil market in the early 1980s, the country faced severe economic crisis from 1982 onward. This completely derailed the economic programmes contained in the fourth national development plan (1981–1985), including the programme for industrial estate development. However, it is worth mentioning that the plan document made a distinction between industrial estates on the one hand, and industrial layouts on the other, as follows: While Industrial estates are expected to have access roads, electricity, pipe borne water, banks, post offices, and efficient transport and communication system, industrial areas or layouts are mere tracts of land required for industry. The latter may be demarcated into plots with access roads and could be developed into industrial estates later.

In spite of this pronouncement, no effort was made by both the federal and state governments to bring the foregoing distinction to bear in the planning and implementation of the industrial estate programme, hence perspectives continued to be blurred. During the fourth plan period, the federal government budgeted a total of N9.5 million to assist states that did not benefit from federal assistance in the preceding plan period. A number of states also indicated their intention to build industrial estates in all their local government headquarters. This was no more than wishful thinking, given the prevailing economic climate of that time. Thus, owing to the rapidly deteriorating economic situation, not much was accomplished by the Federal and state governments (with only a few exceptions) during this period. In 1986, the federal government adopted the structural adjustment programme (SAP) in order to save the economy from virtual collapse. During that period, the federal government continued to provide matching grants to state governments to encourage industrial estate development. Accordingly, in 1988, the federal

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government voted the sum of N10.00 million as counterpart funding, out of which only N3.00 million was released and this was shared out to 15 states at the rate of N200,000 each. In 1989, the budgetary provision for this purpose was N8.00 million, out of which less than N3.0 million was released to the states. Because of the severe economic crisis, many of the state projects for industrial layouts/estates were abandoned. In any case, outside the major industrial centres, many of the so-called estates were mere unoccupied parcels of land that defeated the objective of setting them up. The Ahoada Industrial Estate, started in 1987 by the Rivers State Government, would have been the only exception by virtue of its conception and the provision for supporting infrastructure like fully built-up factory buildings and model factories. But its implementation fell far behind the ideals that informed its establishment. Consequently, Ahoada is not different from the others and remains largely unoccupied owing to its distance from Port Harcourt, the main centre of industrial and commercial activity in Rivers State. In 1990, Nigeria adopted the 3-year National Rolling Plan, the first of which spanned 1990–1992. During that plan period, the federal government budgeted a total of N15.00 million to be disbursed at the rate of N5.00 million per annum as matching grants for the development of industrial estates in all the states of the federation. At the prevailing average exchange rate of N11.77 to the dollar, over the 1990–1992 period, the budget works out at an annual allocation of $424,808 to be shared amongst 21 states, i.e. roughly $20,230 per state, which is clearly insignificant. To complicate matters, in 1992, the federal government decided rather abruptly and outside the budgetary provisions in the Rolling Plan to promote the establishment of Special Industrial Layouts in the capitals of the nine newly created states and nine other urban centres, including the Federal Capital Territory (FCT), in order to stimulate industrial development. It should be noted that no prior studies were undertaken to justify the viability of these proposed layouts. An extra-budgetary allocation of N120 million was voted for the 18 special estates, out of which N94 million was released and shared between the lucky states at the rate of N5.2 million each during the 1992/1993 fiscal years. To ensure judicious use of funds, some conditions were attached to the grants such as confirmation that a suitable site of about 100 hectares was available, contribution of matching grants by state governments for each sum to be released by the federal government and provision of infrastructure on the site. However, because some states could not meet the foregoing conditions, the N5.2 million grant was not fully disbursed to them. Also, in the absence of detailed feasibility studies and comprehensive plans, it was difficult to measure the level of achievement (in terms of progress of civil works/facilities) for the layouts being developed. Indeed some of the states diverted the funds to meet more pressing needs. In addition to the grants for the special industrial layouts in the 17 lucky states and the FCT, a further sum of N4.00 million was shared out by the federal government in 1993 at the rate of N307,692.00 to each of the remaining 13 states that did not benefit from the Special Industrial Layout Programme.

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Over the rolling plan periods between 1992 and 1998, various sums of money were budgeted by the federal and state governments for industrial estate development. But because of the worsening economic situation, actual disbursements were very meagre, leading to serious underfunding of the entire programme. In several states, the only source of funding for the development of industrial estates was the grant received from the federal government, which was completely inadequate to meet the escalating cost of establishing such estates. For example, the federal government disbursed less than N20 million to the states between 1995 and 1998 for industrial estate development. In such circumstances, the very ambitious programmes embarked upon by the states could not be fulfilled, with several of the so-called industrial layouts/estates being no more than mere parcels of land with little or no infrastructure. The only exception to the foregoing was Lagos State where a pilot Technology Business Incubation Centre for promoting technology-oriented small scale industries was established with assistance from the United Nations Development Programme (UNDP). The first phase of the Centre was completed in 1993 at Agege, Lagos with an initial intake of 20 tenants in fully built-up premises. Two other incubation centres were also being developed at Aba and Kano, respectively. Thus, the overall picture that emerged from the review of past efforts at industrial estate development was one characterized by lack of firmness of purpose, serious underfunding of the entire programme, misconception of the role of industrial estates in stimulating industrial development as well as overambitious and unrealistic targets.

4 Survey of Industrial Estates in Nigeria In order to ascertain the status of industrial estate development in Nigeria, a survey of existing and planned estates was undertaken. The survey involved the physical inspection of industrial estates throughout the country with a view to assessing the socio-economic infrastructure and services available as well as the extent of physical occupation by operating establishments. The survey was complemented with structured interviews with officials of the Ministry of Commerce and Industry in each state. The interviews focused specifically on past efforts, achievements, problems, and constraints as well as future plans for industrial estate development. A summary of the findings of the survey is presented below:

4.1

Distribution of Estates

The distribution of industrial layouts/estates in each state of the federation is given in Table 6.1. As can be observed from the table, the distribution covers virtually all the

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Table 6.1 Distribution of industrial layouts/estates by states in Nigeria, 1999 State Abuja (FCT) Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross River Delta Ebonyi Edo Ekiti Enugu Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kwara Kogi Lagos Nasarawa Niger Ogun Ondo Osun Oyo Plateau Rivers Sokoto Taraba Yobe Zamfara Total

Existing 2 3 1 5 3 3 – 1 2 4 1 (private) – – – 4 1 2 – 10 6 1 – 6 – 20 – 2 7 (1 private) 8 1 6 2 2 1 – – 1 105

Proposed or under construction 2 11 1 2 7 1 2 3 2 2 4 1 4 4 1 3 3 – 7 6 1 6 1 14 3 3 6 6 9 6 7 2 3 1 1 1 136

Source: Field Survey/Federal Ministry of Industries

Total 4 14 2 7 10 4 2 4 4 6 5 1 4 4 5 1 5 3 10 13 7 1 12 1 34 5 5 13 14 10 12 9 4 4 1 1 2 241

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states with the largest concentration in the major industrial centres of Lagos. Kaduna. Kano, Aba, and Port Harcourt.

4.2

Ownership and Sponsorship of Estates

Virtually all the estates are owned and sponsored by government (103 out of 105) with only two exceptions. The two exceptions are the Agbara Industrial Estate in Ogun State, owned by the Lawson Group of Companies, and the Edewor Industrial Area in Enerrhen near Warri, established by Chief James Edewor. Of the 103 owned by government, 100 are sponsored by the state governments, whilst only three (i.e. the three Technology Business Incubation Centres located in Kano, Aba, and Lagos) are jointly sponsored by the Federal Government in collaboration with the respective state governments.

4.3

Types of Industrial Estates

Most of the estates in Nigeria are composite or general purpose industrial estates accommodating various types and sizes of enterprises, but without built-up factory sheds. Out of the 105 functioning industrial estates, 98 are of the composite type, six are nurseries/incubators with fully built-up factory sheds for small scale enterprises whilst there is only one ancillary estate, namely, the NNPC Refinery Industrial layout at Kaduna.

4.4

Size of Layouts/Estates

The size of industrial layouts targeted primarily at medium-heavy industries generally run from about 100 ha to over 1000 ha, the most extensive being the following: NNPC Industrial Layout, Kaduna State Ikorodu Industrial Estate, Lagos State Trans Amadi Industrial Estate, Port Harcourt, Rivers State Iwo Road Industrial Layout, Ibadan, Oyo State

2120 ha 1582 ha 1011 ha 1151 ha

Plot sizes within these layouts vary from state to state and from layout to layout. However, the more common sizes are 0.25 ha, 0.5 ha, 1.0 ha, 1.5 ha, 2.0 ha and 2.5 ha, respectively, with the largest plots being up to 6.0 ha.

4 Survey of Industrial Estates in Nigeria

4.5

163

Facilities/Services Provided in Estates

There is a wide disparity in the level of facilities and services provided in the layouts. Generally, the older industrial layouts (those established in the 1960s and 1970s) tend to have the full complement of facilities/ services such as good access roads, tarred road network, electricity, and water supply as well as telecommunications and banking services. On the other hand, the more recently established layouts (i.e. those established in the 1980s and 1990s) tend to be poorly served with these facilities. For example, access roads may or may not be tarred, road network within the layouts are usually left untarred and electricity, and water may only extend to the boundary of the layout, leaving tenant firms with the responsibility of providing water and electricity for their respective plot.

4.6

Comparison with Other Developing Countries

When Nigerian industrial estates/layouts are compared with those in other developing countries, based on findings of a survey conducted by UNIDO, the following observations can be made. In terms of ownership/sponsorship, Nigeria compares favourably with Pakistan and Malaysia as indicated below, with government ownership/sponsorship being predominant in these countries.

Government sponsored Government assisted Private

Nigeria (%) 98 – 2 100

Malaysia (%) 92 – 8 100

Pakistan (%) 100 – – 100

India (%) 79 19 2 100

In Argentina and Turkey, however, most of the estates are government assisted. Government-assisted estates are those that receive government grants, foreign investment, or government loan at concessionary rates and for longer terms than would be available from commercial banks (often from 10–20 years). When compared with these countries, it can be argued that there is room for more private sector participation in the ownership/sponsorship of industrial estates in Nigeria. This point becomes even more important when viewed against the background of dwindling financial support from both the federal and state governments. When the sizes of industrial estates in Nigeria are compared with those in other developing countries, the UNIDO report also reveals the following:

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Country Nigeria Malaysia Pakistan India

Size of estates (ha) 10–2120 Average of 82.50 17.60–45 3–35

Thus, industrial estates in Nigeria tend to be more expansive than those in India, Pakistan, and Malaysia. It is also worth noting that experience in the United Kingdom indicates that the minimum economic size for an industrial estate should be about 20 ha, whilst significant economies of scale are no longer realized once the estate exceeds 60 ha.

4.7

Current Operational Status of Industrial Estates

For the purpose of analysis, industrial layouts/estates in Nigeria can be grouped into six broad categories in terms of their current operational status. The six categories are summarized below:

4.7.1

Group A

This group contains the first generation of industrial layouts in Nigeria. These layouts were established in the late 1950s and early 1960s by the then regional governments. Examples of layouts in this category are those at Apapa and Ikeja in Lagos, Bompai in Kano, Trans-Amadi in Port Harcourt and the Aba Industrial Layout. They account for about 15% of the functioning industrial estates in Nigeria. Generally, these estates were well-planned and have the required infrastructure such as good access/internal roads, electricity, water, and telephone. They are more or less fully occupied by medium to large scale industrial establishments. Most of the major multinational corporations are located in these estates.

4.7.2

Group B

Group B contains the second generation of industrial layouts established in the 1970s by the newly created states. These layouts generally have good access roads, electricity, and water, and are usually located in state capitals. Examples of layouts in this group are those in Ilorin, Maiduguri, Jos, Calabar, Ibadan, etc. These layouts, some of which are not fully occupied, contain a significant number of industrial establishments in Nigeria.

4 Survey of Industrial Estates in Nigeria

4.7.3

165

Group C

Group C contains industrial layouts that have been completed with tarred roads, electricity, and water but with less than five firms operating from each of them. These estates have been built ahead of demand or have been sited in locations with very little commercial/industrial activity, hence they remain largely unoccupied. Examples include Idu Industrial Estate in Abuja, Minna Industrial Estate in Niger State, and Ahoada Industrial Estate in Rivers State.

4.7.4

Group D

Group D contains partially developed industrial layouts with only untarred roads. Electricity is only at the boundary of such layouts (in most cases) and there is currently no water supply. The few firms operating in them have to make arrangements to extend electricity and water supply to their sites. Examples of layouts in this category are found all over the country. Such estates were started in the late 1980s and have been partially abandoned for lack of funds owing to the worsening economic situation. Apart from the parcels of land that have been demarcated into plots there are very little visible signs of development in the layouts. Also only a handful of firms operate from such layouts.

4.7.5

Group E

This group contains the various layouts that are proposed and/or are at early stages of construction spread all over the country. This constitutes the largest category with about 136 layouts/estates in the group—approximately 57% of the total number of estates reviewed in this chapter.

4.7.6

Group F

Group F covers the industrial nurseries at Yaba, Matori, and Isolo, all in Metropolitan Lagos, Uwani in Enugu, and the newly established Technology Business Incubation Centre at Agege. These nurseries occupy between 0.50 and 2.00 ha of land and have good supporting infrastructure. They also contain fully built-up factories that are partitioned into units and let out to small scale entrepreneurs. These tenants are expected to move out into their own premises at some time in the future (e.g. over a period of 3–5 years), thus facilitating the intake of new tenants. Most of the tenants have, however, refused to move out claiming that government has not provided them with suitable alternative locations. A more apparent reason for

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their refusal to move out is because of the highly subsidized rents they pay (about 25% of the open market prices). From the foregoing analysis, it is apparent that there is an urgent need for a comprehensive review of the industrial layout/estate development programme in order to avoid the mistakes of the past and fashion out appropriate strategies for the future.

5 A Critical Evaluation of the Industrial Estate Development Programme In this section, we undertake a critical assessment of the industrial estate development programme in Nigeria over the last four decades. The expected contributions of industrial estates to national development are examined as well as the shortcomings associated with the implementation of the programme. First, the contributions of the programme are reviewed. Over the last four decades, tremendous progress has been made to establish a network of suitable industrial layouts/estates all over the country with the objective of accelerating the pace of industrial development. These layouts/estates along with the supporting infrastructure, such as good access roads, electricity, water, telephone, etc. have provided the springboard for several successful industrial establishments, whether local or foreign, small, medium, or large scale. The first generation of industrial layouts/estates has been particularly instrumental in boosting industrial development in the major industrial centres of Lagos in the west, Kaduna/Kano in the north, and Port Harcourt/Aba in the east. These estates account for over 70% of total industrial production in Nigeria. However, other factors such as proximity to seaports in the case of Lagos and Port Harcourt, concentration of population and ready access to markets for finished goods, proximity to raw materials, etc., are also of equal, if not greater importance than the existence of industrial estates, in stimulating industrial growth in the various locations identified earlier. As Aboyade [6] has observed “a particularly evident lesson is the fact that mere government exhortations and mere creation of industrial estates do not by themselves promote industrial growth or achieve effective spatial industrial diversification”. Rather, simultaneous account must be taken of all relevant economic factors that are pertinent to effective industrial location decision making. Second, the development of industrial layouts/estates all over the country has contributed in no small measure to the objective of industrial dispersal as evident in the distribution of the over 100 functioning layouts/estates spread across the federation. Along with the foregoing, the establishment of these estates has aided the exploitation of locally available resources in the areas where they are sited. Thus, the policy of the regional and state governments in establishing industrial estates to

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promote industrial development in their territories has been partly justified as such estates acted as catalysts in stimulating socio-economic development in general. Third, to the extent that several industrial establishments are operating successfully in these estates and have provided gainful employment to several thousands, the objective of creating employment opportunities through the establishment of industrial estates may have been realized. This is more evident in the total employment impact of such estates, which is in several multiples of the number directly employed by firms operating from the estates. In this regard, the first generation of industrial layouts/estates has been particularly helpful in stimulating employment opportunities in the major urban centres of Lagos, Port Harcourt, Aba, Kano, and Kaduna, respectively. Fourth, in the major metropolitan areas such as Lagos and Kano the establishment of several industrial layouts/estates in different parts of the metropolis and its environs has helped to check the excessive concentration of industries in certain parts of the city whilst at the same time promoting good urban and regional planning. As a fallout of this development, it is now standard practice to reserve parcels of land for future industrial estate development in newly created state capitals. Fifth, the industrial layouts/estates have been of tremendous value to investors/ industrialists, both local and foreign, by eliminating delays in business start-ups through the provision of suitable sites with the required infrastructure. In the absence of such estates, valuable time and resources would have been expended in securing suitable sites and developing the required infrastructure. Sixth, these layouts/estates have also helped to reduce the cost of initial capital investment to industrialists through ready availability of serviced industrial plots at subsidized prices. For example, in major urban centres such as Lagos, Aba, Port Harcourt, and Kano the open market prices of these plots are about 5 to 10 times more than the official prices. Finally, the establishment of industrial estates/nurseries has to some extent, stimulated indigenous entrepreneurship and the development of small scale industries. This is particularly true of the nurseries at Yaba and Matori in Lagos and Uwani in Enugu. But a lot still remains to be done in order to galvanize the small/medium enterprise sector to serve as a vital link and major catalyst in the country's industrialization programme. In spite of the foregoing positive contributions of industrial layouts/estates to the overall socio-economic and industrial development of the country, a critical appraisal of the programme reveals a number of shortcomings. These are summarized below:

5.1

Unrealistic Targets

The goal of developing several layouts/estates in the face of dwindling resources has been simply unrealistic and, therefore, unattainable. So also has been the mistaken

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belief that the mere establishment of industrial layouts in different locations within a state would by itself stimulate industrial development. Another aspect of the problem is that some of the planned layouts are too large for the resources available, hence the need to downsize future layouts to the limits of available resources. Added to the foregoing is the vacillating attitude of the federal and state governments to the programme as evident in shifting emphasis and funding inconsistency from one year to the other.

5.2

Inadequate Project Planning and Management

Except in a few instances, several of the projects for the development of industrial layouts/estates have been executed without any detailed planning as to scope; cost and benefits. In the absence of such a detailed framework, several of the projects have been implemented haphazardly, leading to uncompleted and/or abandoned sites. Examples of such abandoned projects are found in virtually all the states of the federation.

5.3

Poor Funding of the Industrial Estate Programme

In spite of the high priority accorded the development of industrial layouts/estates as a major catalyst for rapid industrialization, both the federal and state governments have failed to release enough funds to prosecute the projects vigorously. This problem was compounded by the absence of proper feasibility studies that would have helped to establish indicative project costs against which capital expenditure and disbursement could have been drawn to guide project execution.

5.4

Low Physical Occupation

Low physical occupation is particularly true of the new layouts established in the 1980s. The problem is partly due to the severe economic crisis that has afflicted the country since the early 1980s as a result of which several prospective entrepreneurs were unable to implement their projects. It can also be argued that several of the layouts were built ahead of demand without sufficient economic justification. This goes back to the need for proper project appraisal. A related problem to the issue of low physical occupation is that several of the firms to which estate land had been allocated were mere speculators without genuine projects.

5 A Critical Evaluation of the Industrial Estate Development Programme

5.5

169

Political Rather than Economic Considerations in the Choice of Locations

A recurring feature in most of the states is that the choice of locations for industrial layouts was guided by political considerations, especially the need for government to be seen by the different communities as being fair and equitable in the distribution of infrastructural development projects. Thus, in an attempt to please everybody, several industrial layouts were embarked upon at the same time even in the face of dwindling resources and in the knowledge that enough funds might not be available to complete even one of them. This has led to the proliferation of undeveloped industrial layouts that are mere parcels of land without any supporting infrastructure. A more logical approach would have been to make a success of one or two layouts to serve as demonstration projects before embarking on the construction of new ones in other locations.

5.6

Public Ownership and Limited Private Sector Participation

Virtually all the industrial layouts/estates in Nigeria are government-owned and sponsored with only one or two exceptions such as the Agbara Estate near Badagry, which is privately-owned. Consequently, social/development objectives take precedence over commercial considerations in the planning, construction, and management of the estates. The situation in Nigeria can be contrasted with that in Malaysia where about 10% of estates are privately-owned, and in Argentina and Turkey where most of the estates are government assisted but under private ownership. In the face of dwindling public revenue there is a need to encourage more effective participation by the private sector in the development of industrial layouts/estates in Nigeria.

5.7

Absence of Monitoring System for Industrial Estate Development

In the absence of an effective monitoring system for industrial estate development, such estates have proliferated throughout the country without regard to number, economic justification, and minimum standards. In addition, there are glaring cases of duplication of efforts in several states with many industrial layouts/estates being planned simultaneously in the same town by different agencies of government. Examples of this are common in the western states of Oyo, Osun, Ondo, and

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Ogun where the Ministries of Lands and Housing, Commerce and Industry, and the State Housing Corporations are all involved in industrial estate development. A proper monitoring system would have helped to streamline development, avoid unnecessary duplication of effort, reduce costs, and promote more efficient use of resources as well as prioritize industrial estate development programmes. It is, however, gratifying to note that one or two of the states mentioned earlier have now taken steps to streamline the activities of the agencies responsible for industrial estate development. The point should also be made here that there is a need for greater consultation and better coordination of efforts between the federal and state governments, especially in the areas of policy articulation, project conception, and implementation as well as funding of industrial estate development programmes.

5.8

Lack of Integration with Other Development Programmes

In several instances, the establishment of industrial layouts/estates has not been properly integrated with other infrastructural development projects in chosen locations such as rail/road development, water and electricity supply, telecommunications, housing, and urban development. In the absence of these facilities, industrialists have been forced to generate their own electricity before connection to the national grid, sink boreholes for water supply and in some instances construct and/or maintain access roads. Added to the foregoing is the frequent power outages by the national electricity supply corporation (the erstwhile state monopoly), which has forced many companies to buy standby generators in order to ensure uninterrupted production. All the foregoing add to the cost of doing business in Nigeria.

5.9

Failure to Appreciate the Special Requirements of Small Scale Industrialists

Most of the layouts on ground have been designed for large scale enterprises; the number for small scale industries are grossly inadequate. As earlier indicated, out of the several layouts/estates that have been established over the years, only three, namely, Yaba, Matori, and Uwani have been specifically designed as nurseries for small scale industries. Given the special role assigned to the small/medium enterprise sector in the overall industrialization programme of the country, it is critically important that specially-packaged industrial estates/nurseries should be developed to meet the specific requirements of such enterprises.

6 Conclusion and Policy Recommendations

5.10

171

Inadequacy of Supporting Institutions

Industrial estate development is just one of the facilitators of industrial development. Several of the states appear to have pursued industrial estate development with the mistaken belief that all that is needed is to establish industrial estates and other things will follow. Of course, other supporting facilities (in addition to industrial estates) are needed by entrepreneurs, such as long term credit, extension services, training, technical assistance, etc., in order to take advantage of the availability of industrial estates. But all these are not usually available as and when needed.

6 Conclusion and Policy Recommendations Over the past 40 years successive Nigerian governments have placed a high premium on the development of industrial layouts/estates with a view to accelerating the pace of industrial development. Thus, several layouts/estates have been built all over the country with many more at different stages of construction. But achievements to date have fallen far below expectation owing to a variety of reasons amongst which are unrealistic targets, poor project execution, underfunding, absence of commercial focus, and the mistaken belief that such estates on their own can help to galvanize industrial development without complementary supporting institutions. In view of the very modest achievements recorded in the programme, especially since the economic crisis of the early 1980s, there is an urgent need to reappraise and fine-tune the conceptualization and implementation of the industrial estate development programme in the context of present realities and future development plans. It is within such a revised context that goals can be realized. Drawing on lessons of experience on industrial estate development in Nigeria over the past four decades, a number of recommendations are made below to guide future policy formulation and decision making: 1. Need to set attainable targets. There is a need to set realistic and attainable targets at both the federal and state levels in the industrial estate development programme. Such targets must be set within the context of available resources, problems, and constraints. This is to avoid the mistake of the past when targets were largely unrealized. 2. Feasibility studies. Before any industrial estate project is executed, it must be backed up with detailed feasibility studies, including the associated costs and expected benefits. It is only after such an exercise that a final decision can be made for project execution. 3. Project management. For effective project execution, there is a need to set up Project Management Committees to oversee the planning, scheduling, and control of implementation activities. This is to ensure that projects are accomplished as scheduled and at the minimum cost.

172

6 A Hard Look at Industrial Estate Development in Nigeria

4. Adequate funding. Realistic budgets should be prepared and adequate funds released to ensure uninterrupted performance during implementation, especially during the construction phase. 5. Prioritization of projects. Rather than begin the construction of several estates simultaneously, efforts should be made to prioritize the development of such estates based on need and available resources. 6. Downsizing of estates. Several of the existing estates in Nigeria are too ambitious in size and scope, resulting in huge capital expenditure far beyond the financial resources of the sponsors. Thus, there is a need to downsize some of the estates within the scope of available resources. Also, consideration should be given to phasing the development of such estates over several years with initial effort being concentrated on the area for immediate use. 7. Estates must be demand driven. As a matter of policy, the establishment of future estates must be demand driven in order to guarantee effective occupation. In addition, commercial considerations should be given more weight in the planning and execution of estates with a view to reducing dependence on the treasury for funds. The cost and revenue projections of proposed estates should, therefore, be closely watched. 8. Policy on subsidization. Even if the government decides to build some industrial estates on social/developmental considerations, such estates should still be evaluated on the basis of relevant economic criteria so that the level of subsidy to be given is known in advance as a matter of deliberate policy. 9. Nurseries for small and medium enterprises. There is a need to take into account the special requirements of small and medium scale enterprises in the development of industrial estates. Because of the escalating cost of construction, most small scale entrepreneurs are unable to build their own premises, hence there is a high demand for rented accommodation in the few available nurseries. Consideration could also be given to outright purchase of units in such nurseries under deferred payment arrangements. 10. Management of estates. Most industrial estates in Nigeria are more or less abandoned to tenant firms after the formal commissioning. There is a need to put in place Industrial Estate Management Boards, not only to see to the day-today running of such estates, but also to oversee the development of new estates on an on-going basis. 11. Integration with regional development plans. The development of industrial estates should be integrated with the regional development plan of each State in order to avoid the mistakes of the past and to achieve optimal results. This approach will ensure that plans for socio-economic and infrastructural development (such as access roads, electricity, and water supply) are closely integrated with the industrial estate development programme. 12. Private sector participation. With only one or two exceptions, virtually all the industrial estates are in the public domain. Given the limited resources available to government and the ever-growing competing demands, it has become imperative that the private sector should be encouraged to venture into the construction and management of industrial estates. Appropriate incentives

References

173

(e.g. assistance in land acquisition, infrastructure development to the boundary of the estate and soft finance) should be given to make such ventures commercially viable and attractive to prospective investors.

References 1. UNIDO, 1978. Guidelines for the Establishment of Industrial Estates in Developing Countries, New York. 2. Bredo, W. 1960.Industrial Esates.Glencoe, Illinois: The Free Press. 3. Schatz, S. 1964. Aiding Nigerian Business: The Yaba Industrial Estate. The Nigerian Journal of Economic and Social Studies 6 (1) March: 199-217. 4. Federal Ministry of Industries 1988. Industrial Policy of Nigeria. Abuja:. 5. Kilby, P. 1969. Industrialization in an Open Economy, Nigeria 1946-1966. Cambridge University Press. 6. Aboyade, O. 1968.Towards a New Industrial Location Policy., The Nigerian. Journal of Economic and Social Studies 10 (3) November: 275 - 302.

Chapter 7

Incentives and Disincentives to Foreign Direct Investment in the Nigerian Manufacturing Sector

1 Introduction In the quest for sustainable socio-economic development all over the world, the competition for foreign direct investment (FDI) has become more intense between all countries and regions of the world, whether developed, emerging or developing. Indeed during the second half of the twentieth century, as it became increasingly recognized that FDI was one of the main drivers (along with trade liberalization and globalization), which stimulated rapid socio-economic development in nation states, most governments had taken steps over time to design and package incentive schemes to attract foreign direct investment. This is so not only among the emerging economies of Asia, Africa and Latin America but also among the newly independent States of the former Soviet Union in Eastern Europe. The advanced industrialized countries of Western Europe, Japan, and North America are not left out in the quest to attract FDI as they too compete for capital investment to sustain development of their economies. Indeed the advanced industrialized countries accounted for over 53% of the total inflows of world foreign direct investment during the period 2012–2017 as indicated in Table 7.1. During the same period Africa averaged a mere 3.25%, Asia and Oceania averaged about 30%, whilst Latin America and the Caribbean accounted for just over 10% of total inflows. The transition economies of South East Europe and the Commonwealth of Independent States—CIS (formerly of the Soviet Union) accounted for the balance of world FDI inflows at less than 4% of the total. Moreover given the critical role the industrial sector is expected to play in the development process, it is therefore not surprising that the government of several developing countries, Nigeria inclusive, have put in place packages of incentive schemes aimed at attracting foreign direct investment into their manufacturing industries with the hope that this will generate multiplier effects throughout the economy. It is within this context that this chapter examines the various incentives © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5_7

175

176

7 Incentives and Disincentives to Foreign Direct Investment in the Nigerian. . .

Table 7.1 FDI Flows by Region and Economy 2012–2017 (Millions of dollars) Region World Developed economies • Europe • North America • Other developed countries Developing economies • Africa • Latin America and the Caribbean • Asia and Oceania South East Europe and the CIS • South East Europe • CIS Percent of world total Region World Developed economies • Europe • North America • Other developed countries Developing economies • Africa • Latin America and the Caribbean • Asia and Oceania South east Europe and the CIS • South East Europe • CIS

2012 1575 858 542 242 74 652 52 190 410 65 5 60

2013 1425 693 350 270 73 649 51 180 418 84 6 78

2014 1339 597 275 261 61 685 52 171 462 57 67 50

2015 1421 1141 595 511 35 744 57 169 518 36 7 29

2016 1868 1133 565 494 74 670 53 140 477 64 6 58

2017 1430 712 333 300 79 671 42 151 478 47 8 39

2012 100 54.5 34.4 15.4 4.7 41.4 3.3 12.1 26.0 4.1 0.3 3.8

2013 100 48.6 24.6 18.9 5.1 45.5 3.6 12.6 29.3 5.9 0.4 5.5

2014 100 44.6 20.5 19.5 4.6 51.1 3.9 12.7 34.5 4.3 0.5 3.8

2015 100 59.4 31.0 26.6 1.8 38.7 3.0 8.8 26.9 1.9 0.4 1.5

2016 100 60.7 30.2 26.5 4.0 35.9 2.8 7.5 25.5 3.4 0.3 3.1

2017 100 49.8 23.3 21.0 5.5 46.9 2.9 10.6 33.4 3.3 0.6 2.7

Source: [16] UNCTAD, FDI/TNC Database (www.unctad.org/fdistatistics). Note: C.I.S ¼ Commonwealth of Independent States

that are in place to attract the attention of foreign investors, especially multinational corporations (MNCs), into the Nigerian manufacturing sector. However, no serious foreign investor will assume that all will be smooth sailing in any given country, hence the other side of the coin will also be examined, namely the disincentives which will constitute part of the risk to be assessed before a final decision is taken. At the end of the day trade offs between the incentives and disincentives as well as the risks associated with expected returns will have to be taken into account in making the final decision as whether to go or not go ahead with the proposed investment in a manufacturing plant. In tackling the issues raised above, this chapter is divided into nine parts. Following this introduction, Sect. 2 of the chapter provides an overview of the size and scope of cumulative foreign direct investment in Nigeria analysed by country/region of origin over the period 1960–2008. It should be pointed out here that the analysis contained in this section is based on statistical data series available from the Central Bank of Nigeria which only provided data up to 2008. However, more recent data are presented in Sect. 5 of this chapter based on data from the

2 Size and Origin of FDI in Nigeria

177

National Bureau of Statistics. Section 3 focuses on cumulative foreign direct investment in the country analysed by type of activity. In Sect. 4 the focus is on foreign direct investment in the manufacturing and processing sector analysed by type of industry. Section 5 reviews the pattern of FDI inflows into Nigeria from 2011 to 2017 in order to give a more up-to-date picture. Section 6 contains an analysis of the incentives that are in place to attract foreign investors to venture into setting up manufacturing plants in Nigeria. Thereafter Section 7 of the chapter examines the array of disincentives in the Nigerian environment that will also be assessed by the prospective foreign investor and these will be matched against the incentives earlier identified. Section 8 discusses the steps which ought to be taken to improve on the gains from foreign direct investment (especially by multinational corporations), leading to Sect. 9 which contains the summary and conclusion. It should be pointed out at the outset that after nearly sixty years of independence and all the clamour about promoting rapid industrial development in Nigeria, sadly the manufacturing sector is still at its infancy with the contribution of the sector to the Gross Domestic Product valued at just N6288.90 billion in 2017 and accounting for about 9.18% of national output. Consequently an increased level of foreign direct investment in the manufacturing sector should make a significant contribution to accelerating the growth of the sector in particular and the Nigerian economy in general. It should also be highlighted that the term foreign private investment as used here covers foreign direct investment by multinational corporations as well as other foreign owned enterprises operating in Nigeria with fixed long term assets in the country.

2 Size and Origin of FDI in Nigeria Tables 7.2a and 7.2b contain a presentation of the magnitude and origin of foreign private investment in Nigeria analysed by country/region from 1962 to 2008 stated in Naira and dollar terms, respectively. From Table 7.2a it would be observed that the total cumulative foreign private investment in Nigeria amounted to just N444.80 million in 1962. This rose steadily over the years to N3620.10 million in 1980, N157,535.40 million in 2000, and N397,394.50 million in 2008, respectively. However, given the magnitude of currency devaluation over the years the Naira figures indicated in Table 7.2a might be misleading as to the real value of FDI over the period. To address this issue the figures indicated in Table 7.2a have been converted to dollars at the official exchange rates ruling as at the end of each year/ period to give a more realistic picture as the U.S. dollar is a more stable currency. Table 7.2b contains the dollar equivalent values of FDI in Nigeria during the period 1962–2008. As will be observed the trends indicated give a very different picture from the one in Table 7.2a as illustrated in Table 7.3. Thus the total cumulative value of FDI in Nigeria amounted to only $3351.6 million in 2008 as opposed to the very high figure of N397.4 billion recorded for the same year. It will

272.6

491.9

1016.7

1976.5

4313.1

10,482.7

18,130.1

41,745.2

75,988.2

1970

1975

1980

1985

1990

1995

2000

2005

2008

100,030.8

58,218.2

32,779.3

15,794.1

6828.6

3594.2

1421.8

857.5

444.4

403.2

25.2

21.6

20.8

13.2

65.4

52.8

39.3

37.5

44.3

53.5

14,664.3

10,269.7

9110.2

7938.2

1923.2

471.1

237.9

84.7

26.2

14.0

Source: Statistical Bulletin, December 2008, Central Bank of Nigeria

24,042.6

16,473.0

14,649.2

5311.4

2515.5

1617.7

405.1

365.6

171.8

178.8

0.4

224.4

61.4

1965

175.6

271.2

95.6

1962

Total

Year

Percentage distribution of total

Paid up capital and reserves

Other liabilities

USA

Paid up capital and reserves

United Kingdom

36,122.4

21,817.8

12,829.4

10,544.7

(1713.9)

389.1

328.3

450.5

203.6

103.0

38.4

Other liabilities

50,786.7

32,087.5

21,939.6

18,482.9

209.3

860.2

566.2

535.2

230.0

117.0

38.8

Total

12.8

11.9

13.9

15.5

2.0

12.6

15.6

23.4

22.9

15.5

8.8

Percentage distribution of total

57,583.7

42,467.6

32,920.0

28,961.6

1801.9

859.2

491.9

234.5

103.4

76.6

24.0

Paid up capital and reserves

66,493.6

52,550.4

51,546.1

48,501.8

(292.2)

741.9

615.3

355.6

121.4

96.0

69.6

Other liabilities

124,077.3

95,018.1

84,466.1

77,463.4

1509.7

1601.1

1107.2

590.1

224.8

172.5

93.6

Total

Western Europe (excluding the UK)

31.2

35.2

53.6

64.9

14.5

23.5

30.6

25.8

22.4

22.9

21.2

Percentage distribution of total

104,030.0

71,892.6

14,831.3

4279.9

1225.2

523.9

325.7

174.1

66.0

43.4

18.4

Paid up capital and reserves

Others

18,470.0

12,628.3

3519.1

3371.4

662.7

224.6

199.2

130.6

38.0

17.8

19.8

Other liabilities

122,500.0

84,520.9

18,350.4

7651.3

1888.5

748.5

524.9

304.7

104.0

61.2

38.2

Total

Table 7.2a Cumulative foreign private investment in Nigeria analysed by country/region of origin (in NMillion) 1962–2008

30.8

31.3

11.7

6.4

18.1

11

14.5

13.3

10.4

8.1

8.6

Percentage distribution of total

Grand total

252,266.5

166,375.1

74,991.6

51,662.3

9263.4

3830.7

2072.2

985.2

468.2

358.4

138.4

Paid up capital and reserves

145,128.0

103,469.6

82,543.8

67,729.3

1172.1

2973.3

1547.9

1302.3

535.0

395.6

303.4

Other liabilities

397,394.5

269,844.7

157,535.4

119,391.6

10,436.1

6804.0

3620.1

2287.5

1003.2

754.0

441.8

Total

100

100

100

100

100

100

100

100

100

100

100

Total

0.71

0.71

0.71

0.71

0.54

0.89

8.04

21.89

102.11

132.15

118.57

Year

1962

1965

1970

1975

1980

1985

1990

1995

2000

2005

2008

640.9

315.9

177.6

479.0

536.6

2211.3

1867.2

688.6

381.6

314.2

133.8

202.8

124.7

143.5

242.7

313.0

1809.9

744.0

511.8

240.5

250.3

245.8

Other liabilities

843.6

440.6

321.0

721.6

849.6

4021.3

2611.2

1200.5

622.1

564.5

379.7

Total

25.2

21.6

20.8

13.2

65.4

52.8

39.3

37.5

44.3

53.5

61.4

123.7

77.7

89.2

362.7

239.3

527.1

436.9

118.6

36.7

19.6

0.6

Paid up capital and reserves

Paid up capital and reserves

Percentage distribution of total

USA

United Kingdom

Note – Based on Naira official cross exchange rates to the dollar at year end Source Computed from Table 7.2a

Naira exchange rate to dollar

304.7

165.1

125.6

481.8

(213.2)

435.3

602.9

630.7

285.0

144.2

53.8

Other liabilities

428.3

242.8

214.9

844.5

26.0

962.4

1039.9

749.3

321.7

163.8

54.3

Total

12.8

11.9

13.9

15.5

2.0

12.6

15.6

23.4

22.9

15.5

8.8

Percentage distribution of total

485.7

321.4

322.4

1323.3

224.2

961.3

903.4

328.3

144.8

107.2

33.6

Paid up capital and reserves

560.8

397.7

504.8

2216.1

(36.4)

830.1

1130.0

497.8

170.0

134.4

97.4

Other liabilities

1046.4

719.0

827.2

3539.4

187.8

1791.3

2033.4

826.1

314.7

241.6

131.0

Total

31.2

35.2

53.6

64.9

14.5

23.5

30.6

25.8

22.4

22.9

21.2

Percentage distribution of total

Western Europe (excluding the UK)

877.4

544.0

145.3

195.6

152.4

586.1

598.2

243.7

92.4

60.8

25.8

Paid up capital and reserves

Others

155.8

95.6

34.5

154.0

82.4

251.3

365.8

182.8

53.2

24.9

27.7

Other liabilities

1033.1

639.6

179.7

349.6

234.9

837.4

964.0

426.6

145.6

85.7

53.5

Total

Table 7.2b Cumulative foreign private investment in Nigeria analysed by country/region of origin (in $Million) 1962–2008

30.8

31.3

11.6

6.4

18.1

11.0

14.5

13.3

10.4

8.1

8.6

Percentage distribution of total

2127.6

1259.0

734.5

2360.5

1152.5

4285.9

3805.7

1379.3

655.5

501.7

193.8

Paid up capital and reserves

Grand total

1224.0

783.0

808.4

3094.6

145.8

3326.6

2842.8

1823.2

748.7

553.8

424.8

Other liabilities

Total

3351.6

2042.0

1542.9

5455.1

1298.3

7612.4

6648.5

3202.4

1404.2

1055.6

618.5

Total

100

100

100

100

100

100

100

100

100

100

100

2 Size and Origin of FDI in Nigeria 179

180

7 Incentives and Disincentives to Foreign Direct Investment in the Nigerian. . .

Table 7.3 Naira and Dollar Values of Cumulative Foreign Private Investment in Nigeria 1962 to 2008

Year 1962 1965 1970 1975 1980 1985 1990 1995 2000 2005 2008

Naira (million) 441.8 754.0 1003.2 2287.5 3620.1 6804.0 10,436.1 119,391.6 157,535.4 269,844.7 397,394.5

Dollar (million) 618.5 1055.6 1404.2 3202.4 6648.5 7612.4 1298.3 5455.1 1542.9 2042.0 3351.6

Source: Computed from Tables 7.2a and 7.2b at the prevailing exchange rate at year end as indicated in Appendix 2

also be observed that before the devaluation of the Naira in 1986, FDI in Nigeria for the years 1980 and 1985 amounted to $6648.5 and $7612.4 million, respectively In addition, it should be noted from Tables 7.2a and 7.2b that the cumulative FDI value indicated for each year is a summation of two components, namely: a. Paid up capital and reserves (comprising of unremitted profits and changes in foreign share capital). b. Other liabilities (comprising of trade and supplier’s credit, other foreign liabilities and liabilities to head offices). Consequently changes in any of the components will affect the total value indicated for each year. At the time of independence in 1960, British firms dominated the Nigerian economy. Hence it is not surprising that in 1962 out of the total cumulative foreign private investment in Nigeria of N441.80 million, the United Kingdom accounted for over 61.00%. This was followed by other Countries of Western Europe (excluding the U.K.) with NN93.60 million representing 21.20%, the USA with N38.80 million accounting for 8.80% and the rest of the world taking up the balance of N38.20 million representing 8.60% of the total. However, over the years since independence, even though the volume of British cumulative private investment in Nigeria increased from N271.20 million in 1962 to N58,218.20 million in 2005, the share of British firms in the cumulative foreign private investment in Nigeria has continued to decline over the years accounting for only 21.60% in that year. However, it should be noted that the downward trend in the share of British investment in Nigeria was temporarily reversed between 1985 and 1990 because of the rise in other liabilities incurred by local subsidiaries of firms from the United Kingdom during that period. The share of American firms in the cumulative foreign private investment in Nigeria rose steadily over the years from N38.80 million in 1962 to N860.20 million in 1985. However, in real terms the share of U.S. investment in Nigeria had fallen by 2005 owing to divestment by some American firms in the oil, gas, and

3 Direction of FDI in Nigeria Analysed by Type of Activity

181

pharmaceutical industries. Moreover, as compared to Britain, Western Europe, and the rest of the world, the percentage share of U.S. cumulative foreign private investment in Nigeria averaged just about 15% over the period 1962–2005 and in 2008 amounted to only N50,786 million at just 12.80% of the total. On the other hand the percentage share of firms from Western Europe (excluding the U.K.) in the cumulative foreign private investment in Nigeria has continued to increase, rising from 21.20 % in 1962 to 30.60% in 1980, and 64.90% in 1995 before declining to 31.20% in 2008 which amounted to N124,077.30 million. Also worthy of mention is the fact that the share of other countries in the cumulative foreign private investment in Nigeria has continued to increase as a result of investments by firms from Asia, especially Japan, China, South Korea, and India. Thus the share of the other countries lumped together increased from N38.20 million in 1962 at 8.6% of the total to N122,500 million in 2008, accounting for over 30% of the total in that year. The reasons for the changes in the share of the various countries and regions of the world are a reflection of the changing pattern of trade relations between Nigeria and these countries as well as the changing pattern of competition for a foothold in an emerging Nigerian economy.

3 Direction of FDI in Nigeria Analysed by Type of Activity Tables 7.4a and 7.4b contain the cumulative foreign private investment in Nigeria analysed by type of activity from 1962 to 2008 stated in Naira and Dollar terms, respectively. From Table 7.4a it will be observed that the major economic sectors where foreign private investment had been predominant are as follows: • • • • • • •

Mining and Quarrying Manufacturing and Processing Agriculture, Forestry, and Fisheries Transport and Communication Building and Construction Trading and Business Services Miscellaneous Services.

The relative size of investment in each of the above areas is presented in Table 7.4a at five yearly intervals to give an indication of trend over time. From the table it will be observed that in 1962, Trading and Business Services accounted for the largest share of foreign private investment in Nigeria at 38.40% of the total, closely followed by Mining and Quarrying at 36.70%. Thus the two sectors accounted for over 74% of total foreign private investment in Nigeria at that time. This state of affairs was not entirely surprising as Nigeria was just emerging from British colonial rule. Colonial trading was the predominant activity during this period and was dominated by foreign firms mostly of British origin. Mining was equally important during this period and investment in this area was mostly in coal, tin, and columbite as well as the emerging oil and gas industry.

173.0

126.3

193.2

406.3

516.8

941.0

1408.6

2140.5

4456.9

1980

1985

1990

1995

2000

2005

2008

3.2

152.9

299.4

769.3

3905.1

5779.3

11,171.6

1990

1995

2000

2005

2008

12,702.5

6713.4

3995.9

1553.0

743.6

453.2

2.2

2.1

3.0

1.6

7.3

6.7

8.5

2649.7 4768.1

45,426.9

(397.0)

(1304.9)

(768.4)

1585.2

294.7

199.4

79.6

23,665.5

11,598.3

4295.6

2478.8

1112.7

398.5

Source : Statistical Bulletin, December 2008, Central Bank of Nigeria

1530.9

934.1

90.8

783.7

444.2

300.3

307.8

373.0

127.0

50,195.0

26,315.2

11,201.3

2990.7

1710.4

2697.9

693.2

572.4

206.6

8.6

8.1

8.3

3.0

16.8

40.0

19.1

25.0

20.6

91,517.4

40,815.5

266.5

266.5

266.5

266.5

182.9

66.9

9.2

10.2

48,852.8

28,827.1

18,956.2

8991.1

(541.8)

100.3

72.2

29.2

8.4

25.8

140,370.2

69,642.6

19,222.7

9257.6

(275.3)

366.8

255.1

96.1

17.6

36.0

23.9

21.5

14.3

9.3

(2.7)

5.4

7.0

4.2

1.8

4.8

381,668.0

205,154.3

51,949.1

32,071.9

9011.8

3778.6

2072.2

985.2

468.2

357.4

138.4

1985

228.5

4.9

1.4

24.6

0.7

79.3

111.2

13.8

185.6

0.6

3.0

1980

77.8

4.8

106.2

169.8

2.4

33.4

79.4

120.4

38.4

9.0

5.3

49.4

1975

40.2

3.8

Other liabilities

1970

31.4

17.0

Total

8.8

9.6

Other liabilities

1965

7744.9

3519.9

320.4

267.4

182.9

30.0

19.9

10.3

9.2

7.4

Total

Percentage distribution of total

0.2

0.4

0.9

1.2

3.3

1.9

3.3

0.8

1.1

1962

Other liabilities

Total

1397.2

1209.0

1209.0

1209.0

334.7

126.0

120.5

19.2

11.2

8.0

Year

1003.9

863.6

863.6

863.6

4.7

11.4

7.5

3.3

1.6

Paid up capital and reserves

393.3

345.4

345.4

345.4

330.0

114.6

113.0

15.9

8.0

11.7

1.0

Paid up capital and reserves

Percentage distribution of total

39.2

41.3

27.8

27.7

62.2

33.7

41.5

22.1

22.4

1.5

1.9

Paid up capital and reserves

Percentage distribution of total

229,764.6

133,894.5

37,333.6

27,668.8

6339.0

2278.1

1503.9

506.2

224.8

10.2

8.6

Total

Paid up capital and reserves

8807.6

5006.3

3228.8

2482.1

1401.6

582.5

418.5

146.8

92.0

18.4

1.4

Total

220,957.0

128,888.2

34,104.8

25,186.7

4937.4

1695.6

1085.4

359.4

132.8

139.0

7.2

Paid up capital and reserves

Miscellaneous services

24.0

24.9

45.1

56.9

10.7

11.0

18.7

41.9

51.4

50.8

17.3

Other liabilities

Percentage distribution of total

204,641.9

118,975.4

82,544.6

67,729.3

1172.7

2973.3

1547.9

1302.3

535.0

396.1

303.4

Other liabilities

3638.4

2045.6

499.9

107.4

57.6

55.9

42.3

12.5

4.6

3.6

3.8

Other liabilities

1.9

1.7

0.6

0.4

2.4

1.3

1.7

1.0

1.4

1.5

1.1

586,309.9

324,129.7

100

100

100

100

100

100

100

100

100

100

100

Total

Percentage distribution of total

134,493.7

99,801.2

10,184.5

6751.9

3620.1

2287.5

1003.2

753.5

441.8

Total

11,383.3

5565.5

820.3

374.8

240.5

85.9

62.2

22.8

13.8

11.6

4.8

Total

Transport and communication

Trading and business services

140,497.1

80,789.5

60,710.9

56,747.3

1091.6

744.0

677.4

959.6

515.4

88.2

76.6

Percentage distribution of total

Agriculture, forestry and fisheries Paid up capital and reserves

Building and construction

136,040.2

78,649.0

59,302.3

55,806.3

574.8

337.7

484.2

833.3

342.4

43.7

36.0

Total

1975

329.4

40.6

1970

176.8

36.7

152.6

162.0

1965

131.6

Total

30.4

1962

Other liabilities

Year

Other liabilities

Paid up capital and reserves

Percentage distribution of total

Manufacturing and processing

Paid up capital and reserves

Mining and quarrying

Table 7.4a Cumulative foreign private investment in Nigeria analysed by type of activity 1962–2008 (in NMillion)

0.71

0.71

0.71

0.71

0.54

0.89

8.04

21.89

102.11

132.15

118.57

Naira exchange rate to dollar

0.71

0.71

0.71

0.71

0.54

0.89

8.04

21.89

102.11

132.15

118.57

Year

1962

1965

1970

1975

1980

1985

1990

1995

2000

2005

2008

Year

1962

1965

1970

1975

1980

1985

1990

1995

2000

2005

2008

3.3

2.6

3.4

15.8

41.1

128.2

207.5

22.3

11.2

14.3

10.1

8.5

6.5

8.5

39.5

0.6

12.8

13.8

4.6

4.5

2.1

2.0

94.2

43.7

38.2

35.2

37.2

171.1

145.6

46.8

12.6

12.3

10.4

12.9

7.1

0.9

35.8

55.3

336.0

419.7

108.9

6.7

44.0

13.4

Other liabilities

107.1

50.8

39.1

71.0

92.5

507.0

565.3

155.7

19.3

56.3

23.8

Total

2.2

2.1

3.0

1.6

7.3

6.7

8.5

4.9

1.4

5.3

3.8

383.1

179.1

113.6

196.3

308.4

1244.9

731.9

522.2

177.8

111.2

69.2

40.2

20.1

(3.9)

(59.6)

(95.6)

1773.6

541.2

279.2

111.4

148.7

168.6

Other liabilities

423.3

199.1

109.7

136.6

212.8

3018.5

1273.1

801.3

289.2

259.8

237.7

Total

8.6

8.1

8.3

3.0

16.8

40.0

19.1

25.0

20.6

24.6

38.4

771.8

308.9

2.6

12.2

33.2

298.2

335.9

93.7

12.9

14.3

3.4

412.0

218.1

185.7

410.8

(67.4)

112.2

132.6

40.9

11.8

36.1

0.8

Other liabilities

1183.9

527.0

188.3

423.0

(34.3)

410.4

468.5

134.5

24.6

50.4

4.2

Total

11.8

9.1

11.8

55.2

41.6

141.0

221.3

26.9

15.7

16.4

12.0

Total

23.9

21.5

14.3

9.3

(2.7)

5.4

7.0

4.2

1.8

4.8

0.7

Percentage distribution of total

0.2

0.4

0.9

1.2

3.3

1.9

3.3

0.8

1.1

1.6

1.9

65.3

26.6

3.1

12.2

22.8

33.6

36.5

14.4

12.9

11.2

1.4

3218.9

1552.5

508.8

1465.4

1121.2

4227.6

3805.7

1379.3

655.5

500.3

193.8

Paid up capital and reserves

Percentage distribution of total

39.2

41.3

27.8

27.7

62.2

33.7

41.5

22.1

22.4

18.4

17.3

Paid up capital and reserves

1937.8

1013.2

365.6

1264.2

788.6

2548.8

2762.0

708.7

314.7

194.6

107.2

Total

Paid up capital and reserves

Percentage distribution of total

74.3

37.9

31.6

113.4

174.4

651.7

768.6

205.5

128.8

71.1

50.4

Paid up capital and reserves

1863.5

975.3

334.0

1150.8

614.3

1897.1

1993.4

503.1

185.9

123.5

56.8

Percentage distribution of total

Total

24.0

24.9

45.1

56.9

10.7

11.0

18.7

41.9

51.4

43.7

36.7

Other liabilities

Miscellaneous services

1184.9

611.4

594.6

2592.8

135.8

832.4

1244.1

1343.4

721.5

461.2

226.8

Total

Percentage distribution of total

1725.9

900.3

808.4

3094.6

145.9

3326.6

2842.8

1823.2

749.0

554.5

424.8

Other liabilities

30.7

15.5

4.9

4.9

7.2

62.5

77.7

17.5

6.4

5.0

5.3

Other liabilities

4944.8

2452.8

1317.2

4560.0

1267.1

7554.2

6648.5

3202.4

1404.5

1054.9

618.5

Total

96.0

42.1

8.0

17.1

29.9

96.1

114.2

31.9

19.3

16.2

6.7

Total

Transport and communication Paid up capital and reserves

Trading and business services

1147.3

595.2

580.8

2549.9

71.5

377.8

889.3

1166.6

479.4

247.5

184.2

Other liabilities

Paid up capital and reserves

Agriculture, forestry and fisheries

Building and construction

37.6

16.2

13.8

43.0

64.3

454.6

354.8

176.8

242.2

213.6

42.6

Percentage distribution of total

Paid up capital and reserves

Other liabilities

Manufacturing and processing

Mining and quarrying

Paid up capital and reserves

Note – Based on Naira official cross exchange rates to the dollar at year end Source: Computed from Table 7.3a based on prevailing dollar exchange rate at year end

Naira exchange rate to dollar

Table 7.4b Cumulative foreign private investment in Nigeria analysed by type of activity 1962–2008 (in $Million)

100

100

100

100

100

100

100

100

100

100

100

Total

1.9

1.7

0.6

0.4

2.4

1.3

1.7

1.0

1.4

1.5

1.1

Percentage distribution of total

184

7 Incentives and Disincentives to Foreign Direct Investment in the Nigerian. . .

The other sectors worthy of being highlighted in 1962 are Manufacturing and Processing which accounted for 17.30% of the total and Building and Construction at 3.80%. Generally speaking the level and sectoral distribution of foreign private investment during that period were a reflection of the prevailing pattern of economic activity at that time. However, two decades after independence, by 1980 the Nigerian economy has undergone spectacular changes. Beginning from the late 1950s into early 1960s, manufacturing activities have become more pronounced with foreign companies trying to have a foothold in an otherwise promising market rather than being shut out behind high protective tariff walls. This led to an outburst of new manufacturing investments in Nigeria during that period. In addition, the windfall from crude oil exports in the 1970s stimulated further investments in the manufacturing sector by foreign companies to meet growing demand for manufactured goods of all kinds. As a result of these developments, cumulative foreign private investment in the manufacturing and processing sector rose from N76.60 million in 1962 to N1503.90 million in 1980 and accounted for over 41% of the total for that year. Next in order of magnitude for 1980 was Trading and Business Services which accounted for 19.10%. Following the increased level of activity in the oil and gas sector, investment in Mining and Quarrying rose significantly from N162.00 million in 1962 to N677.40 million in 1980 and accounted for 18.70% of the total for that year. The other sectors worthy of mention in the cumulative foreign private investment in Nigeria for 1980 are Building and Construction at 8.50%, Miscellaneous Services at 7.0%, and Agriculture and Fisheries at 3.30% of the total for that year. The period between 1980 and 2000 featured amongst others, the adoption of the structural adjustment programme and massive devaluation of the Naira following the near collapse of the national economy brought about by the collapse of the international market for crude oil on which the economy depended. Thus the value of the Naira fell from N1 ¼ $1.87 as at December 1980 to N110 ¼ $1.00 by December 2000. In parallel with the massive devaluation of the national currency the nominal value of cumulative foreign private investment in Nigeria rose from N3620.10 million in 1980 to N157,508.60 million in 2000. In that year mining and quarrying accounted for 38.5%, followed by miscellaneous services at 24.2% and manufacturing and processing at 23.7% of the total FDI Inflow. By 2008, the total cumulative foreign private investment in Nigeria had risen to N586,309.9 million with Manufacturing and Processing accounting for nearly 40%, followed by mining and quarrying with 24% in second position and closely followed by Miscellaneous Services at 23.9% with about the same amount in third position. As previously indicated given the massive loss in the value of the national currency over the period 1985–2008, it will be inappropriate to compare the magnitude of foreign private investment in Nigeria from one year to the other in Naira terms only. To give a better indication of trend, the Naira values in Table 7.4a have been converted to dollars which is a more stable currency as presented in Table 7.4b. It will be observed from the table that the dollar denomination of cumulative foreign private investment in Nigeria analysed by type of activity during the period under review gives a slightly different picture in terms of the magnitude of investment for each year under review as illustrated in Table 7.5.

4 Scope of FDI in the Manufacturing and Processing Sector

185

Table 7.5 FDI dollar values by economic sectors for selected years 1962–2008 ($Million) Sectors Mining and quarrying Manufacturing and processing Agriculture, forestry, and fishing Transport and communication Building and construction Trading and business services Miscellaneous services Total

1962 226.8 107.2 12.0 6.7 23.8 237.7 4.2 618.6

1980 1244.1 762.0 221.3 114.2 565.3 1273.1 468.5 6648.5

2000 594.6 365.6 11.8 8.0 39.1 109.7 188.3 1317.1

2008 184.9 1937.8 11.8 96.0 107.1 423.3 1183.9 4944.8

Source : based on Table 7.4b

Thus, it is apparent from the table that the level of FDI in Nigeria in 1980 estimated at nearly $6650 million at the height of the oil boom, was higher than the value of $4944. 8 million recorded in 2008. Also the magnitude of FDI in each of the sub-sectors is more realistically reflected as demonstrated in the table.

4 Scope of FDI in the Manufacturing and Processing Sector In order to have a deeper insight of the scope of foreign private investment in the Manufacturing and Processing Sectors in Nigeria, Table 7.6 contains a breakdown of the distribution of FDI in the different sub-sectors of manufacturing in the country over the period 1960–2008. From the table it will be observed that foreign private investment in manufacturing is spread across virtually all the major manufacturing sub-sectors ranging from simple processing of agricultural products to more complex manufacturing activities. However, for purposes of analysis these activities have been grouped into eight major sectors and aggregated on the basis of the International Standard Industrial Classification (ISIC) at the 4-digit level as outlined in Table 7.7a. From Table 7.7a it will be observed that at independence in 1960, the bulk of FDI investment in manufacturing and processing was concentrated in five major sub-sectors arranged in order of magnitude as follows: • Chemicals, and chemical, petroleum, coal, rubber, and plastics products • Fabricated metal products, machinery, and equipment • Food, beverages, and tobacco products • Basic metal industries • Wood and wood products, furniture, and fixtures

N Million 27.94 21.17 19.64 0.71 0.55

The foregoing figures give a total of N70.01 million of cumulative inflow for 1960.

186

7 Incentives and Disincentives to Foreign Direct Investment in the Nigerian. . .

Table 7.6 Foreign private investment in manufacturing and processing sector analysed by type of industry 1960–2008 (in N thousand) Industries 1960 1970 1980 1990 2000 2008 Food, beverages, and tobacco products Food products 16,823 19,282 124,443 1,169,335 7,097,634 21,067,184 Beverages 2020 19,480 92,661 651,639 8,152,632 20,281,137 Tobacco products 798 28,650 79,287 228,852 120,581 529,576 Total 19,641 67,412 296,391 2,049,826 15,370,847 41,877,898 Textiles, wearing apparel, leather and fur products, and footwear Textiles 14,379 39,947 349,259 901,373 4,820,171 13,208,630 Wearing Apparel 991 1990 18,076 15,346 15,626 932 Leather and Fur 662 1598 12,717 932 33,173 86,004 Products Footwear – – – 15,975 820,858 2,189,771 Total 16,032 43,535 380,052 933,626 5,658,576 15,483,472 Wood and wood products and furniture and fixtures Wood and wood 771 372 13,375 23,569 210,167 2,027,223 products Furniture and fixtures 225 2942 46,920 585,001 2,328,492 12,730,705 Total 546 3314 60,295 608,570 2,118,325 14,757,927 Paper and paper products and printing and publishing Paper and paper 4077 11,122 24,126 59,413 949,205 13,712,517 products Printing and 882 1626 38,064 240,600 732,052 496,935 publishing Total 3195 12,748 62,190 300,013 1,681,257 14,209,451 Industrial chemicals, other chemical products, petroleum refineries, misc. petro. and coal products, rubber products, and plastic products Industrial Chemicals 4994 – – 364,713 1,298,631 12,829,041 Other chemicals – 18,010 139,599 482,783 5,270,552 42,355 products Petroleum refineries – – – 5235 9,467,779 76,755 Misc. Petro. and coal 11,366 18,230 3894 1846 710,622 2,122,435 products Rubber products 11,583 4076 68,757 270,230 512,799 2,027,402 Plastic Products    263,402 1,274,552 3,380,050 Total 27,943 40,316 212,250 1,377,739 18,534,935 20,478,038 Pottery earthen-wears, glass and glass products, and other non-metal mineral products Pottery earthen-wears – – – 21,340 2,937,352 16,986,204 Glass and glass – – – 9338 550,512 614,281 products Other non-metal min5427 20,394 113,047 1,045,111 2,215,761 9,010,160 eral products Total 5427 20,394 113,047 1,075,789 5,703,625 26,610,645 Iron and steel, and non-ferrous metals Iron and Steel 712 – 34,833 115,146 583,010 275,425 (continued)

4 Scope of FDI in the Manufacturing and Processing Sector

187

Table 7.6 (continued) Industries 1960 1970 1980 1990 2000 2008 Non-Ferrous Metals – – – 6372 112,313 59,135 Total 712 – 34,833 121,518 470,697 334,561 Metal products (fabricated), non-electrical machinery, electrical machinery, transport equipment, professional and scientific equipment, other manufac. industries Metal products 22,876 9156 102,726 56,931 538,561 1,472,029 (fabricated) Non-electrical 521 916 14,087 46,592 147,887 1,604,438 machinery Electrical machinery 929 1520 43,428 96,434 1,234,945 2,851,727 Transport equipment 2006 9052 71,653 135,506 1,711,823 7,695,895 Professional and sci– – – 9409 175,009 145,827 entific equipment Other manufac. 5161 12,844 122,943 490,545 1,144,032 3,590,129 industries Total 21,171 33,488 354,837 721,555 4,952,257 17,360,045 Source: Statistical Bulletin, December 2008 Central Bank of Nigeria

However, in 1960, the year of independence, the country recorded a negative outflow of FDI in the undermentioned manufacturing sub-sectors owing to heightened concern by some foreign investors about the impending new political order. • Textiles, wearing apparel and leather • Non-metallic mineral products • Paper and paper products, printing, and publishing

N Million 16.03 5.43 3.20

The figures indicated above give a total outflow of N24.66 million for the year 1960. Consequently total cumulative net FDI inflow into Nigeria in 1960 amounted to only N45.35 million. By 1980, Textiles, Wearing Apparel and Leather Products had become the dominant sector accounting for N380.01 million out of total FDI in manufacturing of N1513.90 million largely as a result of investment by Indian and Chinese companies. This was followed by Fabricated Metal Products, Machinery, and Equipment with N354.84 million in second place, Food, Beverages, and Tobacco Products with N296.39 million in third place and Chemicals, and Chemical, Petroleum, Coal, Rubber and Plastic Products in fourth position with N212.25 million. As a reflection of the changing dynamics of the Nigerian economy, by the year 2000 total cumulative FDI in manufacturing had risen to N50.25 billion. Out of this total, the chemicals, petroleum, and plastics sector accounted for the highest inflow with N18.53 billion. This was followed by food, beverages, and tobacco in the second place with N15.37 billion. textiles, wearing apparel, and footwear took the third position with N5.66 billion and was closely followed by fabricated metal products, machinery, and equipment with N5.00 billion.

188

7 Incentives and Disincentives to Foreign Direct Investment in the Nigerian. . .

Table 7.7a Foreign private investment aggregated into eight major industrial sectors 1960–2008 (in N thousand) Industries Food products, beverages, and tobacco products Textiles, wearing apparel and leather products Wood and wood products and furniture and fixtures Paper and paper products and printing and publishing Chemicals and chemical , petroleum, coal, rubber and plastic products Non-metal mineral products Basic metal industries Fabricated metal products, machinery and equipment Total cumulative

1960 19,641

1970 67,412

1980 296,391

1990 2,049,826

2000 15,370,847

2008 41,877,898

16,032

43,535

380,052

933,626

5,658,576

15,483,472

546

3314

60,295

608,570

2,118,325

14,757,927

3195

12,748

62,190

300,013

1,681,257

14,209,451

27,943

40,316

212,250

1,377,739

18,534,935

20,478,038

5427

20,394

113,047

1,075,789

5,703,625

26,610,645

712

–

34,833

121,518

470,697

334,561

21,171

33,488

354,837

721,555

4,952,257

17,360,045

45,359

221,207

1,513,895

7,188,636

50,253,869

151,112,036

Source: Computed from Statistical Bulletin, Central Bank of Nigeria

Between 2000 and 2008, the Nigerian economy witnessed rapid economic growth averaging about 8.40% per annum, as a result of four interrelated factors. First, earnings from crude oil exports grew steadily arising from favourable market conditions. Secondly government overhauled the policy environment for FDI which encouraged more inflows. Thirdly the privatization programme of several state owned enterprises was pursued with renewed vigour which attracted both domestic and foreign investors. Lastly, the massive depreciation of the national currency inflated the nominal value of FDI inflows. As a result of the foregoing, total cumulative FDI in Nigeria’s manufacturing sector rose from N50.25 billion in 2000 to over N151 billion in 2008. However, in terms of their relative share, the food, beverages, and tobacco sub-sector accounted for the highest cumulative inflow at N41.878 billion. This was followed by the non-metallic mineral products sector in the second place with N26.61 billion and the

4 Scope of FDI in the Manufacturing and Processing Sector

189

Table 7.7b Foreign private investment aggregated into eight major industrial sectors 1960–2008 (in $ thousand) Industries Food products, beverages, and tobacco products Textiles, wearing apparel and leather products Wood and wood products and furniture and fixtures Paper and paper products and printing and publishing Chemicals and chemical, petroleum, coal, rubber, and plastic products Non-metallic mineral products Basic metal industries Fabricated metal products, machinery, and equipment Total cumulative

1960 27,663

1970 94,946

1980 548,872

1990 254,953

2000 150,532

2008 353,191

22,580

61,317

703,800

116,123

55,416

130,585

769

4668

111,657

75,693

20,746

124,466

4500

17,955

115,167

37,315

16,465

119,840

39,356

56,783

393,056

171,361

181,519

172,708

7644

28,724

209,346

133,805

55,858

224,430

1003 29,818

– 47,166

64,506 657,106

15,114 89,746

4610 48,499

2822 146,412

63,885

311,559

2,803,509

894,109

492,154

1,274,454

Note : Naira exchange rate to the dollar used for conversion for the years indicated above: 1960 (0.71), 1970 (0.71), 1980 (0.54), 1990 (8.04), 2000 (102.11), 2008 (118.57) Source: Computed from Table 7.5

chemicals, petroleum, rubber, and plastics sector with N20.48 billion in the third position. The share of the other sectors was as follows. • Textiles, wearing apparel, and footwear • Wood and wood products, furniture, and fixtures • Paper and paper products, printing, and publishing

N Billion 15.48 14.76 14.21

Thus from the review of FDI in the manufacturing and processing sector over the period 1960 to 2008, it was observed that Nigeria witnessed significant increases in the level of foreign direct investment in the sector. Furthermore, the changing composition in the origin and size of investment in each major sub-sector was a reflection of the dynamic nature of the Nigerian economy and the relative attraction of each sub-sector as dictated by changing economic situation. However, as compared to other developing countries the inflow of foreign direct investment into the Nigerian manufacturing sector was very modest owing largely to inconsistent policies, infrastructural inadequacies to support industrial development as well as a hostile and difficult operating environment characterized by poor macroeconomic policies, bureaucratic ineptitude, and corruption.

190

7 Incentives and Disincentives to Foreign Direct Investment in the Nigerian. . .

5 Recent Developments in FDI Inflows into Nigeria The presentation made in the preceding sections only cover the period 1960–2008 based on data available from the Central Bank of Nigeria. However, no similar data series are available for subsequent years after 2008. To fill this gap recourse was made to more current data available from the National Bureau of Statistics as presented in Table 7.8 From the table it will be observed that FDI inflows into Nigeria since 2011 cover a broad spectrum of activities including agriculture, banking, telecommunications, hotels, transport, oil and gas, construction as well as manufacturing, the primary focus of this chapter. In addition to the broad heading of manufacturing, a number of other activities were identified separately such as brewing, production, weaving, and tanning which clearly should have been grouped under manufacturing. To give a better perspective of FDI inflows, in future efforts should be made by the relevant agencies of government to refine the data collection and accumulation process so as to capture the true values of investment inflows into the major economic sub-sectors. However, based on the data presented in the table, the major sub-sectors attracting FDI during the period 2011–2017 were banking, financing, oil and gas, production/manufacturing, and telecommunications. A review of FDI in the manufacturing sector during the 2011–2017 period revealed that inflows into the sector were not significant with the highest inflow of $27.22 million recorded in 2012 and the lowest of $0.09 million in 2014. However, this is misleading because when the figures recorded under brewing, production, tanning, and weaving are all added to the figures recorded under manufacturing, this gives a better perspective of total investment inflows into the manufacturing sector. Thus FDI inflows into the manufacturing sector as a whole during the period 2011–2017 were as follows. Year 2011 2012 2013 2014

$million 638.22 578.82 448.97 944.06

Year 2015 2016 2017

$million 443.91 357.71 1011.82

Nevertheless these figures are indeed very low for a country such as Nigeria in dire need of major investment inflows to help in stimulating a faster rate of industrial and overall socio-economic development. Consequently the government needs to do more by way of incentives, infrastructure upgrading, and an enabling environment conducive to attract more investment into the manufacturing sector by both domestic and foreign investors. Some of these issues are tackled in the subsequent sections of this chapter.

2011 20.26 1133.92 73.75 49.26 114.91 1.70 13.13 1078.14 22.97 8.88 1.97 37.79 561.39 47.98 0.45 224.26 1.11 27.99 0.26 0.0 3420.12

Source: National Bureau of Statistics

Main heads Agriculture Banking Brewing Construction Consultancy Drilling Electrical Financing Fishing I.T services Manufacturing Oil and gas Production/manufacturing Servicing Hotels Telecommunications Tanning Trading Transport Weaving Total

2012 7.673 1874.66 2.39 59.19 29.81 40.88 10.99 635.31 13.56 10.49 27.22 156.78 544.11 432.2 23.31 139.47 0.01 480.82 74.51 0.0 4636.53

2013 82.37 671.80 37.71 47.71 15.31 6.55 10.94 2375.77 5.08 30.38 20.26 129.62 391.34 630.96 20.17 913.59 0.00 280.06 0.68 0.0 11,716.16

Table 7.8 FDI inflows Into Nigeria by sector/nature of business ($ million) 2011–2017 2014 24.32 964.18 0.00 55.69 26.42 41.26 16.02 2708.31 0.55 9.97 0.09 208.18 943.97 551.31 11.27 994.33 0.00 385.61 2.47 0.0 6943.95

2015 98.33 913.54 9.06 28.02 10.59 1.32 212.32 858.89 0.01 12.78 0.95 29.76 433.70 200.47 1.15 938.13 0.00 167.54 10.00 0.20 3916.71

2016 22.47 932.51 54.26 32.48 2.92 0.46 125.36 95.34 6.00 1.72 0.80 720.15 302.65 298.91 0.75 931.20 0.00 124.92 5.17 0.0 3658.10

2017 159.06 937.12 27.19 98.35 13.67 1.81 38.92 318.55 100.43 16.47 2.66 331.36 981.45 1095.04 0.20 544.60 0.52 55.65 2.98 0.0 4726.03

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6 Incentives to Attract FDI into the Manufacturing Sector There is a wide array of incentives available to foreign investors aimed at stimulating their interest in venturing into manufacturing activities in Nigeria. These incentives can be divided into six broad categories as outlined below. • • • • • •

Country’s endowments. Tax incentives. Effective protection through import tariffs. Export promotion incentives. Export processing free zones. Administrative support incentives. The foregoing incentives are reviewed as follows.

6.1

Country’s Endowments

Nigeria is blessed with abundant human and material resources, all of which should stimulate the interest of foreign investors. With a population currently estimated to be about 200 million, Nigeria is one of the ten most populous nations in the world and its population is projected to surpass that of the USA by 2050, making her the third largest in the world after China and India. Given the size of its population coupled with advancing socio-economic progress, this will definitely open up opportunities for foreign investment in virtually all areas of economic activity. In terms of mineral resources Nigeria is equally blessed with a wide variety of minerals, including huge deposits of oil and gas, coal, gold, limestone, tin, columbite, iron ore, lead, zinc, copper, tantalite and bauxite, to name some of the minerals available in the country. However, apart from oil and gas, the other minerals are still to be fully exploited, providing an arena for future investment opportunities. In the agricultural sector, Nigeria is well endowed to produce a wide variety of agricultural products by virtue of the country spreading across many agro-ecological zones suitable for the cultivation of various crops. In the south of the country various tree crops such as cocoa, palm produce, rubber, and coffee are grown. Also grown are various root crops such as yam and cassava. On the other hand the north of the country is well suited for animal husbandry as well as the cultivation of groundnuts, potatoes, and grains (maize, wheat, millet). In addition rice can be grown in virtually all the agro-ecological zones of the country. Currently subsistence agriculture predominates but there are opportunities for commercial plantations to meet the growing demand for food not only for human consumption but also raw materials for industry and exports.

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Tax Incentives

The country offers various tax incentives for investors wishing to set up manufacturing operations in Nigeria. These incentives include the following:

6.2.1

Pioneer Status

Under this scheme companies that qualify as pioneer industries enjoy 100% tax free holiday for five years in the first instance, subject to a further extension of two years. Under the scheme several industrial undertakings have benefitted ranging from simple processing to more complex activities.

6.2.2

Accelerated Depreciation Allowance

Under the income tax act, companies can claim tax relief under accelerated depreciation scheme which allows companies accelerated allowances on capital assets for tax purposes through the provision of initial and annual capital allowances as per Table 7.9. Under the foregoing arrangement, a company can write off up to 50% of the cost of plant and machinery in the first year of operation based on the historical cost of the assets. Also unrelieved capital allowances can be carried forward indefinitely until the entire allowance is liquidated. Table 7.9 Rates of depreciation on capital expenditure Types of investment qualifiying expenditure (straight line) Industrial and non-industrial buildings Plant and machinery For agricultural production Bought to replace old ones Used in gas utilization Others Motor vehicles For public transportation Others Mining equipment Plantation equipment Housing estate Ranching and plantation expenditure Furniture and fittings Research and development

Initial investment allowance (%) 15

Annual depreciation allowance (%) 10

95 – – 50

Nil 95 (first year) 90 (first year) 25

90 50 95 95 50 30 25 98

25 Nil Nil Nil 25 50 20 Nil

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In addition to capital allowances there is also an investment allowance which is granted to manufacturing companies at the rate of 10%.

6.2.3

Tax Relief on Research and Development (R & D)

For R & D carried out in Nigeria, companies can claim 120 per cent of the expenses incurred on such activity. Furthermore, in the case of R&D on local raw materials 140 per cent of the expenses incurred are allowed. However, such R&D activities have to be undertaken in Nigeria.

6.2.4

Tax Concession on Local Raw Materials Utilization

Under the scheme, tax concession of 30% for 5 years can be claimed by industries that attain the minimum level of local raw material usage specified for designated industrial sectors, ranging from 60% in engineering and chemical industries to 80 per cent in agribusiness.

6.2.5

Tax Concession on Labour Intensive Mode of Production

A tax concession ranging from 6 to 15% for 5 years is granted to qualifying companies depending on the number of people employed.

6.2.6

Tax Concession on Local Value Added

To encourage local value added, companies are granted 10% tax concession for a period of 5 years. This is to encourage local fabrication rather than mere assembly in engineering industries.

6.2.7

Tax Concession on Investment in Economically Disadvantaged Areas

A 100% tax free holiday of seven years is granted to firms locating in areas declared as economically disadvantaged.

6.2.8

Tax Concession on Investment in Greenfield Sites

Under this scheme, a company which has incurred capital expenditure on the provision of electricity, water, tarred road, and telephone for the purpose of trade

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or business which is located at least 20 km away from such facilities can claim rural investment allowance on such capital expenditure as follows. No electricity, water, tarred road or telephone No electricity No water No tarred road No telephone

100% 50% 30% 15% 5%

However, it should be noted that investment allowance cannot be claimed on the same asset on which rural investment allowance has been claimed. Also rural investment allowance can only be claimed in the year of capital expenditure and cannot be carried forward. All the foregoing incentives are subject to review from time to time. It is therefore advisable to obtain a more up date version from the appropriate Federal Ministries and Agencies. In addition information can also be obtained on the status and administration of the incentives from the Federal Inland Revenue Service (FIRS).

6.3

Effective Protection Through Import Tariffs

Over the years, under the import substitution industrialization policy of government, several industries were established in Nigeria and shielded from international competition through high import tariffs to protect the so-called nascent infant industries. Such protective tariffs prevailed up to 1987. Thereafter under the old tariff regime which was in place from 1988 up till 2005 import duties ranged from 0% to 100% at 5% intervals with a total of 20 different bands whilst some goods were placed under import prohibition to protect local industries. During this period, the unweighted average tariff rates for manufactured goods ranged between 16.00% and 34.30%, with the rate for final consumer goods being as high as 53.50%. However, under the ECOWAS common external tariff which Nigeria partially adopted in 2006 and subsequently fully adopted in 2015 import tariffs have been significantly lowered in line with Community rules and prevailing global trends Under the ECOWAS CET all products are classified into five bands attracting import duties of between 0% and 35% as earlier elaborated in Chap. 2. With the adoption of ECOWAS CET by the fifteen member countries of the regional body, it is expected that Nigerian manufacturing companies will take advantage of this development to produce goods not only for the local market but also for the regional and international markets thereby benefitting from economics of large scale production. Together with a more outward looking export promotion strategy it is expected that Nigerian companies should in due course be able to compete in the international market place.

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6.4

7 Incentives and Disincentives to Foreign Direct Investment in the Nigerian. . .

Export Promotion Incentives

In order to reduce the over dependence on crude oil exports from which the country currently derives over 90% of its foreign exchange earnings, the government promulgated the export (incentives and miscellaneous provisions) decree in 1986 to stimulate the growth of the non-oil export sector thereby seeking to diversify the nation’s sources of foreign exchange earnings. Under the decree exporters can benefit from a number of incentives which include the following: 1. duty draw-back scheme which allows an organization to get a refund of import duty on raw materials used directly to produce manufactured goods for export, 2. currency retention scheme which permits an exporter to hold the foreign currency of export proceeds, 3. pioneer status which provides tax relief for any manufacturer exporting at least 50% of its turnover, 4. capital asset depreciation allowance which provides supplementary tax relief to industrial enterprises on plants and equipment used for the production of goods for export, 5. foreign input facility which is designed to meet the foreign exchange requirements for importation of raw materials and equipment needed to produce goods for export, 6. tax relief on interest accruing on loans granted by banks to aid investment in export oriented industries, 7. rediscounting and refinancing facility aimed at assisting banks in providing preand post-shipment finance in local currency in support of non-oil exports, 8. export development fund which provides grant to exporters for export promotion purposes such as participating in international trade fairs, and developing foreign markets, 9. export expansion grant which provides cash inducement for firms that export a minimum of N50,000 of semi-manufactured and manufactured products, 10. export price adjustment fund which is a subsidy aimed at compensating exporters for high cost of production arising from infrastructure inadequacies, 11. export credit guarantee and insurance scheme which is aimed at assisting banks to bear the risk of export financing by providing exporters with insurance cover against default in payments by foreign importers. For effective implementation of these incentives the government has given robust assistance to the Nigerian Export Promotion Council(NEPC) which is the focal institution for the promotion of Nigerian exports. In the same vein the government has also established the Nigerian Export and Import Bank (NEXIM) to stimulate the growth of non-oil exports through the provision of credit facilities for export activities.

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197

Export Processing Zones

As part of its export promotion drive, the government set up the Nigerian Export Processing Zones Authority (NEPZA) under an enabling Act in 1992. Initially there were two operational export processing free zones (EPZs) located in Calabar and Lagos, respectively, to encourage production of manufactured goods for export. From this initial beginning, the number of EPZs and Special Economic Zones (SEZs) has now risen to 40 located in different parts of the country. Out of the 40 EPZs/SEZs only 14 are at the moment operational with the remaining 26 still under various stages of development. It should be pointed out that only two of the EPZs, namely the ones located in Calabar and Kano, are Federal Government owned with the remaining being private sector driven or under joint ownership with government. The incentives offered in the EPZs include the following: • • • • • • • •

Tax free holiday. Exemption from taxes, levies, duties, and foreign exchange control. Repatriation of foreign capital investment at any time. Unrestricted remittance of profits and dividends. Exemption from import and export licences. Rent free land during construction of factory premises. Up to 100% foreign ownership of enterprises within the zones. Sale of up to 25% of production permitted within the domestic market.

As at the end of 2018, even though several applications have been approved only a handful of enterprises are operating within the zones. However, it has been reported that the NEPZA has since its inception in 1992 attracted over $20 billion of foreign direct investment into the country.

6.6

Administrative Support Incentives

In order to further encourage foreign direct investment in Nigeria, the government has taken commendable steps to simplify the procedure for setting up operations in Nigeria. In this regard the government has designated the Nigerian Investment Promotion Commission (NIPC) as the focal institution for attracting foreign direct investment into Nigeria. Unlike the past when several agencies were involved in obtaining approvals and permits leading to cumbersome administrative bottlenecks and delays, NIPC (which replaced the erstwhile Industrial Development Coordinating Committee) has now put in a place a One Stop Investment Centre (OSIC) under one building with 26 participating government agencies to facilitate efficient and transparent services to investors. This new arrangement has considerably simplified and shortened the administrative procedures for the issuance of business approvals,

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permits, licences, and company incorporation thereby removing the bottlenecks faced by foreign investors as well as reducing the cost of doing business in Nigeria. In addition the Centre provides information and statistical data on the Nigerian economy in general, investment climate, legal and regulatory framework as well as sector and industry specific information to assist existing and prospective investors in making informed business decisions. Even though the government has put in place the foregoing array of incentives to attract FDI into the economy in general and manufacturing sector in particular, the results achieved have been very modest compared to other countries and regions of the world. This is because of a number of problems and challenges which prospective foreign investors still have to contend with. Some of these challenges are discussed as outlined below

7 Disincentives to FDI in the Manufacturing Sector Against the incentives previously highlighted, prospective investors in the manufacturing sector still face enormous challenges in setting up operations in Nigeria. The following are some of the major disincentives to foreign direct investment in the Nigerian manufacturing sector.

7.1

Corruption

For several years Nigeria has had a bad press resulting in negative perception about the country. One of the underlying reasons for this state of affairs stems from systemic corruption prevalent in the country. Generally speaking Nigerians are very hospitable, honest, and hard working people. However, the anti-social behaviour of a small minority of the population had given the country a very bad image over the years. Thus the country has consistently been ranked by Transparency International (TI), a watch dog that monitors incidence of corruption across several countries, as one of the most corrupt countries of the world. Of 180 countries surveyed by TI in 2018, Nigeria was ranked in the 144th position, making her one of the most corrupt countries. TI computes Corruption Perception Index (CPI) annually. The index measures the extent of the misuse of public power for private benefit via the frequency of corrupt payments, the value of bribes paid and the resulting obstacle imposed on business. The consistently low ranking of Nigeria obviously places the country at a disadvantage amongst foreign investors when contemplating alternative locations around the world for direct investment. The large scale roguery of public funds estimated to be in several billion dollars since independence in 1960 to date is carried out by a small clique consisting of the

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ruling political elite and the civil service bureaucracy, who number only in thousands as opposed to the multitude of honest, hard working Nigerians who are in millions. Another source of negative image for Nigeria is the advanced fee fraud otherwise known as 419 (named after the section of the penal code for such crimes) being perpetrated by a small number of Nigerian fraudsters across the world. Under this fraudulent scheme thousands of innocent people in several countries have been defrauded, thereby giving the country a very bad image. To the foregoing should be added the persistent negative news being carried by the electronic and print media around the world on happenings in Nigeria.

7.2

Ease of Doing Business

In terms of the ease of doing business, Nigeria is consistently ranked by the World Bank as one of the least hospitable countries in the world. For example, in a survey undertaken in 2018 by the Bank, Nigeria was ranked in the 146th position out of 190 countries polled in that year. Thus a lot still needs to be done, especially in the following areas: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

starting a business registering a property trading across borders getting construction permits getting electricity getting credit protecting minority investors paying taxes enforcing contracts resolving solvency

For example, in terms of the ease of registering a property, Nigeria ranked last in the world, and was the third most difficult country in the ECOWAS sub-region in terms of cross border trade. Thus a lot still needs to be done for Nigeria to compete effectively in attracting foreign investors contemplating investment decisions between alternative locations/countries.

7.3

Infrastructural Problems

It is a well known fact that Nigeria lacks most of the basic infrastructure required for industrial establishments to thrive. The non-availability of adequate electricity supply, pipe borne water, railways, motorable highways, and other municipal services impose additional costs on doing business in Nigeria. Consequently the cost of goods produced in Nigeria is higher than competing imports. This of course will be

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of major concern to foreign investors contemplating to establish manufacturing operations in Nigeria not only to produce for the local market but also as a launch pad for regional and international markets.

7.4

Political Instability

The instability of government in Nigeria has always been of major concern. This is particularly true when viewed against the collapse of the first republic in 1967 and the ensuing civil war which lasted till 1970, the periods of army rule and counter coups followed by the installation and overthrow of civilian governments. Thus within a period of 60 years after attaining independence from Britain, the country has witnessed 15 different Heads of government, with each change of government being a period of heightened tensions arising from the country’s complex geo-political setting featuring over 250 language groups and crude competition for power at the centre. However, it is gratifying to note that since 1999, the country has enjoyed relative political stability culminating in the first ever peaceful change of government through organized elections in 2015 when the opposition party won. For the foreign investor the uncertainty imposed by the political environment is a major risk factor that has to be taken into account in making the final investment decision as to which destination to select.

7.5

Law and Order

The issue of law and order is also of paramount importance in foreign investment decision making. Here Nigeria has a mixed record as various foreign governments have had to issue negative travel advisory at one time or the other to their citizens contemplating to visit Nigeria. Under law and order, the other constraints identified as militating against foreign direct investment in the manufacturing sector include widespread incidents of civil and religious disturbances in several parts of the country, as well as the general insecurity of lives and property arising from kidnapping, banditry and armed robbery. The ongoing war against the Boko Haram religious sect in the North Eastern part of the country as well as the militants operating in the Niger Delta are glaring reminders of the turmoil characteristic of the Nigerian business environment.

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7.6

201

Due Process and Rule of Law

The development of the legal and court system in Nigeria is not yet as robust as may be desired, especially when compared to competing emerging markets. There is a lot still to be done to ensure that the rule of law characterized by impartial and efficient judicial process and law enforcement is in place. Thus there is need for Nigeria to strive to achieve a legal regime that is free from abuse, arbitrary, and unpredictable legal environment in order to instil confidence in the foreign investor that investments once made will be fully protected and enjoy equal treatment under the law of the land.

7.7

Economic Uncertainty

Although Nigeria is blessed with abundant human and material resources, the fact still remains that the country is currently heavily dependent on crude oil exports which provide over 90% of her foreign exchange earnings. As a result the country’s economic fortunes are closely tied to developments in the international crude oil market. This leads to wild swings in government’s revenue and expenditure as oil receipts provide the bulk of government income and the main engine for economic activities. Given the foregoing, the economic foundation of the country is still very weak and the business environment is characterized by stop and go economic policies coinciding with periods of oil booms and depressions. Another weakness of the economic environment is the unsteady value of the national currency which has seen the Naira depreciate from N1 ¼ $1.87 in 1982 to over N400 ¼ $1 by 2016. This of course introduces a major level of uncertainty in long term investment decision making and a reflection of the fragile nature of the underlying economy.

7.8

Weak Policy Environment and Safety of Investment

The policy environment in Nigeria has not always been friendly and predictable. This of course will be a major source of concern to the prospective foreign investor. The unpredictability of the policy environment is evident in such acts as inconsistent government policies, sudden U-turns in announced proclamations, shifting macroeconomic policies, and policy somersaults associated with each change of government. All the foregoing make the business environment very unpredictable both for current operations and long term investment planning. Here Nigeria has some useful lessons to learn from the South East Asian countries such as South Korea, Malaysia,

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Singapore, and Taiwan, all of which enjoyed stable policy regimes during the early stages of their industrial takeoff. There is also heightened concern about the long term safety of investments in the country, especially after the indigenization decrees of the 1970s which compelled foreigners to part with their equities in designated businesses and reserved certain sectors exclusively to Nigerians. This development sent the wrong signal to foreign investors as to the long term safety of their investments in Nigeria and the fear of creeping expropriation of their assets in the country. Although such policies have since been reversed and the policy environment made more attractive and liberal to foreign direct investment, especially under the laws establishing the Nigerian Investment Promotion Commission (NIPC) and the new trade and investment regime introduced under the privatization programme of government since 1999. Also worthy of mention is the fact that Nigeria has become a signatory to two important international investment protection agreements, namely the International Centre for Settlement of Investment Disputes as well as the Multilateral Investment Guarantee Agency (MIGA).

7.9

Inadequate Pool of Required Labour Skills

The country still lacks a pool of the right mix of engineers, technicians, and artisans required to sustain modern manufacturing industries. This is particularly important from the viewpoint of multinational corporations looking for cheaper and less expensive sources of skilled labour to produce for the global market. Here, Nigeria with its huge population and youthful labour force should seek to capitalize on this reservoir of young talents by equipping them with the requisite technical and vocational skills needed in modern manufacturing and service industries. Such a development will be to Nigeria’s advantage especially as labour costs begin to rise in China and South East Asia with the multinational corporations seeking for alternative sources of less expensive labour to produce for the global supply chain.

7.10

Trade Off between Incentives and Disincentives

As indicated earlier in the introduction to this chapter, and as observed by writers such as Behrman [1], Aharoni [2] and Stobaugh [3], the foreign investor contemplating between alternative overseas destinations will have to do a trade off between the incentives and disincentives associated with the different locations as well as estimate the risk associated with expected returns before a final decision is made. Given that the global environment is never static, it is important for an emerging economy such as Nigeria to always strive to make the country investor friendly on a continuous basis in response to changing circumstances and global trends.

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This requires that the government put in place a monitoring mechanism designed for identifying bottlenecks in the operating environment as well as taking into account emerging global best practices. The ultimate goal should be to stay ahead of the pack by reducing and/or eliminating any disincentives that may be hindering the inflow of foreign direct investment at the desired level.

8 Improving on the Gains from FDI As a developing country in need of foreign direct investment, especially in the manufacturing sector, there is an urgent need for Nigeria to develop the expertise and the institutional support required to enter into mutually beneficial relationship with prospective foreign investors, particularly multinational corporations (MNCs). Currently many third world countries, Nigeria inclusive, are not adequately prepared and equipped with an equal level of expertise to appreciate all the key issues at stake when negotiating with prospective foreign investors. Unlike the colonial and post-colonial period when MNCs were viewed with great suspicion because of the weak bargaining position of the newly installed governments, present day relationships, as argued by writers such as Pigato [4] and Moran [5], between host countries and MNCs should be viewed more in terms of a positive sum game in which both parties stand to gain. However, the level of gain by either party depends on the level of expertise each side brings to the bargaining table. In order to reap the gains from FDI several developing countries have gone to great lengths to offer various incentives to make their countries the preferred destination. However, it should be pointed out that these incentives represent a cost to the country. The question then arises as to whether the benefits accruable from such inward foreign investment outweigh the cumulative costs involved. In spite of the obvious benefits which investment by MNCs bring to a country such as inflow of much needed capital to fill investment gaps, introduction of new technology, exploitation of locally available resources, creation of new employment opportunities, training/development of local manpower and a host of other benefits which are well documented, critics and/or opponents of MNCs operating in the third world usually allege that MNCs derive far more benefits from hapless developing countries which are not in a position to bargain with MNCs on equal footing due to lack of expertise and corruption. Consequently it is argued that the costs to host developing countries far outweigh the benefits derived from such inward investments. The array of costs identified as detrimental to the development aspirations of the host country from FDI by MNCs include, amongst others, negative spill over effects, inappropriate technology, crowding out of local enterprises, abuse of market power, tax evasion through transfer pricing, excessive repatriation of profits, royalties, management fees, etc. which may worsen balance of payments position as well as undue/negative influence exerted on government policies.

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In order to increase the level of FDI and maximize the benefits/gains accruable from FDI in the manufacturing sector whilst at the same time minimizing the costs associated with such inflows, Nigeria needs to take proactive steps in the undermentioned areas. First, there is a need to move beyond the provision of general incentives available to all prospective foreign investors. These incentives are of general application and indeed are similar to those being offered by other competing developing countries. In order to stay ahead of the pack Nigeria needs to develop additional incentive packages to meet the specific requirements of selected industrial sub-sectors. This will go a long way to stimulate the attention of interested foreign investors as the ground work and preliminary investigations will have been undertaken in advance by the host country. Second, for Nigeria to optimize the gains from FDI there is a need to isolate priority projects that are most desirable from the viewpoint of potential contributions to achieving the goal of rapid industrial development. Such projects would have been carefully studied in terms of costs and benefits to the economy before engaging in negotiations with prospective foreign investors. Third, as it relates to the manufacturing sector, there is a need to develop and/or acquire the expertise and technical knowledge required to engage in hard bargaining with MNCs on an equal footing. It is within such a context that the host country can seek to minimize the costs associated with the investment on the one hand whilst at the same time seeking to maximize the benefits accruable to the economy at large. Fourth, the present institutional framework for the promotion of foreign direct investment in the manufacturing sector needs to be strengthened in order to achieve goals in the medium to long term. In this regard it is doubtful whether the NIPC as presently constituted and funded is in a position to drive this activity in a proactive manner. Fifth, there is currently a shortage of skilled technological manpower at both the engineers and technicians level to drive manufacturing activities. To attract and increase the size of FDI in the manufacturing sector, Nigeria should take urgent steps to develop and expand the pool of needed skilled manpower required by industry in order to encourage MNCs to locate manufacturing operations in Nigeria. Sixth, there is a need to draw up and articulate an industrial development strategy/ master plan for the country to guide investment decision making in the manufacturing sector. Such a master plan will identify areas of critical need as well as priority sub-sectors. In addition the policies and strategies to be adopted in attracting FDI to priority sectors will have been fully evaluated. Whilst the recently launched Nigeria Industrial Revolution Plan drawn by the previous government is a step in the right direction, it remains to be seen whether government has really done its homework to properly appreciate the key issues at stake. A case in point is the recent automotive policy announced by government aimed at promoting a home grown automotive industry to replace imports. Under this policy, the National Automotive Council, the agency responsible for implementing government policy in this area, announced that thirty vehicle assembly plants (made up of 14 existing plants and 16 new ones) are to commence operations in Nigeria.

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Given the current and projected size of the market it is obvious that none of the plants will have the volume to drive operations on a sustainable basis. If countries such as the USA, Germany, France, and Japan each has only a handful of national automobile companies, it is ironic that a developing country such as Nigeria is aiming at developing 30 automobile companies. The world automotive industry is very competitive and is based on large scale production runs to achieve scale economies. Thus, rather than be a mere assembler of automobiles, Nigeria will be better served by a policy which aims at nurturing about three or four major automobile companies (supported by several local auto component producing firms) targeting not only the domestic market but also the ECOWAS/Africa and international markets in order to achieve economics of large scale production and be able to compete in the global market. Seventh, for a developing country such as Nigeria to optimize the benefits accruable from investments by MNCs as well as grow and diversify its export sector, it is important that the export development strategy of the country should seek to take advantage of international production value chains offered by such corporations. Unfortunately most of the FDI inflows into Nigeria were not production oriented to the global market unlike the situation in South East Asia, China, and Latin America where MNC subsidiaries were structured and integrated into the global trading and supply chain wheel. Lastly, in terms of monitoring of FDI in the manufacturing sector very little is being done to evaluate the benefits accruing to the country once the initial investment has been made. The NIPC as presently constituted is probably not well equipped to undertake this function. Government should therefore give active consideration to the possibility of setting up a separate body to undertake the monitoring function. This is the approach adopted in countries such as Indonesia, Mexico, India, and Malaysia where separate bodies have been set up for this purpose. This arrangement also ensures a system of checks and balances between the investment promotion agency (i.e. NIPC on the one hand) and another agency (being proposed) for monitoring and evaluation on the other.

9 Summary and Conclusion Since attaining independence in 1960, a major preoccupation of successive Nigerian governments has been the goal of achieving rapid industrial development in order to accelerate socio-economic progress. Thus various policies have been put in place to achieve this goal, including that of attracting private foreign direct investment especially in the industrial sector. Immediately after independence the newly installed governments at both the Federal and Regional levels embarked on ambitious industrial promotion plans featuring, amongst others, enactment of laws aimed at protecting and stimulating the emergence of local industries to replace imports (the so-called import substitution industrialization strategy), and the setting up of industrial development

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corporations. In addition both the Federal and Regional Governments embarked on overseas industrial promotion tours, entered into joint ventures with foreign partners to develop industrial enterprises and offered packages of incentive schemes to attract foreign direct investment into the manufacturing sector. In spite of the incentives being offered to promote industrial development only modest achievements were recorded in the 1960s because of the rather sluggish growth of the economy and political instability. However, in the 1970s, following the quadrupling of crude oil prices and the massive increase in government revenues, the various governments at Federal and State levels embarked on several industrial projects with or without foreign partners. There was also a significant increase in the level of private foreign direct investment during this period as foreign owned companies took advantage of the booming economy to expand their activities as well as the entrance of new foreign players in the market place. However, following the collapse of the international crude oil market in the early 1980s, the economy was on the verge of collapse, leading to the adoption of the structural adjustment programme in 1986 and the massive devaluation of the national currency. Arising from the fact that several of the industrial projects implemented in the earlier period were raw material import dependent and not well conceived, this led to partial or total factory closures, with some projects being completely abandoned. Several of the foreign owned enterprises operating in Nigeria were unable to meet their obligations to their foreign parents, hence some of them had to reinvest such liabilities in their Nigerian subsidiaries leading to increase in the level of foreign private direct investment. Since the mid-1980s, government has pursued a policy of export promotion in general and gave encouragement to the setting up of export oriented industries in Nigeria through a variety of incentives with the goal of diversifying the country’s sources of foreign exchange earnings. However, up to the present time only very modest achievements have been recorded as the country continues to rely on crude oil exports which have consistently provided over 90% of foreign exchange earnings and the bulk of government revenue. Besides, unlike the massive inflow of foreign capital recorded in the Nigerian telecommunications sector following the liberalization of that sector, no such spectacular inflows of foreign capital have been recorded in the manufacturing sector despite the wide array of incentives offered to boost the export of manufactured goods from the country. This situation had arisen because of binding infrastructural constraints, weak and inconsistent macro-economic policies as well as a variety of problems in the Nigerian operating environment all of which constitute major disincentives to foreign direct investment in the manufacturing sector, especially by the multinational corporations. Thus in order to attract significant foreign capital investment into the Nigerian manufacturing sector not only to produce for the domestic market but also for regional and international markets, government needs to take bold and imaginative steps aimed at eliminating and/or minimizing the major bottlenecks, disincentives, and constraints earlier identified as impeding the progress of Nigeria’s march to rapid industrial development. Beyond that, a well articulated industrial development

References

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strategy and programme of action spanning the medium to long term should be put in place by a visionary leadership dedicated to the goal of rapid transformation of society.

References 1. Behrman J.N. 1970.National Interests and the Multinational Enterprise, Prentice- Hall, Engelwood Cliffs, New Jersey 2. Aharoni Yair, 1966. The Foreign Investment Decision Process,, Harvard Graduate School of Business, Division of Research, Boston 3. Stobaugh R. 1969.How to Analyse Foreign Investment Climate, Harvard Business Review, September/October pp100-108 4. Pigato A. Miria 2000. Foreign Direct Investment in Africa; Old Tales and New Evidence, African Region Working Paper Series No 8, 5. Moran T. 1999 Foreign Direct Investment and Development, Institute for International Economics,Washington D.C.

Chapter 8

An Appraisal of the Export Potential of Made-in-Nigeria Goods

1 Introduction As a result of the oil shocks of the late 1970s and early 1980s which were accompanied by wild swings in the revenue accruing to the Federal Government of Nigeria through crude oil exports, it became apparent to the country’s leadership, whether military or civilian, that Nigeria had to speed up the development of non-oil exports in order to achieve a more stable and diversified economy as well as balanced growth and rapid economic development. Arising from the foregoing, the government as part of the Structural Adjustment Programme (SAP) adopted in 1986, promulgated the Export (Incentives and Miscellaneous Provisions) Decree [1]. Under the decree a number of bold initiatives were adopted, including a package of export incentives and the banning of selected imports, with a view to promoting not only the production of such goods in Nigeria but also encouraging their export into regional and international markets. Thus it was envisaged that after a period of time Nigeria will unbind itself from over dependence on a single export commodity. However, despite the various incentives put in place to promote non-oil exports it is disheartening to observe that crude oil exports continue to be the mainstay of the Nigerian economy consistently accounting for over 90% of foreign exchange earnings and the bulk of government revenue. It is against this background that an attempt is made to examine the potential and prospects for the export of made-inNigeria goods. This is particularly relevant at the present time given the country’s precarious economic situation and the need to diversify sources of foreign exchange earnings. In appraising the export potential of made-in-Nigeria goods, this chapter is divided into eight parts. Part 1 contains the introduction. In Part 11 a general review of the role of export in national development is undertaken. This is followed in Part 111 with an overview of Nigeria’s export trade performance since independence. In Part IV attention is focused on the opportunities for the development of made-in© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5_8

209

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Nigeria goods. Part V contains an analysis of potential export markets. In Part V1 the problems and constraints involved in marketing such goods abroad are discussed. This is followed in Part V11 with a brief examination of the strategies which ought to be pursued in order to translate export goals into reality on a self-sustaining basis. Finally, the chapter concludes in Part V111 with a few remarks on the need for firmness of purpose in pursuing national export development goals anchored on a strong determination to win the competitive battle in the international market place.

2 Role of Export in National Development The old saying that civilization travels on the wings of trade holds true, even till today. Without external trade, if this were possible, a country is likely to be by-passed by progress and developments in other parts of the world given the rapidity of change in today’s global village made possible by advances in science, engineering, information and communication technology. Consequently, export trade has a vital role to play in the economic and social development of nations as evidenced by the export led growth of the newly industrialized countries of South East Asia. In Nigeria’s case in particular, the diversification and expansion of exports in the non-oil sector has become mandatory for the following reasons: 1. To reduce the over dependence on one export commodity, namely crude oil from which the country has over the past four decades consistently derived over 90% of her foreign exchange earnings and the bulk of government revenue. 2. Given that oil is a wasting and non-renewable asset, a programme of export diversification is the greatest insurance against the unforeseen future when the country’s oil reserves would have been exhausted. 3. With increasing emphasis on non-fossil and renewable sources of energy as well as the emergence of electric vehicles, it is apparent that the long term demand for crude oil will begin to wane and certainly not as robust as it was in the twentieth century, hence another reason for Nigeria to reduce its dependence on crude oil exports as the mainstay of the economy. 4. To the extent that more foreign exchange is generated from the non-oil export sector, the quantum of hard currency available to the country is enhanced and becomes available in meeting other pressing national requirements, especially given the pressures on balance of payments and foreign exchange reserves. 5. The development of export oriented manufacturing industries will surely lead to greater use of domestic resources thereby generating multiplier effects, increasing value added, and the contribution of manufacturing to the Gross Domestic Product. This is likely to be the case given that Nigeria is one of the most richly endowed countries in the world with abundant natural resources awaiting full exploitation.

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6. Closely related to the point made in (5) above, Nigeria is equally blessed with abundant human resources, being one of the ten most populous countries in the world. One way to capitalize on this great reservoir of manpower is to develop labour intensive export—oriented manufacturing industries which will undoubtedly help to reduce unemployment and under employment in the country. 7. To take advantage of market opportunities at the regional and continental levels arising from the formation of the Economic Community of West African States (ECOWAS) and lately the African Continental Free Trade Area (AfCFTA). These developments present a good opportunity for manufacturing industries in Nigeria to leverage on their size and a relatively more robust base which should enable them to expand their marketing operations by producing goods not only for the domestic market, but also for regional and continental markets. 8. The development and promotion of non-oil exports should generate positive spill over effects throughout the economy thereby accelerating the pace of scientific, technological, and manpower development in the country. This is bound to have a long term positive impact on the future growth rate of the economy in general and of the industrial sector in particular. For all the foregoing reasons, it has become imperative for the government to take proactive steps and formulate strategies to boost non-oil exports, especially of manufactured goods, on a self-sustaining basis.

3 An Overview of Nigeria’s Export Trade Before proceeding to examine in some detail the export potential for “made-inNigeria” goods, it is useful to undertake a general review of Nigeria’s export trade performance since independence in 1960 as a background to the present situation on the ground. To assist in this endeavour, the relevant statistics are captured in Tables 8.1, 8.2, 8.3, and 8.4, respectively. From Table 8.1, it will be observed that Nigeria’s total merchandise exports rose in absolute terms from N339.4 million in 1960 to N9,649 million in 1980, an increase of over 280%, largely as a result of the windfall from crude oil exports. Over the next 20 years, from 1980 to 2000 it rose to about N2.0 billion and reached a high of N15.26 billion in 2013 before declining to N8.77 billion in 2016 following the collapse of the international oil market. However, it should be pointed out that given the massive devaluation of the Naira over the period under review, the increases recorded are somewhat exaggerated. A more realistic assessment of export growth over the period is revealed when the figures are expressed in U.S. dollars at the prevailing exchange rate. For this purpose in Table 8.2 a presentation is made of the value of Nigeria’s exports stated in U.S. dollars at five yearly intervals from 1960 to 2017. From the table it will be observed that the value of Nigeria’s merchandise exports rose from $475.2 million dollars in 1960 to $26,054.5 million dollars in 1980, largely as a

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8 An Appraisal of the Export Potential of Made-in-Nigeria Goods

Table 8.1 Trend and structure of Nigeria export trade 1960–2017 (Naira millions) Year 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Total exports Nm 339.4 347.3 337.1 378.7 429.3 536.8 568.2 485.6 422.1 636.0 885.7 1293.4 1434.2 2278.4 5794.8 4925.5 6751.1 7630.7 6064.4 10,836.8 14,186.7 11,023.30 8206.40 7502.50 9088.00 11,720.80 8920.50 30,360.60 31,192.80 57,971.20 109,886.10 12,1533.70 20,5611.70 218,801.10 206,059.2 950,661.4 1,309,543.4 1,241,662.7 751,856.7 1,189,006.5 2,287,400.3

% 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Oil exports Nm 8.8 23.1 34.4 40.4 64.1 136.2 183.9 144.8 74.0 261.9 509.6 953.0 1176.2 1893.5 5365.7 4563.1 6321.6 7072.8 5401.6 10,166.8 13,632.3 10,680.50 8003.20 7201.20 8840.60 11,223.70 8368.50 28,208.60 28,435.40 55,106.80 106,626.50 116,856.50 201,383.90 213,778.8 200,710.2 927,565.3 1,286,215.9 1,212,499.4 717,786.5 1,169,508.5 2,262,610.6

% 2.6 6.7 10.2 10.7 14.9 25.4 32.4 29.8 17.5 41.2 57.5 73.7 82.0 83.1 92.6 92.6 93.6 92.7 89.1 93.8 96.10 96.90 97.50 95.90 97.30 95.50 93.80 92.90 91.20 94.90 97.80 96.0 97.9 97.7 97.4 97.6 98.2 97.6 95.5 98.4 98.9

Non-oil exports Nm 330.6 324.2 302.7 338.3 365.2 400.6 384.2 340.9 348.1 374.1 376.0 340.4 258.0 384.9 429.1 362.4 429.5 557.9 662.8 670.0 554.4 342.80 203.20 301.30 247.40 497.10 552.00 2152.0 2757.40 2954.40 3259.60 4677.20 4227.8 5022.3 5349.0 23,096.1 23,327.5 29,163.3 34,070.2 19,498.0 24,789.7

% 97.4 93.3 89.8 89.3 85.1 74.6 67.6 70.2 82.5 58.8 42.5 26.3 18.0 16.9 7.4 7.4 6.4 7.3 10.9 6.2 3.9 3.10 2.50 4.10 2.70 4.50 6.20 7.10 8.80 5.10 2.10 4.0 2.1 2.3 2.6 2.4 1.8 2.4 4.5 1.6 1.1

(continued)

3 An Overview of Nigeria’s Export Trade

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Table 8.1 (continued) Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total exports Nm 1,867,953.9 1,744,177.7 3,087,886.4 4,602,781.5 7,246,534.8 7,324,680.5 8,309,758.2 10,161,490.1 8,363,326.4 11,662,462.5 14,826,062.8 15,139,454.2 15,262,822.0 12,988,296.3 9,016,321.1 8.769,316.9 13,987,446.88

% 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Oil exports Nm 1,839,945.3 1,649,445.8 2,993,110.0 4,489,472.2 7,140,578.9 7191085.6 8110500.3 9,913,651.1 8,067,233.0 11,257,633.9 14,326,518.7 14,259,789.7 14,132,595.7 12,033,543.2 8,339,553.5 8,093,408.37 12,912,647.82

% 98.5 94.6 96.9 97.5 98.5 98.2 97.6 97.6 96.5 96.5 96.6 96.8 92.6 92.6 92.5 92.3 92.3

Non-oil exports Nm 28,008.6 94,731.8 94,776.4 113,309.4 105,955.9 133,594.9 199,257.9 247,838.9 296,093.4 404,828.6 499,544.1 879,664.5 1130226.3 954,753.1 676,767.6 675,908.56 1,074,799.05

% 1.5 5.4 3.1 2.5 1.5 1.8 2.4 2.4 3.5 3.5 3.4 3.2 7.4 7.4 7.5 7.7 7.7

Source: Central Bank of Nigeria Annual Reports Table 8.2 Value of Nigeria’s exports, 1960–2017 (Million Dollars)

Year 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2016 2017

Total exports 475.2 751.5 1240.0 7859.4 26,054.5 11,725.5 12,209.5 11,241.1 20,880.0 55,571.6 77,409.1 45,768.1 28,751.9 45,710.6

Oil exports 123.2 190.7 713.6 7281.1 25,036.4 11,228.2 11,847.3 10,968.0 20,653.7 54,759.0 74,722.1 42.332.8 26,535.8 42,198.2

Non-oil exports 352.0 560.8 526.4 578.3 1018.1 497.3 362.2 273.1 226.3 812.6 2687.0 3435.3 2216.1 3512.4

Source: Computed from Table 8.1 at the official exchange rate prevailing as at the end of each year

result of the oil boom of the 1970s. However, arising from the collapse of the international market for crude oil, total merchandise exports continued to decline over the next 20 years to below $12,500 million in 1995 before bouncing back to $20,880 million in 2000 as a result of the resurgence in the global demand for crude

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Table 8.3 Value of Some Major agricultural exports from Nigeria, 1960–2010 ($ million) Commodity Cocoa Cotton Groundnuts Groundnut oil Rubber Coffee Palm oil Palm produce Pineapple Gum Arabic Fish and shrimps Cashew nuts Spices/ginger Hides and skins Timber(logs and sawn) Bananas Sesame seeds Others Total

1960 102.9 17.3 64.1 14.8 39.9

1970 186.2 18.5 61.0 32.5 24.3

39.2 72.9

1.7 30.5

12.0 19.7 7.3

390.1

1980 570.6 4.8 –

1990 130.2 12.0 –

2000 2.1 2.1 0.1

21.6 –

95.8 4.7

0.3 –

21.0 – – – – –

11.8 0.4 – 12.1 1.1 0.5

2.6 – Neg 2.0 0.3 0.1 –

4.4 622.4

15.3 283.9

7.8 8.6

371.1

9.6

2010 1466.5 111.4

300.5

3.9 80.0 98.2 122.6 20.2

377.5 28.9 2609.7

Neg Negligible Sources: Central Bank of Nigeria Annual Reports and Statistical Bulletins; National Bureau of Statistics

oil driven largely by China. Over the next 10 years total merchandise exports rose to $55,571.6 million in 2005 and $79,427.2 million in 2010, respectively. Regardless of the foregoing, in a replay of the early 1980s crude oil prices collapsed in 2014 from a high of over $130 per barrel to less than $40 per barrel in 2016. This impacted negatively on the value of total merchandise exports from Nigeria which nosedived from $97.05 billion in 2013 to $28.75 billion in 2016. It is useful to point out that whereas in 1960 non oil exports, mainly agricultural commodities, accounted for over 97% of export earnings, by 1970, oil exports had risen to over 57% with non oil exports declining to 42.50%. Since 1974 to the present time crude oil exports have consistently accounted for over 90% of Nigeria’s foreign exchange earnings with non-oil exports contributing less than 10% to total merchandise exports. In the non-oil export sector, as indicated in Table 8.3, the export of agricultural commodities predominate, with cocoa, palm kernel, and rubber accounting for the bulk of export earnings. A further examination of the non-oil sector revealed that Nigeria has ceased to be a major exporter of a number of agricultural commodities where the country used to be significant market players such as palm oil, groundnuts, cotton, timber, etc.

Product (1) agricultural produce Cashew nuts Cocoa beans Coffee Cotton Cow horn/bones Fish and crustaceans Ginger Groundnuts Gum Arabic Rubber Sesame seeds Other agricultural products (2) minerals Copper Lead Manganese Quartz Zinc Zirconium Other minerals (3) semi-manufactured Aluminium Cocoa products Copper

2013 448,725.20 22,556.79 203,841.61 – 21,205.07 129.10 19,819.54 5365.36 2623.10 11,928.06 45,128.66 107,556.41 8571.52 3533.31 61.86 2290.96 – – 663.29 145.11 372.09 327,232.96 33,018.97 40,066.01 23,583.38

% 39.70 2.00 18.04 – 1.88 0.01 1.75 0.47 0.23 1.06 3.99 9.52 0.76 0.31 0.01 0.20 – – 0.06 0.01 0.03 28.95 2.92 3.54 2.09

2014 413,501.96 26,307.61 182,992.86 13.82 6516.75 356.95 19,215.70 8248.01 38.47 1661.56 24,133.13 134,006.36 10,010.74 5415.86 148.73 3,55.24 9.41 15.53 788.90 99.72 900.32 334,422.34 29,147.05 46,973.62 21,095.67

Table 8.4 Non-Oil Exports by Products (Naira Million) 2013–2017 % 43.24 2.75 19.14 0.00 0.68 0.04 2.01 0.86 0.00 0.17 2.52 14.01 1.05 0.57 0.02 0.37 0.00 0.00 0.08 0.01 0.08 34.97 3.05 4.91 2.21

2015 331,199.77 19,170.50 141,789.33 – 5062.31 417.14 24,757.04 10,206.33 2.32 1258.86 19,082.42 100,586.36 8867.16 4416.03 27.18 2139.39 211.33 – 1095.73 181.31 761.09 155,379.29 20,180.74 33,890.35 4341.92

% 48.94 2.83 20.95 – 0.75 0.06 3.66 1.15 0.00 0.19 2.82 14.86 1.31 0.65 0.00 0.32 0.03 – 0.16 0.03 0.11 22.96 2.98 5.01 0.64

2016 270,555.79 17,565.94 130,422.01 56.63 476.92 165.08 32,002.85 4763.41 397.27 889.56 19,858.53 58,050.46 5907.13 5141.80 – 933.51 2111.12 – 1164.69 288.33 644.14 143,715.30 17,416.26 35,056.66 882.13

% 40.03 2.60 19.30 0.01 0.07 0.02 4.73 0.70 0.06 0.13 2.94 8.59 0.87 0.76 – 0.14 0.31 – 0.17 0.04 0.10 21.26 2.58 5.19 0.13

2017 336,374.97 46,666.56 111,595.79 – 2050.21 93.18 29,136.26 3587.89 3514.05 560.57 35,074.37 78,884.40 25,211.71 20,262.29 32.82 1098.96 160.87 77.45 2816.03 239.16 15,837.01 216,727.35 19,394.39 37,886.55 1285.62

(continued)

% 31.30 4.34 10.38 – 0.19 0.01 2.71 0.33 0.33 0.05 3.26 7.34 2.35 1.88 0.00 0.10 0.01 0.01 0.26 0.02 1.47 20.16 1.80 3.52 0.12

3 An Overview of Nigeria’s Export Trade 215

Product Cotton products Furniture /processed wood Lead Leather and processed skins Palm products Poly products Steel/Iron Textured yarn/polyester Tin Wheat bran pellets Zinc Other semi-manufactured products (4) manufactured Aluminium products Asbestos products Beer/beverages Carpets/rug Copper Confectionery Electrical Empty bottles Furniture Glass Insecticide Milk products

Table 8.4 (continued)

2013 2038.68 925.79 13,292.21 176,233,23 1982.85 5190.82 5174.57 2514.17 15,421.40 704.13 362.55 6724.20 144,803.15 13,455.04 202.47 7030.23 117.78 1274.29 – – 4333.84 301.25 623.39 5725.05 6201.36

% 0.18 0.08 1.18 15.59 0.18 0.46 0.46 0.22 1.36 0.06 0.03 0.59 12.81 1.19 0.02 0.62 0.01 0.11 – – 0.38 0.03 0.06 0.51 0.55

2014 1936.17 1346.58 16,098.39 168,203.98 786.39 3341.12 1251.08 1461.46 36,227.71 764.73 501.71 5286.67 163,082.01 9970.72 321.01 7769.53 191.72 1193.12 – 1023.97 4665.35 210.42 691.78 7261.09 6809.48

% 0.20 0.14 1.68 17.59 0.08 0.35 0.13 0.15 3.79 0.08 0.05 0.55 17.05 1.04 0.03 0.81 0.02 0.12 – 0.11 0.49 0.02 0.07 0.76 0.71

2015 1831.25 1429.83 14,227.80 49,572.78 335.15 2234.00 272.31 38.75 19,651.13 3494.17 432.62 3446.49 134,767.69 1530.82 409.37 7826.85 148.20 1097.90 68.97 1319.32 5057.75 220.06 176.22 4701.35 5243.77

% 0.27 0.21 2.10 7.32 0.05 0.33 0.04 0.01 2.90 0.52 0.06 0.51 19.91 0.23 0.06 1.16 0.02 0.16 0.01 0.19 0.75 0.03 0.03 0.69 0.77

2016 1981.13 9900.91 12,333.11 25,377.76 2848.93 19,272.38 2685.59 200.97 – 8184.81 300.60 7274.0.09 149,503.55 624.29 497.92 11,104.42 83.68 1366.99 – 324.58 6098.94 98.92 85.89 6728.00 3711.46

% 0.29 1.46 1.82 3.75 0.42 2.85 0.40 0.03 – 1.21 0.04 1.08 22.12 0.09 0.07 1.64 0.01 0.20 – 0.05 0.90 0.01 0.01 1.00 0.55

2017 1364.82 15,727.70 14,767.97 27,502.92 5862.93 30,582.19 11,098.78 419.14 – 8370.00 440.13 42,024.20 149,048.33 – 233.74 12,702.44 123.41 814.42 – 1536.88 3623.44 127.08 204.41 6995.05 3570.99

% 0.13 1.46 1.37 2.56 0.55 2.85 1.03 0.04 – 0.78 0.04 3.91 13.87 – 0.02 1.18 0.01 0.08 – 0.14 0.34 0.01 0.02 0.65 0.33

216 8 An Appraisal of the Export Potential of Made-in-Nigeria Goods

1140.27 (135.72) 15,673.89 18,711.63 3666.46 832.21 3172.32 33,467.73 750.20 28,259.45 205,931.69 461.41 1709.89 – 161,351.97 5708.15 352.75 16,243.76 20,103.76 1130,226.32

0.10 0.01 1.39 1.66 0.32 0.07 0.28 2.96 0.07 2.50 18.22 0.04 0.15 – 14.28 0.51 0.03 1.44 1.78 100.00

1777.48 637.85 19,006.49 21,703.24 4144.69 1022.54 2415.31 37,634.14 944.61 33.687.47 39,854.94 1187.72 1777.99 – 1245.81 2358.95 1201.01 19,663.65 12,419.81 956,277.11

The figures include estimate made for informal /unrecorded exports Source: Central Bank of Nigeria

Paper products Pharmaceuticals Plastic Plastic footwear Soap and detergents Steel /Iron products Textiles Tobacco Vehicles Other manufactured products (5) other exports Cement/lime products Charcoal Fertilizer Petroleum products Urea Used /re-exported machinery Electricity Other products TOTAL

0.19 0.07 1.99 2.27 0.43 0.11 0.25 3.94 0.10 3.52 4.17 0.12 0.19 – 0.13 0.25 0.13 2.06 1.30 100.00

1055.55 789.86 12,345.65 11,867.71 7601.77 2175.92 531.31 39,727.66 1135.19 29,736.49 51,004.83 4286.91 3856.42 – 1196.39 10,419.41 4314.64 25,420.03 1511.03 676,767.61

0.16 0.12 1.82 1.75 1.12 0.32 0.08 5.87 0.17 4.39 7.52 0.63 0.57 – 0.18 1.54 0.64 3.76 0.22 100.0

851.03 511.12 9511.46 1295.08 8501.63 2.503.61 122.47 63,874.77 259.58 31,847,70 106,992.11 16,445.52 1481.51 125.92 18,315.15 34,342.21 3788.05 29,359.80 3133.96 675,908.56

0.13 0.08 1.41 0.19 1.26 0.37 0.02 9.45 0.04 4.0.64 15.83 2.43 0.22 0.02 2.71 5.08 0.56 4.34 0.46 100.00

1612.50 395.04 10,201.76 2060.16 6430.97 1383.25 123.30 65,011.33 433.77 31,464.40 352,386.10 18,087.95 5696.25 – 193,271.48 96,474.19 1556.01 34,280.23 3019.99 1.074.799.05

0.15 0.04 0.95 0.19 0.60 0.13 0.01 6.05 0.04 2.93 32.79 1.68 0.53 – 17.98 8.98 0.14 3.19 0.28 100.00

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However, as a result of the package of export incentives put in place under the Export (Incentive and Miscellaneous Provisions) Decree of 1986 to promote non-oil exports, the value of Nigeria’s agricultural exports rose significantly from about $215 million in 1985 to $395.5 million in 1988. Thereafter it declined to $283.8 million in 1990 and $191 million in 1995 before crashing to a low of $9.54 million in 2000 due to haphazard implementation of policies needed to reform the agricultural sector. In the first 15 years of the new millennium the performance of agricultural exports has shown some improvement as a result of the incentives put in place to boost agricultural production not only for domestic consumption but also for exports. Thus the value of agricultural exports rose to $2606 million in 2010 and $1935 million in 2015, respectively. The export of non-agricultural based manufactured goods continues to remain unimpressive. These amounted to about $55 million, $67 million, and $500,000 in 1990, 1995, and 2000, respectively. Included in the list of manufactured exports are urea-ammonia, empty bottles and glasses, insecticides, soap and detergents, beer and beverages, textiles as well as chemicals. Table 8.4 gives a more recent picture of the performance of non-oil exports in general and of the status of the export of semi-manufactured and manufactured goods in particular over the period 2013 to 2017. Total non-oil exports rose to N1,130 billion in 2013, declined to N677 billion in 2015 before rising to 1075 billion in 2017. This confirms that crude oil is still the predominant foreign exchange earner, accounting for over $42.3 billion out of total merchandise exports estimated at $44.9 billion in 2015. Following the massive devaluation of the Naira from $1.0 ¼ N150.66 in 2010 to $1.0 ¼ N306 in 2017 the value of non-oil export earnings rose to N1,075 billion in 2017. However, in dollar terms this amounted to only $3513 million. As can be observed from the table, a breakdown of non-oil exports by products revealed that agricultural produce accounted for over 39% of the total in 2013. This proportion declined to about 31% in 2017. The products exported include cocoa beans, cashew nuts, rubber, cotton, fish and crustaceans, ginger, gum arabic, groundnuts, sesame seeds, amongst others. However, it should be noted that cocoa beans accounted for the largest share of agricultural export products ranging between 33 and 48% of the total over the period under review. Another major category of non-oil exports is the solid minerals sector (i.e. excluding oil and gas). In spite of the abundance of solid mineral deposits identified all over the country, only a handful are currently being exploited in commercial quantities. Over the period 2013 to 2017, the value of solid minerals exported from the country rose from N3,533 million in 2013 to N5,141 million in 2016 and reached an all time high of N20,262 million in 2017. These accounted for between 0.3% and 1.88% of total non-oil exports for the years indicated. Thus the sector lags far behind in terms of contribution to national output and exports, despite the vast array of solid mineral deposits available in the country. This is an area that holds tremendous opportunities for the future, given the right enabling environment to attract massive investment for exploration and exploitation.

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The third category of non-oil exports relates to semi-manufactured products. As can be observed from Table 8.4 this category consists of exports mainly of semiprocessed agricultural products such as cocoa, cotton, palm produce, leather and skins, wood, and furniture. Also featuring are refined mineral products such as aluminium, copper, lead, steel/iron, tin and zinc. The value of the exports of semimanufactured products amounted to N327, 233 million in 2013 before declining to N155,379 million in 2015 but rebounded to N216,727 million in 2017. These account for 28.95%, 22.96%, and 20.16%, respectively, of non-oil exports for the years indicated. It should be noted that the nominal value of the export of semimanufactured products rose to N216,727 million in 2017 only as a result of Naira devaluation rather than improved performance. However, it should also be pointed out that this sub-sector holds great promise for the future in terms of value addition as more goods are processed locally before being exported. The fourth category of exports which holds the greatest promise for future industrial development of the country relates to manufactured products. Unfortunately the development of this sub-sector is still at its infancy arising from the failed policies of previous years. Sadly the export of manufactured products amounted to only N144,803 million in 2013, but rose gradually over the next 3 years to N149,503 million in 2016. When these figures are converted to U.S. dollars it becomes apparent that the contribution of this sector to non-oil as well as to total exports is insignificant, especially given the potentials that exist. As a percentage of total non-oil exports, the contribution of manufactured products was only 12.80% in 2013 but this improved significantly to 22.12% in 2016 However, as a proportion of total merchandise exports the value of both semi-manufactured and manufactured products is less than 1.0%. Thus there is a need for the country to come up with a bold industrial master plan to fast track the development of the manufacturing sector as this is the sector that will galvanize the entire economy in meeting the goal of rapid economic development. In addition this will create massive employment opportunities for the country’s teeming millions, boost national output, and reduce the over dependence on crude oil exports as well as assure a more balanced and diversified economic base for the country. As indicated in Table 8.4 the fifth category of non-oil exports is grouped under the sub-head of other exports. However, a closer look at the products listed under this sub-head indicate that many of the products so listed, such as cement/lime, fertilizer, urea, petroleum are in fact manufactured products and should have been so classified. It should be noted that the output of the industries producing these products are so classified in the computation of national accounts series. From the foregoing review of Nigeria’s export trade, it is apparent that the country still has a very long way to go in the effort to promote the development of made-in-Nigeria products destined for the export market. Such a vision can only be fully realized in the context of a medium to long term export development plan. Consequently all efforts should be focused in this direction so that this vision can become a reality in the not too distant future.

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4 Opportunities for the Development of Made-in-Nigeria Goods In discussing the opportunities for the development of made-in-Nigeria goods, it will be useful as a starting point to define and explain what is meant by the term. By made-in-Nigeria goods, we mean semi-manufactured and manufactured goods produced in Nigeria, with inputs from local or external sources. This covers processing, assembly, fabrication or any aspect and/or combination of the conversion process. It should be noted that under ECOWAS rules of origin [2], for goods to qualify as made-in-Nigeria it must meet the following criteria. 1. as a percentage of total raw materials, 40% contribution by value (or 60% by volume) from raw materials of community origin, 2. 35% added value in the country of origin, or 3. 51% equity holding in the exporting company by nationals of the country of origin. It is generally recognized that for Nigeria to unbind herself from over dependence on crude oil, efforts must be made to develop the non-oil export sector, with the main focus on three broad areas, namely agricultural commodities, solid minerals, and manufactured goods. However, the point should be made that for the country to join the league of newly industrialized nations, the manufacturing sector is the area that holds the greatest promise for the future in terms of multiplier effects, employment, output, and productivity. Consequently, bold and imaginative strategies aimed at the development of export oriented manufacturing industries in Nigeria must be fashioned out in order to translate export dreams into reality. What then are the prospects in this area? Let us start by saying that any serious discussion on the export potential of made-in-Nigeria goods must be viewed from the medium to long term perspective, i.e. over a period of about 5–20 years in order to create the necessary supply capability. Given that time frame Nigeria has great potential to become a major exporter of manufactured goods of all kinds. Indeed, based on a survey of Nigeria’s manufacturing industries undertaken on behalf of the Nigerian Export Promotion Council [3] in the early 1990s, Nigeria has export potential in virtually all the major manufacturing sub-sectors if the right policies are pursued. At the time the study was undertaken, the products (made-in-Nigeria goods) listed in Table 8.5 below were identified as having export potential in the short, medium or long term based on a number of parameters such as resource endowment, comparative advantage, planned investments in both the public and private sectors and other relevant factors. As would be observed, the list of potential exportable products include various agro- allied semi manufactures and a wide variety of manufactured goods. However, for the short term, given the agricultural base of the economy, efforts should be concentrated on expanding agricultural output and processing of surpluses for export in order to increase value added and earn foreign exchange to meet development

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Table 8.5 Manufacturing Sub-sectors with Potential for Export Development in the Short, Medium, and Long Term classified on the basis of ISIC at the 4 Digit Level 1. Food, beverages, and tobacco Food manufacturing (a) Canning and preserving of fruits and vegetables (b) Canning, preserving, and processing of fish,crustaceans, and similar foods (c) Manufacture of vegetable and animal oil and fats (d) Grain mill products (e) Manufacture of cocoa,chocolate, and sugar confectionery (f) Malt liquors and malt 2. Textiles, wearing apparel and leather (A) Manufacture of textiles (a) Spinning,weaving, and finishing textiles (b) Manufacture of made-up textile goods (except wearing apparel) (c) Knitting mills (d) Manufacture of carpets and rugs (e) Cordage, rope, and twine industries (f) Manufacture of wearing apparel(except footwear) (B)manufacture of leather and products of leather (a) Tanneries and leather finishing (b) Manufacture of products of leather and leather substitutes (except footwear) (c) Manufacture of footwear 3. Manufacture of wood and wood products including furniture (a) Sawmills, planning, and other wood mills (b) Manufacture of wood and cane wear (c) Manufacture of furniture and fixtures 4. Manufacture of paper products, printing, and publishing (a) Manufacture of pulp, paper, and paper board 5.Manufacture of chemicals, and chemical, petroleum, coal, rubber, and plastic products (A) Manufacture of industrial chemicals and other chemical products (a) Basic industrial chemicals

Products Frozen and canned fruits and vegetables Frozen shrimps and prawns Palm kernel cake Baby foods, cornflakes Cocoa butter,cocoa cake,and cocoa powder, cocoa based beverages Malt beverages and beers Products Grey cloth, real wax, African prints, cotton sheets, yarns (cotton,and polyester filament) Bed linen, towels Cotton underwear, casual wear, children’s wear Carpets, backing/underlay Fishing nets Made-up garments(children’s wear, safari suits, etc.) Products Wet blue, crust, and finished leathers Hand bags,wallets, suitcases, etc. Shoes Products Veneer, parquet flooring, flooring strips, plywood, skitting boards,wall panels, etc. Rattan cane ware Furniture components, outdoor hardwood components, door/window frames Products Short fibred pulp Products

Benzene,Crude Glycerine,Anhydrous Ammonia (continued)

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Table 8.5 (continued) (b) Manufacture of fertilizers and pesticides (c) Manufacture of drugs and medicines (d) Manufacture of soap and cleaning preparations, perfumes,cosmetics, and other toilet preparations (e) Manufacture of chemical products not elsewhere classified (f) Products of petroleum refineries (B) Manufacture of rubber products (a) Tyres and tubes industries (b) Manufacture of rubber products not elsewhere classified (c) Manufacture of plastic products, not elsewhere classified 6. Manufacture of non-metallic mineral products (a) Manufacture of Pottery,China, and earthen ware (b) Manufacture of glass and glass products 7. Basic metal industries (a) Iron and steel basic industries (b) Non-ferrous metal basic industries 8. Manufacture of fabricated metal products, machinery, and equipment (a) Manufacture of motor vehicles

(b) Manufacture of motor cycles and bicycles

Domestic insecticides,agro-chemicals,Urea, and anhydrous ammonia Analgesics, anti-malaials,tonics,and anti-biotics (pharmaceuticals) Soap,perfumes, cosmetics,detergents,toothpastes,air fresheners, etc. Carbon black, candles Gasolene, dual purpose keresone, automotive gas oil, fuel oils, lubricating oils, and greases Products Automotive Tyre and tubes, wheel barrow tyres Rubber foot mats, transmission belts,canvass shoes,shoe soles,floor tiles, etc. Woven polypropylene sacks/bags, various plastic ware (plastic shoes, plastic furniture, etc.) Products Ceramic sanitary wares Glass bottles, jars,globes, sheet glass, etc. Steel billets and rolled products, direct reduced iron *DRI) and cold-briquette iron (CBI) Tin and columbite, aluminium products (extrusions and hollow ware) Products Automotive components (batteries,plastic light coverings, oil-filters,brake pads/linings,radiators, wheel covers, etc., cars, trucks, etc. Bicycles

Source: Nigerian Export Promotion Council/ECG Report

needs. In the medium term it should also be feasible to produce petro-chemical based products for export as well as harness the potentials of the solid minerals sub-sector. Unfortunately, since this survey was undertaken in the1990s, the manufacturing sector had faced serious headwinds leading to several of the sub-sectors and product groups identified as having export potential not performing up to expectations. For example, the two tyre manufacturing companies, namely Michelin and Dunlop, have since closed their operations in Nigeria. Also several textile manufacturers have closed their factories.The two integrated steel complexes at Ajaokuta and OvwianAladja as well as the rolling mills are in comatose with no significant output for over 20 years. Similarly the motor assembly plants have remained dormant for several

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years. In the prevailing situation the hope of exporting the products of these industries from Nigeria remains a distant dream. However, in order to translate the export potentials highlighted in Table 8.5 into reality, the following policy areas will need to be urgently addressed: 1. development and upgrading of internal resource bases where the necessary raw materials and production inputs are already available or potentially available, 2. provision of supporting industrial infrastructure such as electricity, water supply, transport network, etc. at reasonable costs and on steady basis, 3. appropriate export incentives and the elimination of administrative bottlenecks, 4. relative political stability and a leadership class that is fully committed to free Nigeria from her over dependence on crude oil, 5. commitment to a long range plan and avoidance of sudden “U” turns in government policies, 6. a competitive exchange rate which avoids the over-valuation of Naira relative to her major trading partners, 7. absence of excessive protection to local import substitution industries.in order to minimize and/or eliminate anti-export bias, 8. appropriate demand management policies which involve holding down domestic demand and increasing the pressure to sell abroad, 9. timely and prudent investment in export oriented industries in order to create appropriate supply capability, 10. exploitation of opportunities in areas of comparative advantage and resource endowment, 11. judicious use of foreign aid and technical assistance.in promoting export oriented industries, 12. increasing the level of foreign direct investment in the manufacturing sector. Detailed discussion in each of the foregoing areas is beyond the scope of this chapter. However, each area will need to be critically examined as part of the export development and promotion strategy for made-in-Nigeria goods.

5 Potential Export Markets for “Made-in-Nigeria” Goods Having identified the products with export potential in the short, medium, and long term, the next stage is to select potential export markets for such goods. Although the entire world could be regarded as the market place for Nigerian goods, it is advisable to concentrate on a few selected target markets with the highest potential to begin with and gradually expand into other territories or regions. In identifying potential overseas markets, the following are some of the general parameters to be considered, namely. • Gross Domestic Product of the target country/region. • Population Size and Demographic Indicators.

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Per Capita Income and Consumption. Balance of Payments Position. Historical Trade Relationship with Nigeria. Cultural/Ethnic Links. Transport and Communication Links. Tariff and Non-Tariff Barriers. Market Similarity and Accessibility. Convertibility of Currency. Preferential Trade Arrangement (multilateral or bilateral).

Within the context of the foregoing, the undermentioned regions should, in the first instance, be accorded highest priority in Nigeria’s quest for foreign markets: • ECOWAS Countries/African Continental Free Trade Area. • Countries of the European Union. • North America (comprising USA, Canada, and Mexico). To start with, by virtue of proximity and regional trade agreement grouping the 15 West African countries into a custom union, Nigeria should as a matter of priority aspire to maximize the export opportunities available in the ECOWAS sub-region. Such opportunities exist for a wide range of made-in-Nigeria goods which can be exported into the regional market. To date official trade between Nigeria and ECOWAS countries is negligible. Total non-oil exports to the sub-region amounted to only $265.8 million in 2015. However, a lot of unofficial export in manufactured goods is taking place across the whole region ranging from detergents and textiles to a wide variety of manufactured goods. A visit to the major markets in Lome, Accra, Abidjan, and others will convince one of the market acceptability of made-in-Nigeria goods in these countries. What is required is to translate these unofficial exports to official trade. With the devaluation of the Naira, coupled with effective payment arrangements, and enlightenment of Nigerian exporters, this region holds great promise for the future. Nigeria’s export prospects in the region will be further enhanced if major industrial projects scheduled for implementation such as in iron and steel, pulp and paper, petro chemicals, etc. are designed ab initio with the regional market in view. Furthermore, proactive Nigerian companies should seek to establish subsidiaries in some of the more promising ECOWAS countries as a logical extension of their export promotion strategy. However, it should be pointed out that in contrast to North America and Europe where ability to pay may not be a problem, the same is not true of most of the ECOWAS countries some of which are reckoned amongst the poorest and least developed countries of the world. Therefore, there is a need to take appropriate precautions in coping with commercial risks that will arise from exporting to such countries. At this juncture mention should also be made of the export market opportunities that will arise from the coming into force of African Continental Free Trade Area (AfCFTA) agreement. With the signing of the Treaty in July 2019 Nigeria joined 53 other African countries in establishing a continental free trade area. With a

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population of over 1.20 billion and a GDP estimated to be in excess of $2.50 trillion, AfCFTA will be a formidable market for goods and services. All the challenges and opportunities highlighted later under ECOWAS sub-region will be equally applicable under AfCFTA, especially as the continent transits to a common external tariff against third countries. The second region to be targeted for export market development are countries of the European Union (EU). Historically, Western Europe has been the largest market for Nigerian exports accounting on the average for over 60% of oil exports and over 80% of non-oil exports. Accordingly, efforts should be made to expand exports into this region, especially with the continuing enlargement of the European Union. Furthermore, under the Economic Partnership Agreement (EPA) between the EU and 16 West African countries all exports will eventually enjoy duty free access between the two regions. Consequently, Nigeria should seek to exploit this opportunity to maximum advantage. However, as at the time of writing this chapter, Nigeria is yet to ratify the Agreement for reasons stated in Chap. 10 of this book. Also it should be pointed out that with the emergence of AfCFTA, the dynamics of future trade relations between Africa and the outside world, the EU inclusive, will undergo significant changes. In 2015, Europe accounted for about 46% of crude oil exports from Nigeria valued at N3,227 billion ($116.38 billion). On the other hand, Nigeria’s non-oil export to the EU is still very small and consists mostly of agricultural commodities and semi-processed intermediates. For the future, the non-oil trade with the EU must move beyond the traditional commodities to manufactured goods, which as previously pointed out holds the key to Nigeria becoming a member of the newly industrialized countries. The success stories of the South East Asian countries, namely South Korea, Singapore,Taiwan, and Hong Kong should be eye openers in this direction. The third major region in terms of potential for Nigeria’s exports is North America, comprising the USA, Canada, and Mexico, making up the North America Free Trade Area (NAFTA). This region, principally the USA (before the advent of shale oil) used to take about a third of Nigeria’s oil export and about 10% of non-oil exports. Furthermore, North America continues to be one of the largest and richest markets in the world with a population in excess of 490 million and a GDP of over $24 trillion in 2019. Apart from the size and potential of the market, North America has the largest concentration of blacks outside the African continent. This factor could be exploited by Nigeria to maximum advantage since one out of every five blacks is a Nigerian. Consequently, every effort ought to be made in promoting the export of made-inNigeria goods to this region. It is also worth highlighting here that whilst efforts should be directed at these three regions to start with, it does not mean the complete abandonment of export market opportunities in other parts of the world, especially in the Middle East, Asia, and Latin America. Furthermore, it should be pointed out that the treatment of potential export markets has been at the macro-level. To translate export

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opportunities into reality, it is necessary for each company at the micro-level to fashion out appropriate market penetration strategies. At the micro-level, individual companies planning to venture abroad must have robust strategies and action plans for export market development. There are several questions to which the individual exporter must seek answers before venturing abroad. These include: 1. Which overseas target markets and market segments to aim at? 2. Which specific products to export? 3. What features should be incorporated into the products to meet requirements of overseas buyers? 4. What quality standards to aim at in line with market requirements? 5. How should the products be packaged? 6. Which channels of distribution to use in order to reach the target market segments? 7. Which promotional tools to employ? 8. What prices to charge? 9. How to get paid? 10. How to mitigate against risks of delay or default in payment? In short, the prospective exporter must review all the marketing mix variables that call for decision and action as part of an overall marketing strategy before venturing abroad.

6 Problems and Constraints of Made-in-Nigeria Goods So far, the picture painted is that of potential foreign markets waiting to be grabbed and flooded with made-in-Nigeria goods. In reality, this is not likely to be easy as there are several problems and constraints which have to be tackled in order to gain a foothold in potential export markets. Some of these problems are highlighted below:

6.1

High Cost Structure and Poor Infrastructure

The high cost of producing made-in-Nigeria goods could be a major constraint in penetrating potential export markets. However, with the devaluation of the Naira, this problem is being partially tackled. However, given that for most manufactured goods there is still a heavy reliance on imported inputs whose costs have more than doubled in recent times, the high cost structure of made-in-Nigeria goods still remain a problem. Furthermore, some of the underlying factors responsible for the high cost of such goods stem from inefficient and poor infrastructure such as inadequate power supply which necessitates the need to have stand-by generators, poor transport network, lack of water supply and basic municipal services, low productivity,

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bureaucratic ineptitude as well as a generally hostile business environment. In order to remain competitive in export markets against cheaper goods from other sources, steps must be taken to reduce the high cost of doing business in Nigeria.

6.2

Quality Standards

Until recently Nigerians preferred imported products to made-in-Nigeria goods because of the perceived superior quality standards associated with such goods. Generally, many goods produced in Nigeria are believed to be of inferior quality with the exception of internationally well known brands produced to specifications laid down by the multinational companies. Consequently, to succeed in the international market place, quality standards have to be improved upon in order to meet the stringent requirements of foreign markets, especially in Europe and North America. Here the Standards Organization of Nigeria (SON) can do a lot by prescribing and enforcing high quality standards for made-in-Nigeria goods in order to establish the appropriate quality image for goods originating from the country. It should be pointed out here that in some countries it is a criminal offence to produce and/or market sub-standard or adulterated goods.

6.3

Restrictive Trade Practices

Another major constraint which might prevent the exportation of made-in-Nigeria goods to foreign markets stems from the restrictive trade practices imposed by multinational corporations who have the proprietary rights to several of the branded products currently produced in Nigeria. For example, subsidiaries of multinationals operating in Nigeria cannot, under existing trade arrangements, export their well known brands to other countries no matter how near without permission and the payment of royalties to their parent companies. Given that most of the well known brands are already being supplied by plants located outside Nigeria, it may not be easy in getting such concessions. Consequently, several of the made-in-Nigeria goods which are obvious candidates for exportation into foreign countries may not just be available under existing conditions. Here the government, organized private sector, and the multinational corporations with subsidiaries operating in Nigeria, must join hands in finding acceptable solutions to this problem. This is considered to be very urgent in view of the recently launched African Continental Free Trade Area agreement which envisages free trade in goods and services across the African continent.

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Marketing Skills

Having operated for so long behind high protective tariff walls, many companies in Nigeria have lost their marketing orientation. It is therefore very doubtful under prevailing inward looking and poor marketing practices whether such companies can survive the competitive battle in the international market place. However, it is gratifying to note that since the introduction of the Structural Adjustment Programme (SAP) and the arrival of a buyers’ market many companies have suddenly realized that the customer is king and the cornerstone for survival and growth. Unless this attitude is carried into the export sector, the full market potential of made-in-Nigeria goods cannot be realized.

6.5

Research and Development

Those companies that are in the forefront of international trade are the ones that are continually turning out new and improved products and processes. The secret of their success lies partly in the heavy expenditure on research and development (R & D). For Nigeria to establish a sustainable image for made-in-Nigeria goods, there is an urgent need to invest heavily on R & D so that such goods can be continuously improved upon to meet the ever changing and demanding requirements of overseas customers. In addition, R & D ought to be given the pride of place in the current efforts aimed at the development of local raw materials and inputs for industry.

6.6

Tariff and Non-Tariff Barriers

For some of the made-in-Nigeria goods for which potential foreign markets have been identified, there will be a need to overcome the problems associated with tariff and non-tariff barriers before such goods can gain access into these markets. For example, tough health standards, product labelling, and packaging requirements have to be complied with in North American and countries of the European Union for certain types of exports to gain entry, e.g. food, cosmetics, and health-care related products.

6.7

Transport and Communication

Within the ECOWAS sub-region, apart from the other problems which potential exporters have to overcome, transport and communication remain major constraints to reaching potential customers. Shipping services are irregular and costly since most

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north-bound ships return to Europe in ballast due to lack of cargo on their home word journeys. Consequently, many of the made-in-Nigeria goods which should have found ready markets in the ECOWAS countries cannot be exported easily or could only be exported at prohibitive transport costs. Also several impediments, including border controls currently make land transportation across ECOWAS countries difficult. All the problems and constraints highlighted above will also have to be contended with in trade relations between Nigeria and other African countries as espoused under the erstwhile New Partnership for African Development (NEPAD) Protocol and lately the African Continental Free Trade Area (AfCFTA) agreement. In view of all the foregoing, government should redouble its efforts to significantly reduce the cost of doing business in Nigeria and also make the country more attractive to would be investors, both local and foreign, wishing to produce for export markets.

7 Strategies for Export Development This section of the chapter examines the strategies which ought to be pursued in order to translate export goals into reality. In the world of business, there are three major aspects of a strategic plan, namely 1. the identification and setting of objectives and goals to be achieved. 2. the formulation of the strategy to be adopted in order to achieve goals. 3. the implementation of the agreed strategy to translate goals into reality. In line with the foregoing, the government should as a matter of urgency set clearly defined national goals for export development which would provide the framework for export policy formulation and implementation in both the public and private sectors. For example, a challenging, but yet attainable goal should be to diversify Nigeria’s export base such that within 10 years no more than 50% of the country’s foreign exchange earnings come from the oil sector. Such a goal will of course mean that efforts have to be made to develop non-oil exports like agricultural commodities, solid minerals, and a wide variety of manufactured goods. It should be pointed out immediately that such a goal is only realizable under a dedicated political leadership that understands the key issues at stake and is totally committed to unbind Nigeria’s near total dependence on crude oil. Apart from setting the overall national objective for export development, subsidiary goals should be established for each of the major economic/industrial sectors in terms of the contribution expected from each sector in the medium to long term towards the attainment of export diversification and expansion. Similarly private sector establishments should carry out strategic appraisals of their export development plans with a view to achieving corporate goals in this area. Any discussion on export development strategy will not be complete without some mention of the package of incentives put in place by the government in order to

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boost exportation of made-in-Nigeria goods on a self-sustaining basis. This is one area, after several years of delay, where government in 1986 finally came out with bold policies aimed at creating the right environment for export business. Under the Export (Incentive and Miscellaneous Provisions) Decree of 1986 as elaborated in Chap. 7 of this book, government rolled out a package of incentives to boost non-oil exports so as to reduce the over dependence on crude oil exports which since the 1970s had consistently accounted for over 90% of foreign exchange earnings and the bulk of government revenue. The provisions of the export promotion decree are well known and many exporters are already taking advantage of them. However, it should be pointed out that the Authorities need to fine tune the administration of some of these incentive schemes in order to ensure their effectiveness in motivating exporters to superior performance. There is also the need to strengthen the focal institution, namely the Nigerian Export Promotion Council, charged with the responsibility for export development and promotion. Apart from what the government can do to help exporters, the exporters themselves should ask what they can do to help themselves. Those exporters who see export business as an avenue to make quick profits through sharp business practices are not helping the image of the more serious Nigerian exporters. Indeed, export business is a long term proposition which like any new business has to be nurtured over a period of years. Therefore, the basis for success in the long run lies in building on a solid foundation of credible performance in terms of the quality of goods exported, keeping to promised delivery dates, and mutual confidence established over the years between Nigerian exporters on the hand and their overseas customers on the other. At this juncture, the efforts of those exporters who have come together to form the Association of Nigerian Exporters (ANE) as well as the Export Group of the Manufacturers Association of Nigeria should be commended. It should be emphasized here that exporting companies in Nigeria have much to gain by collaborating with one another in promoting export business rather than engaging in needless and destructive competition. Nigerian exporters can take a cue from the experience of their counterparts in other countries by forming “Joint Export Marketing Groups” to promote the business of their members in their respective trades. Joint export marketing groups are voluntary associations made up of individual firms in an industry who associate to form trading companies for the purpose of promoting their goods in identified foreign markets, whilst still retaining their individual identities and freedom of action in the domestic market. Such joint export marketing groups will enable Nigerian manufacturers, especially the small and medium scale enterprises, to pool their limited resources in promoting their export business through the following: 1. 2. 3. 4.

joint sharing of orders beyond the capability of a single firm. joint promotional efforts and export drives. more effective utilization of limited production facilities. long term planning for foreign market penetration.

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In addition, NGOs such as the Manufacturers Association of Nigeria, the Nigerian Chambers of Commerce and Industry, and other similar bodies have a role to play in mobilizing and sensitizing their members to support government drive to promote the export of made-in-Nigeria goods.

8 Summary and Conclusion In concluding this chapter, a number of observations are made as they relate to export development in general and made-in-Nigeria goods in particular. At the risk of repetition, the point should be made that export trade has a key role to play in economic and social development, especially in a developing economy like Nigeria. Consequently, the view of those critics who advocate the closing of Nigeria’s borders, produce everything we need at home and engage in minimal export business is not tenable. Such a siege mentality has no place in today’s world of globalization and trade liberalization. Economic and industrial development at home can go on simultaneously with aggressive export promotion aimed at exploiting Nigeria’s abundant resource endowment and comparative advantage. What is required is to put national interest as the focal point in the fierce competitive battle of international trade. The second observation relates to the fact that export business development has to be implemented within the context of a medium to long range strategic plan spanning a period of 5–20 years. In the interim markets have to be identified, appropriate policies and the required infrastructure put in place, and investments made in selected export oriented industries. Here the record of previous administrations leaves much to be desired. Had the country made the right investment decisions during the oil boom era of the 1970s, and as envisaged in the various national development plans, especially in iron and steel, petro-chemicals, pulp and paper, LNG, sugar, oil refineries, etc. Nigeria should by now be net exporters of a sizeable crop of made-in-Nigeria goods. Unfortunately virtually all the previous administrations lacked the discipline and political will required to translate export development plans and goals into reality. Given the realization of this folly, it is hoped that the present and future political leadership of the country would draw appropriate lessons from past mistakes as a guide to the future with a view to pursuing sustainable long term export development goals. Lastly, in promoting the export of made-in-Nigeria goods on a self-sustaining basis, there are no short cuts - it is a tortuous laborious race which only the dedicated and steadfast can win. Countries such as Brazil, China, South Korea, Malaysia, and Taiwan have all demonstrated the importance of export led growth in promoting rapid industrial and socio-economic development. Nigeria can do the same if the right policies are pursued and all the binding constraints to export development are eliminated.

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Given dedicated leadership, a strong commitment to national goals, appropriate policies, and strategies, Nigeria too can win the race over the next 10–20 years. In this regard, the government should fully enlist the support of the private sector in this endeavour by partnering with them and rolling out policies and incentives to promote export business. However, to succeed in the international market place, the private sector must itself come up with imaginative export development strategies, aggressive marketing policies, high quality standards, and price competitiveness combined with good business practice nurtured over time to meet the challenges of export trade on a sustained basis.

References 1. Federal Government of Nigeria, 1986. Export (Incentives and Miscellaneous Provisions) Decree 2. Economic Community of West African States, 1975. Treaty of the Economic Community of West African States 3. Nigerian Export Promotion Council, 1990. Consultancy Report on Study of Nigeria’s Export Potential

Chapter 9

Tariff Harmonization in West Africa and Africa: Prospects for the Nigerian Manufacturing Sector

1 Introduction Tariff harmonization and the adoption of a common external tariff have been a major goal of the founding fathers of the Economic Community of West African States (ECOWAS) since the formation of the regional economic community in 1975. However, over the next 25 years not much was achieved in this direction until the year 2000 when at a summit of the Heads of State of ECOWAS member states held in Abuja, Nigeria, it was resolved to adopt a common external tariff (CET) against third countries with effect from first January 2001. It was also resolved that the ECOWAS CET is to be based on the lowest custom duties currently applicable in the Community. As at the proposed start off date the lowest custom duties applicable in the region were those of the UEMOA (Union Economique et Monetaire Quest Africaine) countries, a sub-group of eight French speaking countries within ECOWAS. In effect that meant that the other seven countries within ECOWAS, Nigeria inclusive, had to adopt the EUMOA CET which became the ECOWAS CET to be effective from 1st January 2001. However, not much was achieved in this direction of tariff harmonization over the next 10 years because of the wide disparity between the UEMOA CET and the other ECOWAS Countries, especially Nigeria which has the largest economy in the sub-region. Given the wide disparity between the EUMOA CET featuring only four tariff bands ranging from 0 to 20% as compared to Nigeria with 20 tariff bands ranging from 0 to 100%, the Nigerian government was not in a position to

Member States of ECOWAS are: Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea, Guinea Bissau, Cote D’Ivoire, Liberia, Mali, Mauritania (later withdrew), Niger, Nigeria, Senegal, Sierra Leone, and Togo. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5_9

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fully implement the newly adopted ECOWAS CET without causing major disruptions to the manufacturing sector in particular and the economy in general. It was not until 2005 that the Nigerian government finally resolved to adopt the ECOWAS CET, but based on five tariff bands with an upper limit of 50%. Even then it was a partial adoption as about 30% of the tariff lines under the new regime were above the maximum rate of 20% allowed. Another 10 years were to lapse before Nigeria and the other 14 countries in the sub-region finally resolved to fully implement the ECOWAS CET provisions with effect from 1st January 2015 but based on five tariff bands of 0,5,10,20, and 35%, respectively, to accommodate the concerns of Nigeria. In addition to the move towards regional integration in West Africa under the ECOWAS Treaty, there were also other sub-regional economic groupings across the African continent such as East African Community, South African Development Community as well as the Central African Customs and Economic Union. In spite of this development, it has always been the desire of African Heads of State to transform the whole continent into a single Customs Union in order to accelerate socio–economic development. This goal was finally achieved in 2019 with the signing of the Treaty establishing African Continental Free Trade Area (AfCFTA) by 54 African countries, including Nigeria. Under the Treaty, it is envisaged that AfCFTA will metamorphose into a Customs Union in the near future with an African common external tariff (AfCET) against third countries as well as free trade in goods and services throughout the continent. This will no doubt pose challenges and opportunities to manufacturing industries in Nigeria, and indeed throughout Africa, when the full provisions of the Treaty are implemented. It is against the background of the foregoing that this chapter seeks to examine the problems and prospects for the Nigerian manufacturing sector in particular and the economy in general arising from tariff harmonization in the West African sub-region and ultimately throughout the African continent. For this purpose the chapter is divided into seven parts as outlined below. Following this introduction Part II focuses on the origins of ECOWAS and the background to the common external tariff. Part III contains a review of the previous tariff regime that prevailed in Nigeria up to 2014. Part IV compares Nigeria’s previous tariff regime with the ECOWAS CET. Part V examines the implications, problems, and prospects that will arise from the implementation of a West African common external tariff for the Nigerian economy in general and the manufacturing sector in particular. Part VI highlights some of the opportunities and challenges that manufacturing industries in Nigeria will have to face as a result of the recently launched AfCFTA. Part VII contains the summary and conclusion.

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2 Background to ECOWAS CET The Economic Community of West African States (ECOWAS) came into existence in 1975 under the Treaty of Lagos. At its formation, it was envisaged that over a period of 15 years, ECOWAS would metamorphose into a complete customs union characterized by free trade amongst member countries with a common external tariff against third countries and free movement of the factors of production within the Community, as well as the harmonization of economic and industrial policies. The objective of becoming a Custom Union was emphatically stated as one of the chief aims of ECOWAS as enunciated under article 2 of the Treaty [1] which states as follows: 1. It shall be the aim of the Community to promote cooperation and development in all fields of economic activity for the purpose of raising the standard of living of its peoples. 2. For the purpose set out in the preceding paragraph, the Community shall by stages ensure: (a) the elimination between Member States of customs duties and other charges of equivalent effect in respect of the importation and exportation of goods. (b) the abolition of quantitative and administrative restrictions on trade amongst members. (c) the establishment of a common customs tariff and a common commercial policy towards third countries. (d) The abolition as between the Member States of the obstacles to the free movement of persons, services, and capital. These objectives are again reaffirmed in Article 12 of the Treaty with a specific time frame as follows: "There shall be progressively established in the course of a transitional period of fifteen (15) years from the definite entry into force of the treaty a custom union among the member states". The requirement concerning the establishment of a common external customs tariff was reaffirmed in Article 14 of the Treaty, namely, that Member States agree to the gradual establishment of a common customs tariff in respect of all goods imported into the Member States from third countries. Thus, the current effort being made by ECOWAS Heads of State to implement the provisions of a common external tariff is long overdue and should be commended. On both theoretical and empirical grounds, the formation of a customs union, as observed by Viner [2] is expected to lead to the rapid expansion of trade, promote industrialization and enhance economic growth and development. A glaring example of the advantages of a custom union is the European Union which was established in 1957 under the treaty of Rome with an initial membership of six countries. Today the EU has grown to become a global giant with a membership

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(as at March 2019) of 28 countries and many others waiting to join the union in the not too distant future. Apart from the European Union, several other regional trade/economic blocks have been established during the second half of the twentieth century to promote trade, industrialization, and socio-economic development as illustrated in Table 9.1. Table 9.1 Examples of regional trade agreements Agreement Andean Common Market (also called the Andean Pact or Andean Community) Asia-Pacific EconomicCooperation

Acronym ANCOM

Members Bolivia, Colombia, Ecuador, Peru, Venezuela

APEC

Association of South East Asian Nations Caribbean Community and Common Market Economic Community

ASEAN

5.

Central American Common Market

CACM

6.

Central African Customs and Economic Union (Union Douaniere et Economique de 1’Afrique Centrale) Central European Free Trade Area

UDEAC

Australia, Brunei, Canada, Chile, China, Hong Kong, Indonesia, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Philippines, Singapore, Taiwan (China), Thailand, USA Indonesia, Malaysia, Philippines, Singapore, Thailand Antigua and Barbuda,Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname,Trinidad, and Tobago Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua Cameroon, the Central African Republic, Chad, Congo, Gabon

1.

2.

3. 4.

7.

CARICOM

CEFTA

8.

Union Economique et Monetaire Quest Africaine

UEMOA

9.

Economic Cooperation Organization

ECO

10

European Free Trade Agreement

EFTA

11 12

East African Community Economic Community of West African States

EAC ECOWAS

Czech Republic, Hungary, Poland, Slovak Republic, Slovenia Benin, Togo, Cote D’Ivoire, Senegal, Mali, Burkina Faso, Guinea, Niger Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzia, Iran, Pakistan, Tajikistan, Turkey, Turkmenistan, Uzbekistan Austria, Finland, Iceland, Liechtenstein, Norway, Sweden, Switzerland Kenya, Tanzania, Uganda Benin, Burkina Faso, Cape Verde, Cote D’Ivoire, The Gambia, Mali, Niger, Senegal, Togo, Ghana, Guinea, Guinea Bissau, Liberia, Mauritania(later withdrew), Nigeria, Sierra Leone (continued)

2 Background to ECOWAS CET

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Table 9.1 (continued) 13.

Agreement European Union

Acronym EU

14

Gulf Cooperation Council

GCC

15.

Latin American Free Trade Area

LAFTA

16

Latin American Integration Association’

LAIA

17.

Mercosur (Southern Common Market) North American Free Trade Agreement South Asian Preferential Trade Agreement Southern African Development Community

Mercosur

18. 19. 20.

NAFTA SAPTA SADC

Members Austria, Belgium, Bulgaria, Czeck Republic, Croatia, Cyprus, Denmark, Estonia, France, Finland, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania Luxembourg, Netherlands, Malta, Poland, Portugal, Spain, Romania, Slovenia, Slovak Republic, Sweden, United Kingdom Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, Venezuela Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, Venezuela Argentina, Brazil, Paraguay, Uruguay Canada, Mexico, USA Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Swaziland, Tanzania, Zambia, Zimbabwe

The importance of trade blocks in promoting trade and economic development continue to receive attention in different parts of the world, Africa inclusive. A good example is the recent launching of the African Continental Free Trade Area in 2019 following the ratification of AfCFTA Treaty [3] by Heads of State of the 54 members of the African Union. The primary objective of the trade agreement is to create a single African common market for goods and services throughout the continent and ultimately a common external tariff against third countries. Given developments in other parts of the world as highlighted in Table 9.1, it has therefore become imperative for the leaders of ECOWAS and indeed Africa to take urgent steps to make the goal of the founding fathers of ECOWAS/AfCFTA a reality within the shortest possible time if the Continent is not to be by-passed by developments in other parts of the world. Furthermore, judging by the progress achieved by other regional trade groups such as the European Union, Association of South East Asian Nations (ASEAN) etc. ECOWAS still has some catching up to do in order to meet the goals and aspirations of its founders.

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At this stage, it is sad to note that intra-ECOWAS trade is still quite low as a percentage of total trade. Currently, intra-ECOWAS export accounts for less than 15% of the total value of exports of the countries within the Community, despite the ECOWAS Trade Liberalization Scheme. But this is not surprising as implementation of the ECOWAS Treaty has been haphazard and slow. Analysts have attributed the slow pace of economic integration within ECOWAS to many factors, including the in-fighting between English speaking and French speaking groups of countries and most importantly, lack of the political will to embark on tariff reduction and the elimination/removal of other non-tariff barriers to trade. Thus there has been a clear lack of success in satisfying the two requirements of a customs union, namely intra-ECOWAS free trade and a Common External Tariff against third countries. This lack of trade integration has naturally resulted in poor performance in the growth of trade, both total and intra-union, and to weak overall economic performance. To arrest this uninspiring situation, the Authority of Heads of State of ECOWAS at their mini-summit held in Abuja in March 2000 approved the adoption of a Common External Tariff (CET) with effect from first January 2001. At a subsequent meeting in Dakar in December 2001 the Authority of Heads of State urged all Member States to implement the provisions of the ECOWAS Trade Liberalization Scheme within the shortest time and take all necessary measures to prepare their economies for the introduction of the ECOWAS Common External Tariff based on the lowest existing customs duties in the sub-region which range from zero to 20%. It should be pointed out that the lowest existing customs duties in the sub-region were those of the UEMOA CET, covering eight Francophone countries. Under the UEMOA CET products are classified into four groups for purposes of tariff setting as follows: • • • •

0% for medicines, medical equipment, newspapers, books, etc. 5% for capital goods and raw materials. 10% for intermediate goods and other inputs. 20% for finished consumer goods.

All countries in the ECOWAS sub-region were expected to adopt this new tariff regime within a transitional period of 4 years starting from 2005. Full harmonization was expected to be achieved by 2008. However, arising from several delays in the implementation programme full tariff harmonization did not take place until 1st January 2015 when the ECOWAS CET came into force amongst all countries in the Community. However, it should be noted that the ECOWAS CET, unlike the EUMOA CET, consists of five tariff bands of 0%,5%,10%,20%, and 35%, respectively. The 35% tariff band was added at the instance of Nigeria to give further protection to manufacturing industries considered sensitive to trade liberalization and covers a variety of final consumer and luxury goods. What then are the implications of ECOWAS Common External Tariff on the Nigerian economy in general and the manufacturing sector in particular? Before one can give a robust answer to this question, it is necessary to undertake a review of the tariff regime which prevailed in Nigeria prior to the adoption of ECOWAS CET. This task is undertaken in the third part of this chapter.

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3 Customs Tariff Regime in Nigeria Prior to ECOWAS CET, the prevailing tariff regime in Nigeria came into force in 1995 with the promulgation of the Customs, Excise Tariffs etc. (Consolidation) Decree of 1995. The decree set out the tariff levels applicable in Nigeria over the seven-year period 1995–2001. This was the second multi-year tariff regime to be adopted by Nigeria, the first being the 1988–1994 tariff regime. Prior to 1988 Nigeria operated a system of ad hoc annual tariff reviews under the Open General Licence (OGL) system. The 1995–2001 tariff regime expired at the end of 2001. However, through annual amendments to the published tariff regime, its duration was extended to 2005. Thereafter Nigeria adopted a new tariff regime based on the UEMOA benchmark at the beginning of 2006. However, this was only a partial adoption as over 30% of the tariff lines in Nigeria were still above those of EUMOA CET.The full adoption of the ECOWAS CET had to wait for another ten years before it was finally adopted by all the fifteen members of the Community, including Nigeria, effective from 1st January 2015. What then were the key features of the tariff regime from which Nigeria transited to the ECOWAS CET in 2015? The structure of Nigeria’s import tariff over the period 1995–2001 was a cascading one in which tariffs increase with the levels of processing. Tariff rates, all advalorem, range from zero to 100%. As originally published, the unweighted average tariff rate at the inception of the new tariff regime in 1995 was 24.3%. However, by the end of 2001, this has risen to 27.8% arising from the annual changes to the published rates.As at the end of 2001, some 1500 tariff lines (about 30% of the total number of tariff lines) had been amended. Thus the objectives of stability and consistency were not realized, nor were those of transparency and predictability, as several product groups and sub-sectors received approval to import at concessionary rates. There was also evidence that some firms received approval to import products that were import prohibited. As the qualifying criteria for such approvals were not published, the process cannot be said to be transparent. The net effect of all the foregoing was the absence of a level playing field for all investors. This state of affairs provided incentives for lobbyists and other rent seekers wanting to profit from tariff waivers/concessions. Given the foregoing, a move towards a simpler, more predictable, consistent, and transparent tariff regime is therefore recommended for the future. Thus the ECOWAS CET offers the best opportunity to achieve this goal. The net effect of amendments on the actual structure of tariff over the 1995–2001 period as compared to the published position in 1995 is as shown in Table 9.2. A further disaggregation of the tariff regime revealed the following: 1. There were 20 rates, at 5% intervals from zero to 100%. The share number of rates provided loopholes for tariff arbitrage as well as extensive administrative discretion, both of which were not in the interest of a stable and transparent tariff regime. This situation also provided avenues for bribery and corruption.

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Table 9.2 Trends in Nigeria’s unweighted average tariff rates %

Overall Economy (of which) Agriculture Mining Manufacturing (of which) Consumer goods Intermediates Capital goods

Published 1995 24.3 22.9 14.5 24.6 39.1 18.3 12.6

Tariff 2001 26.0 24.7 14.7 26.4 36.7 22.3 16.2

Actual 1995 15.8 14.9 9.4 16.0 25.4 11.9 8.2

Tariff 2001 27.8 16.0 14.2 28.1 43.9 21.0 15.5

Source: Federal Ministry of Finance / ECG Reports

2. About 70% of the total number of tariff lines cluster between 5 and 30%. Most of the tariff rates applying to medicines, medical equipment, newspapers, books, raw materials, capital goods as well as intermediate products fall into 0–30% range. These hopefully can easily be harmonized under the ECOWAS CET. 3. Another 30% of the tariff rates were over 30% and in the range of 35–100%. These will definitely require a closer look before being harmonized. Several of the products falling under this category are finished consumer goods, textiles, some agricultural products as well as luxury goods. Against the background of the tariff regime that prevailed in Nigeria before the full adoption of ECOWAS CET, an attempt is made to compare Nigeria's previous tariff regime with the newly adopted ECOWAS CET as outlined below.

4 Tariff Comparison Between Nigeria and UEMOA As earlier indicated, the Authority of the Heads of State of ECOWAS gave the final approval for the adoption of ECOWAS CET throughout the Community based on the UEMOA CET with effect from first January 2015. However, it should be pointed out that the move towards a Common External Tariff had been gathering momentum over the last 10 years as all the other non-UEMOA countries, namely Ghana, Gambia, Liberia, Guinea, Guinea Bissau, Cape Verde, and Sierra Leone have in varying degrees made significant progress in this direction before the final adoption of ECOWAS CET in 2015. In Nigeria, the Federal Government has also taken steps to harmonize its tariff regime within the framework of ECOWAS CET. This was partially achieved in 2006. However, to appreciate the significance of the transition in Nigeria it is appropriate at this stage to compare the tariff regime that prevailed in the country up till 2005 with the new ECOWAS CET with a view to assessing the implications for the Nigerian economy in general and the manufacturing sector in particular.

5 Problems and Prospects for Nigerian Manufacturing Sector Under ECOWAS CET Table 9.3 Nigeria and UEMOA: unweighted average tariff rates in 2004 (%)

Minimum Maximum Mean Tariff rate(of which) Agriculture Mining Manufacturing (of which) Consumer goods Intermediates Capital goods

NIGERIA (2004) 0 100 29.6 34.8 13.6 30.0 49.1 21.7 11.8

241 UEMOA 0 20 12.1 11.0 5.0 12.2 17.7 9.3 8.5

Source: Federal Ministry of Finance/ECG Report

From comparative data, Nigeria’s import tariffs in 2004 were higher than those of UEMQA which is the benchmark for the ECOWAS CET as presented in Table 9.3. From the table, it will be observed that the unweighted average tariff rate for the overall economy was 29.6% in Nigeria as compared to UEMOA of 12.1%. A further analysis of the unweighted average tariff rate for the major economic sectors of agriculture, mining, and manufacturing revealed that the rates were 34.8%, 13.6%, and 30%, respectively, in Nigeria as compared to 11.0%, 5.0%, and 12.2% in UEMOA countries. The average tariff rate on goods under the manufacturing sector was further broken down as shown in the table to give additional insight into the applicable rates as they impact on different types of manufactured goods imported into Nigeria as compared to UEMOA countries. Based on the analysis, the average tariff rate on consumer goods, intermediates, and capital goods were estimated at 49.1%, 21.7%, and 11.8%, respectively, in Nigeria as compared to 17.7%, 9.3%, and 8.5% in the UEMOA countries. Thus at the macro, sectoral, and sub-sectoral levels, the unweighted average tariff rates in Nigeria were significantly higher than those prevailing in the UEMOA countries. It was therefore not surprising that several members of the Manufacturers Association of Nigeria were apprehensive as to the potential negative impact which the adoption of ECOWAS CET might have on their operations. Also there was serious concern on the potential loss of revenue that will accrue to the Nigerian government from the lowering of custom duties.

5 Problems and Prospects for Nigerian Manufacturing Sector Under ECOWAS CET Given the above scenario, what are the problems and prospects for the Nigerian economy in general and the manufacturing sector in particular following the adoption of ECOWAS CET? Before proceeding to seek answers to this question, a number of observations are made as follows:

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9 Tariff Harmonization in West Africa and Africa: Prospects for the Nigerian. . .

1. Global data (available from WTO) on tariff trends in both developed and developing countries confirm that tariff rates in Nigeria were significantly higher than the average in other parts of the world. From available data, it was observed that Nigeria’s average tariff in 2000 at 27.80%, was more than double the 11.30% average for129 developing countries. 2. The trend towards lower tariff is a worldwide phenomenon being driven by the forces of globalization and trade liberalization under the impetus of the World Trade Organization (WTO) to which most countries (including Nigeria) are signatories. Consequently Nigeria cannot isolate itself from global trends. 3. The commitment of ECOWAS Heads of State (of which Nigeria is a dominant player) to tariff harmonization within the sub-region to promote regional integration, trade, industralization, and economic development. In this connection, Nigeria has always demonstrated its leadership position in ECOWAS since its inception and as such the country should not be seen at the stage as backsliding. Given the foregoing, it is apparent that Nigeria’s high tariff could not be sustained into the future, hence there was an urgent need for tariff reforms based on the prevailing realities of the time. Thus Nigeria had to join the other countries in the sub-region to adopt the ECOAS CET, effective from first January 2015. However, Nigeria was able to persuade the other member countries of ECOWAS to introduce some modifications and safeguards to protect local producers/manufacturers that might be adversely affected by the wholesale adoption of ECOWAS CET. These safeguards include the following: 1. Adoption of anti-dumping and countervailing provisions under which imported products which threaten the existence of local producers through unfair trade practices could be prohibited from being imported into the Community in order to protect domestic producers. 2. Adoption of 5 tariff bands, namely 0%, 5%, 10%, 20%, and 35%, respectively, as opposed to the 4 tariff bands under UEMOA. The 35% tariff rate is to give additional protection to local producers of sensitive and finished consumer goods. Within the foregoing context, it should be possible to explore the problems and prospects that are likely to confront the Nigerian economy in general and the manufacturing sector in particular following the adoption of ECOWAS CET. From the national perspective and based on static analysis, the major concerns are in the following areas (a) reduced nominal and effective protection of domestic enterprises. (b) increased imports which may lead to deterioration in the balance of payments position. (c) probable loss of revenue to government from import and related taxes. To counter the foregoing concerns, the government is taking bold steps to improve on the ease of doing business in Nigeria, especially through the provision of better infrastructural facilities as well as putting in place appropriate policy

5 Problems and Prospects for Nigerian Manufacturing Sector Under ECOWAS CET

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measures and reforms to create a better enabling environment, all of which will in due course lower the cost of business operations in Nigeria. Secondly, in order to cushion the impact of lower tariff regime, government is pursuing policies aimed at boosting domestic output as well as aggressive diversification of the Nigerian economy in general. Thirdly, as to possible loss of revenue by government, this is expected to be mitigated through better collection efficiency and greater voluntary compliance arising from lower/moderate tariff rates. For the manufacturing sector in particular, some of the concerns/problems relate to the following: 1. The lowering of duties may put manufacturers at a competitive disadvantage given the poor state of infrastructure in Nigeria (electricity, railways, roads, water supply) and the consequent high cost of doing business in the country. 2. The emergent nature of some manufacturing sub-sectors in Nigeria and the need to protect such sectors until the time that they can stand up to competition. 3. The need to protect the industries that are strategic to Nigeria’s industrial take-off (for example, iron and steel, petro-chemicals, etc.) 4. For a number of manufacturing sub-sectors where Nigeria is at a more advanced stage of development than the other ECOWAS countries such as in pharmaceuticals, there will be need to take a second look and make adjustments to the rates applicable under ECOWAS CET. This is because under existing rules finished drugs and medicines are imported duty free whilst raw and packaging materials required by local pharmaceutical manufacturers attract duties of between 5 and 20%, thereby rendering their output uncompetitive with finished products. This situation arises because Nigeria is perhaps the only country in the sub-region that has a domestic pharmaceutical industry which needs to be protected, whereas virtually all the other ECOWAS countries rely on importation to meet their requirements and therefore are in favour of zero duty on drugs and medicines. These are genuine concerns requiring dialogue amongst all concerned stakeholders so as to come up with solutions that are appropriate. Every encouragement should be given in this regard to the formulation and articulation of appropriate policy responses especially at the sub-sectoral level where there may be glaring needs for protection of local industries. However, it should be added that import tariff is just one of the several factors which ought to be addressed in order to uplift the performance of the Nigerian manufacturing sector on a sustained basis. All the other factors affecting the performance of the sector such as inadequate infrastructure, high cost of funds, and inconsistent government policies should also be tackled at the same time. On the other side of the coin, what then are the advantages of ECOWAS CET and of regional integration? To seek satisfactory answers to the foregoing question one must go beyond static analysis and evaluate the situation under dynamic conditions. Whilst it may be true that some manufacturing enterprises may not be able to compete given the new

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economic realities and the inherent inefficiency of their operations, one can expect the benefits accruing to the country from regional integration to more than make up in the following areas. 1. Market enlargement for Nigerian products catering for the entire ECOWAS regional market with a population of over 300 million people. For this benefit to accrue, Nigerian companies are advised to put in place proactive market penetration strategies in order to capture a larger share of the ECOWAS market. In this regard, the bigger companies such as UAC, Dangote Group, Nigerian Breweries, Unilever, Nestle, PZ Cussons, etc. have a greater role to play as they have in place superior managerial, financial and marketing skills all of which can be deployed to penetrate the ECOWAS market. Hopefully this will galvanize other medium/large scale enterprises to follow suit. It should be pointed out that in the area of financial services, a number of Nigerian banks have already exported their services by establishing subsidiaries in ECOWAS countries. 2. Reaping of economies of scale arising from market enlargement and increased output should hopefully lead to a lowering of costs for manufacturers. More importantly, from the national perspective, capital-intensive projects such as iron and steel, petro-chemicals, automotive industries, etc. will become more viable within a regional context. Thus Nigeria, because of her size and a relatively more advanced manufacturing sector, has the potential to become the industrial powerhouse of the ECOWAS sub-region. 3. Opportunities for learning and practice at the sub-regional level will better prepare. Nigerian manufacturing enterprises for the New Partnership for African Development (NEPAD) which envisages increased economic integration and cooperation amongst African Countries. The recently launched African Continental Free Trade Area (AfCFTA) agreement should also be viewed from this perspective. 4. Prevention of trade and investment diversion from Nigeria arising from a different tariff and trade policy regime with their regional partners in ECOWAS. 5. Enhanced foreign direct investment in Nigeria due to market enlargement will be to the advantage of manufacturing enterprises in the country, thereby increasing their capability for regional/international competition. 6. Greater commitment by government to regional policies and reforms should lead to policy credibility and macro-economic stability in Nigeria especially within the context of ECOWAS macro-economic convergence criteria and adoption of a single currency. This will provide a better environment for long term planning and investment decision making by manufacturing enterprises. In the context of all the foregoing, the overall performance of the manufacturing sector in particular and of the Nigerian economy in general should be further enhanced through the deepening of regional integration and the adoption of ECOWAS CET.

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6 The Challenge of Africa Continental Free Trade Area (AfCFTA) In addition to the efforts being made to harmonize tariff at the ECOWAS sub-regional level, on 21st March 2018, the Heads of State of members of the African Union (AU) signed the African Continental Free Trade Area (AfCFTA) agreement at their meeting held in Kigali, Rwanda. The primary goal of the Agreement is to create a single African common market with free movement of goods and services throughout the continent and ultimately a common external tariff against third countries. The agreement came into force on 30th May 2019. At the launch date 25 countries have ratified the Agreement. As at July 2019, 54 out of the 55 member States of AU have signed the Agreement, with the only exception being Eritrea. The effective start off date of AfCFTA is now scheduled for 1st January, 2021. Phase 1 of the Agreement covers goods and services liberalization, including trade protocols, dispute settlement procedures, customs cooperation, trade facilitation, and rules of origin. Outstanding issues still to be finalized include schedule of tariff concessions and other specific commitments. Phase 2 of the agreement, in respect of which negotiations began in Feburary 2019, is to cover protocols for competition, intellectual property rights and investments. The negotiations are expected to be completed in 2021. After initial hesitation, Nigeria finally signed the Agreement at the 12th Extra Ordinary Summit of AU Heads of State held in Niamey, Niger Republic in July 2019. The delay in Nigeria’s signing of the Agreement arose out of heightened concern by members of the Manufacturers Association of Nigeria (MAN) and the Nigerian Labour Congress (NLC) that Nigeria may become a dumping ground for goods from other African countries, In addition, that made-in-Nigeria goods cannot compete effectively in a liberalized regime as envisaged under AfCFTA given the magnitude of infrastructural inadequacies and other bottlenecks confronting businesses in the country. Thus, it is argued that government should remedy this situation before opening up its borders to other African countries. These are basically the same reasons canvassed by MAN under the ECOWAS CET and the European Union (EU) Economic Partnership Agreement (EPA) with 16 West African countries which Nigeria is yet to ratify. However, Nigeria being the most populous nation in Africa with a population of about 200 million and the largest economy with a GDP of over $400 billion cannot afford to stay out of AfCFTA given the long term opportunities that will arise from a single African common market of over 1.2 billion people with a Gross Domestic Product estimated to be in excess of $2.50 trillion. The long term benefits that will accrue from the full implementation of AfCFTA agreement and protocols include, amongst others, market enlargement for made-in-Nigerian goods, scale economies arising from bigger production runs, opportunities for pooling of interests and subcontracting, deepening of research and development efforts, enlargement of

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raw material sourcing, and a more integrated logistics and supply chain management anchored on the resources and potentials available on the African continent. Nigeria must therefore redouble her efforts to remove the problems and constraints confronting the manufacturing sector so as to become more competitive in order to reap the gains that will arise from AfCFTA. In the long run it is apparent that the countries which stand to benefit most from the African common market will be those with well developed manufacturing sector, efficient infrastructure and market friendly environment.

7 Summary and Conclusion The Economic Community of West African Sates came into existence in 1975 by the Treaty of Lagos. A major goal of the founding fathers of ECOWAS was total regional economic integration anchored on a Common External Tariff against third countries, free intra-community trade, and the adoption of common commercial and industrial policies. Sadly, after over 40 years of its establishment, ECOWAS is still a long way from achieving the goals and aspirations of its founders. To arrest this deplorable situation the Authority of the ECOWAS Heads of State in 2000 approved the adoption of a Common External Tariff based on the UEMOA CET with effect from first January 2001. However, after several delays this objective was finally achieved in January 2015. In pursuant of this new reality, the Nigerian government decided to reform its high import tariff regime which had prevailed for nearly three decades in favour of the ECOWAS CET, featuring much lower tariff rates in line with prevailing global trends. The ECOWAS CET which is based on the UEMOA CET classifies all products into four tariff bands of 0% for medicaments, newspapers, books, and necessaries, 5% for capital goods and raw materials, 10% for intermediate goods and other inputs, and 20% for finished consumer goods. This is in sharp contrast to Nigeria’s previous tariff regime with 20 tariff bands and rates ranging from 0 to 100%. However, transiting from a tariff regime with an unweighted average rate of 27.80% in Nigeria to UEMOA’s lower rate of 12.1% will involve a lowering of the nominal and effective rates of protection for manufacturing enterprises in Nigeria. The emerging scenario made some manufacturers to be apprehensive of the potential negative impact on their operations which may arise from the adoption of ECOWAS CET by Nigeria. In order to cushion the impact, the Federal Government of Nigeria was able to negotiate for the adoption of five tariff bands (instead of UEMOA’s 4) set at 0, 5, 10, 20, and 35%, respectively. The 35% tariff band is to provide additional protection to manufacturers of strategic and finished consumer goods likely to be adversely affected by the immediate lowering of tariff rates. In addition, government is putting in place a programme of action to reduce the cost of doing business in Nigeria.Given the trend to lower tariff rates in both developed and developing countries as part of

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increasing globalization and trade liberalization under the impetus of WTO, Nigeria cannot continue to isolate itself from global trends. Furthermore, as a leading member of ECOWAS, Nigeria cannot backslide on its obligations to the Community. Consequently, the lowering of tariff rates within the context of ECOWAS CET is inevitable. However, government should endeavour to allay the fears of concerned private sector operators as partners in progress by taking steps to mitigate some of their short term concerns whilst still keeping to the commitment of tariff harmonization in the ECOWAS sub-region. In addition to the foregoing there is an urgent need to take complementary measures in such areas as port reforms, institutional strengthening of regulatory agencies (e.g. Nigerian Customs Service, NAFDAC, Standards Organization of Nigeria), upgrading of infrastructure and incentive systems, etc. in order to minimize some of the negative consequences of tariff harmonization. Nevertheless, manufacturers in Nigeria are advised to face up to the challenges and opportunities presented by ECOWAS CET and increased economic integration in the sub-region by putting in place proactive market penetration strategies to capture a larger share of the ECOWAS market with a population of over 300 million people.Finally it should be pointed out that in contrast to Nigeria’s unwieldy tariff regime featuring 20 bands, the ECOWAS CET is based on widely known criteria, simple to administer, easier to understand, and minimizes administrative discretion and attendant corruption. Thus the new ECOWAS CET provides a more level playing field for all manufacturers and investors. Full implementation of ECOWAS CET is therefore recommended as the best option for Nigeria given the realities of the national, regional, and global environment. Beyond the steps being taken to harmonize tariff at the ECOWAS level, in 2018 the Heads of State of the African Union took a giant step with the launching of the African Continental Free Trade Area. The treaty establishing AfCFTA envisages free movement of goods and services throughout the continent and ultimately a common external tariff against third countries. No doubt this will promote intraAfrican trade which is currently very small (at just 2%) as compared to intra community trade within the European Union, NAFTA, and ASEAN Countries at over 67%, 47%, and 61%, respectively. However, this development will pose challenges and opportunities for manufacturing enterprises in Nigeria in particular and individual African countries in general. To benefit maximally from this development will require that Nigeria maps out proactive strategies for her manufacturing sector to be able to capitalize on emerging opportunities. Thus, there is an urgent need for the Nigerian government to take steps to tackle the major problems hindering the performance of the sector, especially in the area of supporting infrastructure required for efficient operations and effective service delivery not only in the domestic market but also in export markets.

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References 1. Treaty of the Economic Community of West African States 1975 ECOWAS Secretariat, Abuja. 2. Viner J. 1953 The Customs Unions Issue, Carnegie Endowment for International Peace, New York. 3. Treaty of the African Continental Free Trade Area 2018, African Union Secretariat, Addis Ababa.

Chapter 10

Future of the Manufacturing Sector in West Africa Under the Economic Partnership Agreement with the European Union

1 Introduction Since the first decade of this century the European Union (EU) had been engaged in protracted negotiations [1] with 16 West African countries comprising 15 members of the Economic Community West African States (ECOWAS) and Mauritania with a view to fashioning out a new trade agreement between the two regions. The proposed new trade agreement otherwise referred to as the Economic Partnership Agreement (EPA) is expected to be a successor to the Lome Conventions and the Cotonou Agreement which had hitherto governed trade relations between the EU on the one hand and the group of African, Caribbean, and Pacific (ACP) Countries on the other. Unlike the previous trade agreements which were non-reciprocal, under the proposed Economic Partnership Agreement it is envisaged that there will be free trade between the two regions in everything but arms. This is in line with World Trade Organization (WTO) rules which prohibit non-reciprocal preferential trade agreements. However, given the relatively low level of industrial development in West Africa as compared to the countries of the European Union there is heightened concern amongst stakeholders in the former that full liberalization of trade between the two regions as espoused under EPA will lead to the emasculation of manufacturing enterprises in West Africa thereby slowing the process of economic development in the sub-region. This belief is further reinforced by the apparent strong positive correlation between the level of industrialization and economic progress in Western Europe, North America, Japan, and the newly industrialized countries of South East Asia. The fear is that the West African sub-region is likely to remain poor and underdeveloped if appropriate safeguards are not put in place to protect and enhance the development of manufacturing enterprises in the region within the context of EPA.Arising from the foregoing concerns, Nigeria is yet to ratify the Agreement as at November 2020. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5_10

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In order to address the foregoing concerns this chapter is divided into èight broad parts. Following this introduction, the second part of the chapter contains a review of the output and structure of production in West Africa. The third part focuses on the current state of the manufacturing sector in the sub-region whilst the fourth part examines industrial development strategy in West Africa and the associated problems and constraints. The fifth part zeros on the potential impact of EPA on the manufacturing sector in West Africa and the strategic imperatives which ought to be pursued in order to ensure that the sector continues to flourish under EPA. The sixth part examines the prospects for the manufacturing sector in West Africa under EPA final provisions and protocols. In view of the coming into force of AfCFTA agreement in 2019, Part VII highlights the implications of the emergence of an African Common Market and potential future trade relations with other regional trade blocks, leading to the Part VIII which concludes the chapter. However, it should be pointed out at the onset that the analysis contained in this chapter is based entirely on data and information collected from secondary sources, namely those available in the public domain through the web, statistical bulletins, and publications of international organizations such as the World Bank, UNIDO, ECOWAS Secretariat, Economic Commission for Africa as well as the publications of trade associations combined with the author’s experience in undertaking socioeconomic surveys in the West African sub-region. Needless to say, the level of analysis contained in this chapter is constrained by the non-availability of primary data that would have provided a more robust basis for policy options and decision making.

2 Size of West African Economy and Structure of Production As compared to other regions of the world, the level of economic development in West Africa is still very low, with Gross Domestic Product of the sub-region estimated in 2014 at less than US $730 billion as illustrated in Table 10.1. With an estimated population in excess of 300 million, the average income per capita in West Table 10.1 Structure of West African Economy Gross Domestic Product (dollar $billions) % of GDP Agriculture Industry Of which manufacturing Services Sources: World Development indicators

1989 58.4

1999 77.8

2014 725.3

33.2 29.9 (9.2) 36.9 100.0

31.2 33.5 (9.6) 35.3 100.0

42 17 (6) 41 100.0

2 Size of West African Economy and Structure of Production Table 10.2 Gross domestic product of individual countries in West Africa, 2014

Country Benin Burkina Faso Cape Verde Cote D’Ivoire Gambia Ghana Guinea Guinea Bissau Liberia Mali Mauritania Niger Nigeria Senegal Sierra Leone Togo Total

GDP in $billion 8.7 12.5 1.9 34.3 0.8 38.6 6.6 1.0 2.0 12.1 5.1 8.2 568.5 15.6 4.9 4.5 725.3

251 Percentage of total 1.20 1.7 0.26 4.76 0.11 5.32 0.91 0.14 0.28 1.67 0.70 1.13 78.38 2.15 0.68 0.62 100.00

Source: World Development Report

Africa is about $316. The total GDP of the sixteen West African countries put together is just about the size of that of Belgium, one of the smaller economies within the EU. Thus the West Africa sub-region is still a long way behind the EU in terms of industrial and overall economic development. The structure of production in the West African sub-region is as illustrated in Table 10.1. From the table it will be observed that West Africa is still basically a commodity based economy with agriculture and Industry (mainly mineral exploitation) accounting for about 60% of the GDP of the region. Indeed as can be observed in 2014, the agricultural sector accounted for over 40% of the GDP for that year. On the other hand the contribution of Industry to the GDP was 17% whilst Services amounted to 41% in 2014. Table 10.2 on the other hand contains a summation of the GDP of each of the 16 West African countries. As can be observed from the table, Nigeria is the dominant economy of the sub-region with a GDP estimated at $568.5 billion in 2014 and accounting for over 75% of the total regional output of $725.3 billion. Two other countries, namely Ghana and Cote D’Ivoire call for special mention with their estimated GDP standing at $38.6 billion and $34.3 billion, respectively, in 2014. This is followed by three other countries, namely Senegal, Burkina Faso, and Mali with their GDP estimated at $15.6 billion, $12.5 billion, and $12.1 billion, respectively. The GDP of each of the remaining ten countries is between $0.8 billion and $8.7 billion with Gambia having the smallest economy in the sub region. Overall it will be observed that with the exception of Nigeria and to a lesser extent Ghana and Cote D’Ivoire, the economy of the individual West African countries is too small and in no position to compete on their own in the global marketplace.

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Table 10.3 Structure of West Africa Economies in 2014 (In Percentage of GDP) Country Benin Burkina Faso Cape Verde Cote D’Ivoire Gambia Ghana Guinea Guinea Bissau Liberia Mali Mauritania Niger Nigeria Senegal Sierra Leone Togo West Africa Average

Agriculture 36 22 8 22 2 21 20 44 n.a 42 23 37 20 17 62 42.1 42

Industry 14 26 16 21

of which manufacturing 8 7 – 13

Services 50 52 76 57

30 38 14 n.a 23 36 20 21 24 6 21.1 17

6 7 – n.a – 8 6 10 14 2 9.1 6

50 42 43 n.a 35 42 44 59 59 32 36.8 41

Source: World Development Indicators, 2014

In addition to the foregoing, it is important to note that not all the countries are equally endowed with a clear distinction between the Sahel and non-Sahel countries. On the other hand, Nigeria which accounts for over 50% of the population and over 75% of the regional GDP is very rich in hydro carbon (petroleum and gas) and other natural resources and has the potential to become the economic driving force of the sub-region. Ghana and Cote D’Ivoire are also potential axis for future industrial development. It is equally important to observe that 13 of the countries in the sub-region, namely Benin, Burkina Faso, Cape Verde, Guinea, Guinea Bissau, Gambia, Liberia, Senegal, Mali, Sierra Leone, Togo, Niger, and Mauritania are classified amongst the least developed countries (LDCs) of the world. When it comes to a review of the structure of production in each of the West African countries, it is apparent that the countries are still engaged mainly in primary production with the manufacturing sector accounting for less than 10% of output in most of the countries. As can be observed from Table 10.3, it is only in three countries, namely, Nigeria, Cote D’Ivoire, and Senegal where the manufacturing sector accounts for 10%, 13%, and 14%, of the GDP, respectively. On the other hand, the agricultural sector accounts for over 35% of the GDP in six of the countries in the sub-region, ranging from 36% in Benin to 62% in Sierra Leone. In six other countries the contribution of the agricultural sector is between 20% and 23% of the GDP. It is only in Gambia and Cape Verde, both of which rely on tourism, where the contribution of the agricultural sector to the GDP is below 10%. Thus the economy of most of the countries in West Africa is still largely

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agrarian with a significant proportion of the population dependent on the sector for employment and sustenance. The industry sector is also important in the GDP of several West African countries. However, this is dominated by mining of hydrocarbon resources, mainly petroleum and gas as in the case of Nigeria and solid minerals such as gold, diamond, bauxite, zinc, alumina, limestone, uranium, etc. in several countries. The services sector is dominant in the GDP of several countries ranging between 50% and 76% of the national output in eight countries, whilst it is between 32% and 44% in the GDP of the remaining countries. From all the foregoing, it is apparent that a clear understanding of the current structure of production and the level of development in West African countries are very important in order to reach a satisfactory and mutually beneficial long term trade agreement with the EU as envisaged under the Economic Partnership Agreement.

3 Overview and Performance of the Manufacturing Sector As indicated in the previous section, the contribution of the manufacturing sector to the Gross Domestic Product of the West African sub-region averages less 10%. This is very low as compared to the other developing regions of the world. This is also an indication that very little is added to the value of natural resources originating from the sub-region, whether agricultural commodities or minerals. In addition to the foregoing, the manufacturing sector in West Africa is passing through a period of crisis and transition occasioned by the decay of infrastructural facilities, the sweeping forces of trade liberalization as well as the privatization of state owned manufacturing enterprises. For these reasons, many think that the timing is not just right to enter into a free trade agreement with the European Union. The contribution of the manufacturing sector to the GDP of individual West African countries over the years 2000 and 2014 is presented in Table 10.4. From the table it will be observed that in 2000 the contribution of the sector to the GDP was below 10% in nine countries in the sub-region. The number of countries in this category increased to 13 by 2014 indicating the stagnation of the sector. Indeed several countries recorded a decline in the growth rate of their manufacturing sector over the period 2000–2014 as compared to the preceding decade. However, there is a notable exception, namely Nigeria where the contribution of the manufacturing sector rose from 4% to 10% of the GDP as a result of the growth of the sector averaging 10.60% over the period 2000–2014 as against a minus 1.4% recorded in the previous decade. Three other countries, namely Togo, Sierra Leone, and Gambia also recorded improved performance in the average growth rate of their manufacturing sector over the period 2000–2014 as compared to the preceding decade. For several years the growth of the manufacturing sector had stagnated in West Africa with many countries recording very low or negative growth rates in the sector. However, as a result of the reforms initiated in the 1980s and 1990s under the various

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Table 10.4 Growth of the Manufacturing sector in West African Countries 2000–2014

Benin Burkina Faso Cape Verde Cote D’Ivoire Gambia Ghana Guinea Guinea Bissau Liberia Mali Mauritania Niger Nigeria Senegal Sierra Leone Togo

Manufacturing % of GDP 2000 2014 8 8 16 7 9 – 17 13 10 4 11 – 4 13 7 4 15 4 10

6 7 6 8 6 10 14 2 7

Manufacturing average % growth 1990–2000 2000–2014 6 2.3 4.8 1.6 9.7 – 4.9 4.0 1.3 2.6 3.8 – – 1.4 4.1

1.7 5.2 5.1 0.6

1.4 3.1 3.3 1.8

10.6 2.2 3.6 3.2

Source: World Development Indicators, 2014

structural adjustment programmes, which featured amongst others the privatization and/or commercialization of state owned enterprises, there had been some improvements in the situation. In spite of the foregoing, the performance of the manufacturing sector in West Africa is far from satisfactory and below expectations given the potentials that exist. No thanks to the onslaught of trade liberalization, under utilization of installed capacities, obsolescence of plant and machinery, and the decay of infrastructural facilities. According to UNIDO, in 2010, the region’s share of global manufacturing value added was just about 0.1%, whilst the value of manufactured exports from the region is very small, at less than 1.0% of merchandise exports, as compared to other developing regions of the world, most especially that of South East Asia. Furthermore, the statistics on the manufacturing sector as presented in Table 10.4 masks the very poor performance of the sector and the reality on the ground in terms of the value added to the output originating from West Africa. In order to gain additional insight on the status of the sector, in Table 10.5 we present a picture of manufacturing value added in the individual countries of West Africa for the years 2000 and 2015, respectively. As would be observed, manufacturing value added in the whole of the sub-region amounted to only $5.81 billion in 2000 and this rose to $56.87 billion in 2015, largely as a result of the impressive gains recorded in Nigeria where manufacturing value added rose from $1.65 billion in 2000 to $45.36 billion in 2015. It is also important to note that Nigeria accounted in 2015 for about 80% of manufacturing value added in West Africa with all the remaining fifteen countries

3 Overview and Performance of the Manufacturing Sector Table 10.5 Manufacturing Value Added in West African Countries, 2000 and 2015

Countries Benin Burkina Faso Cape Verde Cote D’Ivoire Gambia Ghana Guinea Guinea Bissau Liberia Mali Mauritania Niger Nigeria Senegal Sierra Leone Togo Total

255 Amount ($ billion) 2000 0.19 0.33 0.05 1.84 0.05 0.45 0.11 0.02 0.02 0.09 0.16 0.12 1.65 0.60 0.02 0.11 5.81

2015 1.01 0.69 0.10 4.17 0.04 1.70 1.07 0.11 0.07 n.a 0.27 0.41 45.36 1.60 0.07 0.20 56.87

Source: World Development Indicators

put together contributing only 20%. Thus in order to boost the level of industrial development in the sub-region there is need to expand the scope and depth of manufacturing activities so that goods emanating from the region would have undergone further processing into semi manufactures and manufactures before being exported. Given the unsatisfactory performance of the manufacturing sector in West Africa, a proper diagnosis of the sector is crucial in order to formulate appropriate strategies and policies to protect and stimulate of industrial production. This is considered to be very important as the sector will face enormous threats and challenges under EPA which envisages full trade liberalization between West Africa and the European Union over the next 20 years. With its more advanced industrial structure and superior technology, more competitive EU imports will surely displace local production which will inevitably lead to plant closures and a worsening of the unemployment situation in West Africa. In order to prevent this situation from arising, a robust diagnosis of the manufacturing sector in West Africa is urgently needed so as to provide a rational and informed basis for appropriate policy responses. For such a diagnosis to be firmly rooted, it will be necessary to undertake an industrial inventory survey of the region to ascertain the situation on the ground with a view to charting an appropriate course of action to guide future development. Such a survey should cover all the major manufacturing sub-sectors at the 4 digit ISIC level, in order to ensure effective coverage of all relevant sub-sectors and in-depth analysis of the situation on ground. For this purpose it is recommended that

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the scope of coverage should include the following major manufacturing sub-sectors. • • • • • • • •

Food, Beverages, and Tobacco. Textile, Wearing Apparel and Leather. Wood and Wood Products. Paper and Paper Products, Printing, and Publishing. Chemicals and Chemical, Petroleum, Coal, Rubber and Plastic Products. Non-Metallic Mineral Products. Basic Metal Industries. Fabricated metal Products, Machinery, and Equipment.

It is against the hard facts revealed by the survey that appropriate policies and strategies can be formulated to protect and stimulate the manufacturing sector in the sub-region within the context of EPA in particular and global trade in general. To illustrate the foregoing advocacy by way of an example, such a survey will reveal that under the Basic Metal Industries sub-sector it is only Nigeria that has a fledgling iron and steel industry, comprising two integrated steel complexes at Ovwian-Aladja (Delta State) and Ajaokuta (Kogi State). With appropriate protection and incentives the steel industry in Nigeria could be developed to serve the entire sub-region. Moreover as part of the strategy to develop an integrated iron and steel industry based on raw materials available in the sub-region, efforts should be made to source most of the raw materials (e.g. iron ore, limestone, coking coal, dolomite, refractory clays, manganese ore, etc.) required for steel production across West African countries, so that the benefits accruing from the industry will be widely diffused between Nigeria and the other West African countries. Within the context of the foregoing, there is an urgent need to develop a new industrial master plan for West Africa, spanning a period of about 20 years. Although an initial effort was made in this direction in 1994 when a master plan for the industrialization of West Africa was designed and developed, not much was achieved in subsequent years as the performance of the manufacturing sector worsened throughout the 1990s up to the present time.However, the ECOWAS Common Industrial Policy (ECIP) which was adopted at that time is still very relevant even till today and should form one of the building blocks for the preparation of a new industrial master plan for the sub-region taking into account present day realities and the challenges arising from EPA and other global trends. The main outputs envisaged from the common industrial policy in the medium term include the following: • • • •

Enlarged industrial and export base. Increased productivity. More local value added. Integration in local, regional, and international value and supply chain. • Creation and sustenance of employment. • Eradication of poverty.

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Thus through the common industrial policy ECOWAS intends to achieve the following: 1. Make the sub-region’s integration an important process for economic and social development. 2. Increase significantly the level of industry’s contribution to the global industrial value added in manufacturing. 3. Promote the brand image of the West African sub-region. 4. Strengthen the cooperation amongst the member states respective private sectors through the exchange of experience. 5. Set up systems of financing suited to sub-regional enterprises and notably to the SMEs. 6. Promote foreign direct investment. 7. Bring specific support to companies in difficulties arising from the advent of the customs union. 8. Mobilize the necessary and sufficient resources to improve the environment of enterprises. Significant progress and achievement in all the foregoing areas over the next 20 years should be a pre-requisite before the full provisions of EPA can come into force in the trade of manufactures, between West Africa and the EU. Not only that, the EU as partners in progress should assist West Africa to achieve the goal of industrial development in the sub-region so that economic relations between EU and West Africa can change from that of dependence on Europe by West African countries as was the case under Lome Convention to one of mutual interdependence between the two regions.

4 Problems and Constraints to Industrial Development in West Africa Since the attainment of political independence in the late 1950s and 1960s, a major pre-occupation of some of the more well endowed countries in West Africa such as Nigeria, Ghana, and Cote D’Ivoire had been the desire to transform their largely agrarian economies to industrialized ones within the shortest possible time. This has led to ambitious programmes of industrial development under the import substitution strategies adopted by these countries. Under Import Substitution Industrialization (ISI) strategy manufacturing industries were established and protected using high tariffs, import quotas, and other trade restrictions like import licensing. Under the regime, several modern manufacturing enterprises were established in the 1960s and 1970s across West Africa. However, most of these enterprises, after over four decades of existence, cannot stand up to the rigours of international competition. Moreover, following the adoption of the structural adjustment programme in the 1980s and increasing trade liberalization and

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competition from low cost producers, especially from South East Asia, several of these enterprises such as those in the textile sub-sector have closed down. Others still surviving are operating at below 50% of their installed capacities. However, domestic resource-based industries such as those engaged in food processing, leather processing, wood and wood products, rubber, cement etc. have faired better. Such domestic resource based industries hold a lot of promise for future industrial development in West Africa. Presently, most of the manufacturing enterprises in West Africa are engaged in assembly type operations and the production of low technology final consumer goods. There is a noticeable absence of intermediate and capital goods production resulting in very weak inter-sectoral linkages. Against the background of the foregoing, the problems and constraints militating against better performance in the manufacturing sector are discussed below. The main problems and constraints confronting manufacturing enterprises in West Africa are aptly captured in the West African Common Industrial Policy Document [2]. These are summarized as follows: 1. The fiscal, legal, and judicial environment which is marked by corruption, lack of transparency, and political insecurity that can put even existing enterprises at risk as well as make industries unattractive for investment, both domestic and foreign. 2. The underutilization of installed capacities. It is estimated that two thirds of industries use less than 50% of their installed capacities. 3. The inadequacy of infrastructures and the excessively high cost and/or poor quality of inputs (power supply, water, etc.) and of basic infrastructures (industrial areas, road network, railways, ICTs, etc.) 4. The difficulty of accessing funding, especially the inadequacy of long term financial resources and excessively high interest rates. 5. The insignificance of national markets whose integration is thwarted by administrative sluggishness, harassment by customs and police officers along trade corridors. 6. The insufficient circulation of information resulting from inadequate basic infrastructures; this prevents key economic players from seizing the opportunities available both at the regional and international levels. To the foregoing must be added the problems arising from the following: • Poor macro-economic performance and failure to implement the macro-economic convergence criteria expected to lead eventually to the emergence of a single currency in the sub-region. • Old equipment and outdated technologies. • Dumping of goods from Europe and Asia and influx of relatively cheaper imports. • Low labour productivity and unskilled workforce.

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• Insecurity of lives and properties occasioned by kidnapping, banditry, armed robbery as well as incidents of civil and religious disturbances in several countries of the sub-region. • Weak management structures, poor managerial techniques, lack of dynamism, and general inefficiency.

5 Potential Impact of EPA on the Manufacturing Sector As earlier observed, under EPA, West African countries are expected to open up their economies to imports from the EU in line with the reciprocity clause contained in the trade agreement in order to be compatible with WTO rules. This is unlike the case under the Lome Conventions which gave free access to goods (everything but arms) originating from African, Caribbean and Pacific (ACP) countries into the EU without a corresponding obligation of reciprocity. The elimination of import barriers for EU imports into West Africa will have both positive and negative impact on the manufacturing sector in the sub-region. On the positive side, EPA is expected to lead to increased market access for exports of manufactured goods from West Africa. However, this is easier said than done given that non-tariff barriers will still be in place even with the implementation of EPA. Furthermore, as demonstrated under the Lome Conventions binding export supply capacity constraints prevent West African countries from taking full advantage of the preferential trade agreements offered by the EU. This continues be to the case and is not likely to change in the short to medium term. The elimination of import barriers for EU imports is also expected to lower trade input costs, thus enhancing competitive advantage of domestic production. As observed by Adenikinju and Alaba [3] this will enhance domestic manufacturers access to essential imports and technologically embodied inputs and thus enhance domestic production. Finally, on the side of consumers, access to cheaper imports will increase the scope for choice as well as increase real income and welfare. However, given the low level of industrial development in West Africa and the weak manufacturing base in the region, unrestricted access of imports from EU will certainly slow the pace of industrial development and hence of socio-economic development in the sub-region. Therefore EPA poses a lot of threats and challenges to the manufacturing sector in West Africa. Thus increased trade flows accompanied by a surge of manufacturing exports from the EU as expected under EPA is likely to stifle the already weak manufacturing sector in West Africa. Given the problems and constraints affecting manufacturing enterprises in West Africa, especially poor infrastructure, it can be argued that some measure of protection is required for these enterprises to survive, hence the protective tariff wall put in place. If full trade liberalization were to be adopted more competitive imports from EU will displace local production, thereby leading to plant closures and a worsening of the unemployment problem in the sub-region.

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It is against the foregoing background that an attempt is made to highlight some of the strategic imperatives that are crucial for the manufacturing sector to survive and grow within the context of EPA as follows. 1. Earlier, the case for an industrial inventory survey of West African countries was made. Also the need to put in place a West African industrial Master Plan based on the ECOWAS Common industrial policy was emphasized. It is within the context of a well articulated industrial master plan that appropriate strategies, policies, and programmes can be pursued to protect the manufacturing sector in West Africa. This of course will require that certain safeguards be put in place under the Economic Partnership Agreement being negotiated with the EU to make this goal realizable. The foregoing observations suggest that trade liberalization between West Africa and EU should be carried out gradually at measured paces over a period of about 20 years in parallel with the progress being made in implementing the West African Industrial Master Plan. Otherwise West Africa will continue to be largely a producer of primary commodities. 2. There is an urgent need to accelerate and deepen the process of regional integration in West Africa. As earlier indicated, several of the countries in the sub-region have small, fragile slow growing economies. The internal markets of these countries are limited in size, diversification, and sophistication. However, the creation of a regional market for goods and services along with the free mobility of the factors of production as envisaged under ECOWAS Treaty would create a better environment for industrial development to thrive in the sub-region. With a population currently estimated to be in excess of 300 million and projected to rise to about 400 million by 2020, this will no doubt create a huge regional market that will support the establishment of large scale industries which will cater not only for the regional market but for exports as well. As a deliberate strategy concrete steps should be taken to speed up the process of regional integration over the next 10–15 years with particular attention being paid to the development of infrastructural facilities in the sub-region especially as it relates to. • • • • • •

electricity and power, road transport, air transport, water/sea transport, rail transport, telecommunication.

3. There is a need to unify and improve the business environment in West Africa in order to facilitate rapid integration and the development of a regional market for goods and services. The development of a truly regional market over the next 10–15 years should be a precondition before full trade liberalization with the EU takes place. 4. Political will on the part of West African leaders and commitment on the part of European leaders to create a new relationship between Europe and West Africa based on mutual interdependence rather than one characterized by dependence as

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was the case under the Lome Conventions and certainly during the colonial period. For this new state of affairs to prevail concrete steps will have to be taken in the following areas: • Assistance from the EU, World Bank, and other development partners and international agencies to speed up the process of regional integration in West Africa so that the region can become a more viable market able to support large scale production units thereby benefiting from the economies of scale as well as able to attract major foreign direct investment into the manufacturing sector. • Increase in joint ventures between EU and emerging large scale West African manufacturing enterprises producing for regional and international markets. EU multinational corporations operating and those not yet operating in West Africa certainly have a role to play in this regard. • Creation of a new development financial institution outside the European Investment Bank and a more virile industrial promotion agency to replace the Centre for the Development of Industry to assist in the realization of the goals envisaged under the ECOWAS Industrial Master Plan. • Commitment by West African leaders to the principles of democracy, transparency in governance, peace, and security in the sub-region as well as carrying the populace along in the integration process. It is only within the foregoing context that West Africa can demonstrate to Europe and indeed to the rest world that it is no longer business as usual but that a new dawn has arisen in the region’s international trade relations and development cooperation.

6 Prospects for the Manufacturing Sector under EPA Final Provisions After over a decade of negotiations, the final agreement to govern the trade regime between the EU and West African countries appears to have been struck. As at 2018, most of the West African countries have signed up to EPA. However, Nigeria is still to sign up due to concerns about the potential negative impact on its manufacturing sector. The document, to all intent and purposes, appears to have addressed all the major concerns raised about the potential negative impact of EPA on the manufacturing sector in West Africa. Before going into specifics, a brief summary of the main provisions of EPA is outlined below. The EPA final document between EU on the one hand and the sixteen West African countries on the other consists of 114 Articles divided into seven parts as per the sub-headings indicated below. Part I—Trade and Economic Partnership for Sustainable Development Part II—Trade Policy and Trade- Related Issues

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Part III—Partnership for the Implementation of the Development Programme and Achievement of the EPA Objectives Part IV—Dispute Avoidance and Settlement Part V—General Exceptions Part VI—Institutional Provisions Part VII—Final Provisions In addition there are a number of Protocols annexed to the agreement covering Rules of Origin, Development Programme, Tariff Dismantling Schedule, and Sensitive Products to be Excluded from Liberalization. Of particular interest from the viewpoint of protecting the manufacturing sector in West Africa from the onslaught of unrestrained imports from the EU are three interrelated issues negotiated as part of the agreement, namely (a) elimination of import tariffs between the two regions, (b) transitional period before full implementation of the agreement, (c) development assistance to West Africa to cushion the impact of EPA and promote the region’s competitiveness, To start with, it was agreed between the contracting parties that the immediate trade liberalization and dismantling of import tariffs will impact negatively on the fragile manufacturing sector in West Africa. To address this concern there is provision for a transitional period of 20 years within which duties will be progressively eliminated from goods coming from the EU. Secondly, the dismantling of import tariffs on EU exports to West Africa will only apply to 75% of the ECOWAS CET tariff lines during the transitional period of 20 years. The goods to be affected during this phase cover those currently enjoying 0%, 5%, and 10% tariff protection and include products classified as (a) social goods, capital goods, and specific inputs, (b) inputs and intermediate goods, (c) some final consumer goods. The remaining 25% of ECOWAS CET tariff lines will not be affected by the dismantling schedule but could remain the same as with all third countries even after the transitional period of 20 years. It should be noted that goods in this category are considered sensitive to the development of the manufacturing sector in West Africa and cover goods currently subject to the 35% tariff band under ECOWAS CET as well as about half of the lines under the 20% tariff band. Examples of goods in the former category include meat preparations,cocoa powder, chocolate, soap and detergents, printed fabrics, tomato paste and concentrate whilst products in the later category cover fish and fish preparations,vegetables, flour, spirits, cement, paint, stationery, textiles and apparel, fully built up cars, and similar goods. In addition to the trade liberalization scheme envisaged above, there is provision within EPA for a variety of safeguards if imports from EU threaten the existence of manufacturing industries in West Africa. Such safeguards include the suspension of tariff reduction or increase in customs duties. Also there is provision for protection

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of new or existing infant industries. These provisions allow for temporary tariff protection if threatened by imports from the EU. Furthermore, if members are facing balance of payments problem and/or external financial difficulties, Article 89 of EPA allows ECOWAS to take or maintain trade restrictions as may be deemed necessary. Also it should be mentioned that in the various protocols annexed to EPA document, detailed provisions have been made regarding most of the issues of concern to West African countries. All these safeguards are intended to protect and nurture the growth of the manufacturing sector within the context of EPA. More importantly from the viewpoint of West African countries is the EPA Development Programme (EPADP). The programme consists of measures and development assistance to build capacity, encourage improvement in the supply capability, and competitiveness of the production sectors in the West African region. This is in line with the preamble and Part 1 of the EPA document which explicitly states that the Agreement shall be a development tool for increasing the production capacity and exports of West African states and supporting the structural transformation of the West African economies and their diversification and competitiveness. It should be noted that under EPADP, a sum of 6.5 billion euros has been set aside for the 5 year period 2015–2019 to cover the cost of activities designed to implement the programmes of assistance envisaged during that period. In spite of all the foregoing concessions by the EU, some critics still believe that EPA is not in the long run interest of West Africa, especially given the wide gap in the level of industrial and economic development between the two regions. This antiEPA sentiment is most apparent in Nigeria which has the largest economy and the most promising prospect to become the manufacturing hub of West Africa by virtue of resource and manufacturing potential. Thus Nigeria has the most to gain or lose from the way EPA is structured and implemented, hence the country’s concern is fully justified and should be taken into consideration before the final ratification of the trade agreement. However, given the transitional period of 20 years before the full trade provisions of EPA can come into force, the exemption of sensitive products from trade liberalization and the safeguards against dumping and the special provisions included in case of external financial shocks and balance of payment difficulties, it can be argued that the onus is on Nigeria to put its house in order within 20 years so as to position the country to benefit maximally from the new trade regime under EPA. Also it is up to Nigeria to strive to access and optimize the benefits accruable under the development assistance programmes of EPA. The foregoing advocacy suggests that Nigeria must take urgent proactive steps to tackle most of the problems militating against the performance of its manufacturing sector, especially at it relates to infrastructural inadequacies, lack of competitiveness, the ease of doing business and endemic corruption.Surely a lot can be achieved in all these areas within 20 years based on a well designed strategy and a time phased implementation plan. However, it can be argued that the sum of 6.5 billion euros budgeted for development assistance programme under EPA over the 5 year period from 2015

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to 2019 was too small given the gargantuan nature of the problems to be tackled before West Africa can become competitive in the global market place. Thus the size and scope of development assistance deserve a second look. Furthermore, EPADP should be a permanent feature of the trade agreement and its size and scope tied to some predetermined parameters based on quantifiable trade and development indicators rather than at the discretion of EU Commission.

7 Implications of African Common Market and Future External Trade Relations With the coming into force in 2019 of the African Continental Free Trade Area (AfCFTA) Agreement envisaging free trade amongst African countries and ultimately a Common External Tariff (AfCET) against third countries, it is apparent that the dynamics of trade between African Countries and other major regional trade blocks throughout the world will undergo unprecedented changes in the future. In view of this development, existing sub-regional trade agreements between African countries and the outside world such as that between West African Countries and the European Union under the Economic Partnership Agreement will in due course give way and be subsumed under AfCFTA. What should be the main concerns of African countries in terms of potential free trade agreement between Africa and the other major trade blocks such as the European Union, North American Free Trade Area (now USMCA), and China? The African region with a population currently estimated to be in excess of 1.2 billion and a GDP of $2.50 trillion will constitute a formidable trade block and should be in a position of strength to negotiate mutually beneficial trade agreements with the outside world, the EU inclusive. Some of the concerns earlier highlighted under the West African—EU Economic Partnership Agreement are equally relevant as and when trade negotiations between Africa and the other major trade blocks come up in the future. Some of the concerns and issues which African countries will have to grapple with include the following: First, the unequal level of socio-economic development between Africa and the EU, NAFTA, and China, respectively, will be a matter of great concern in negotiating future trade relations with these major trade blocks. The GDP of the entire African continent estimated at $2.50 trillion in 2019 is just a fraction of the GDP of the other trade blocks highlighted earlier. For example, the GDP of the European Union was estimated at $18.70 trillion in 2019, whereas the GDP of all the 54 countries making up AfCFTA is just about that of one European country, namely France with an estimated GDP of $2.70 trillion. Second, the manufacturing and technological base of the other major trade blocks are far ahead and superior to those of African countries. Thus, there will be heightened concern that if care is not taken Africa will become a dumping ground

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for their manufactures, and the continent will continue to remain a supplier of raw materials and commodities. Third, African industrial enterprises because of their relatively smaller size and a host of various bottlenecks confronting them, chief amongst which is the underdeveloped state of infrastructures in the continent, will be at a competitive disadvantage compared to their foreign counterparts. In this unequal setting African industrial enterprises will be at a competitive disadvantage with enterprises from the other regions. Fourth, the major trade blocks with their more developed economic and political institutions are in a more formidable position to bargain with Africa, given the emergent nature of most African countries and their state of underdevelopment. As a result, it will take several decades for Africa to develop and emerge as a competing partner. Thus, there will be need to negotiate a period of transition, accompanied with appropriate safeguards, before the full implementation of free trade can take place. Fifth, given the low level of development in Africa, any free trade agreement with other trade blocks will have to be negotiated within a medium to long term transitional framework of development assistance to the benefit of all contracting parties. This route is to be preferred to that of the colonial past when Africa was seen by the outside world largely as a source of raw materials and a market for manufactured goods. Sixth, trade relations between Africa and the outside world, the EU inclusive, must be anchored on mutual interdependence rather than that of dependence by the weaker on the stronger as was the case during the colonial period. With its abundant human and natural resources coupled with a growing regional market for goods and services, Africa can leverage on these strengths to negotiate for a more favourable deal with other trade blocks throughout the world. Seventh, it should be pointed out that negotiations with trade blocks from emerging markets such as the Association of South East Asians (ASEAN) and Latin American Free Trade Area (LAFTA) will present a somewhat different set of challenges to African countries given the broad similarities in their development aspirations. Nevertheless opportunities for significant trade between Africa and these emerging regions exist and should be explored. Lastly, in order to maximize the gains from trade, African political leadership should strive to ensure peace and stability in the continent before embarking on trade negotiations with other trade blocks. However, such trade negotiations should be pursued with the mindset of a positive sum game from which all contracting parties stand to benefit as evidenced by the economic growth of several countries and regions under the regime of trade liberalization and globalization which had prevailed since the second half of the last century.

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8 Conclusion In concluding this chapter it should be emphasized once more that every effort should be made to avoid the maintenance of the status quo and a perpetuation of economic and trade relations based on the colonial trading pattern as was the case under the various Lome Contentions between the African, Caribbean, and Pacific (ACP) Countries on the one hand and the European Union on the other. Under EPA emphasis should be on mutual interdependence between the two regions with the West African countries pursuing their goal of rapid industrial development within a framework that helps to achieve this purpose. Surely West Africa can borrow from the experience of some of the South East Asian countries which were more or less at the same level of development with West African countries in the 1960s but which have today become the newly industrialized countries of the world able to participate more effectively in the global trade in manufactures, thereby changing the pattern of international division of labour. It is expected that if the general principles being advocated in this chapter as well as the special provisions and safeguards made under EPA to protect the manufacturing sector are faithfully implemented, then there is hope that the desire of West African countries to achieve rapid industrial development in the not too distant future can be realized even as EPA comes into force. Looking ahead into the future, it is apparent that with the coming into force of the African Continental Free Trade Area agreement in 2019, the dynamics of trade between African countries and the outside world will undergo significant changes. This development will pose challenges and opportunities between Africa and the other major trade blocks such as the European Union, North American Free Trade Area (now USMCA), and China. The implications of this unfolding scenario are highlighted as a guide to future strategic options and action plans.

References 1. EU Commission 2003, Economic Partnership Agreement: Start of Negotiation, Brussels. 2. Ecowas Secretariat 2004, West African Common Industrial Policy. 3. Adenikinju and Alaba O 2005 EU-ACP Economic Partnership Agreements: Implications for Trade and Development in Africa.

Chapter 11

Small and Medium Enterprise Development Under the Structural Adjustment Programme in Nigeria

1 Introduction The focus of this chapter is on small business and entrepreneurship development in Nigeria under the Structural Adjustment Programme (SAP) over the 10-year period from 1986 to 1996. Following the collapse of the international market for crude oil in the early 1980s, the Nigerian economy deteriorated rapidly, arising from the fact that the oil sector accounted for over 90% of foreign exchange earnings and the bulk of government revenue. The decline in the national economy was accompanied by negative GDP growth, huge external debt in excess of $30 billion, low capacity utilization in industry and general economic gloom. In order to save the economy from virtual collapse, the government had to adopt a structural adjustment programme in 1986 with the main objectives as earlier elaborated in Chap. 3 of this book, namely, to restructure and diversify the productive base of the economy; to achieve fiscal and balance of payments viability; to lay the basis for sustainable non-inflationary or minimal inflationary growth; to lessen the dominance of unproductive investments in the public sector, as well as to improve the sector’s efficiency; and to intensify the growth potential of the private sector. Within this context, the development of small and medium enterprises (SMEs) was one of the major planks of government policy under SAP aimed at stimulating and diversifying the national economy. This chapter therefore aims at assessing the success of government policies and initiatives in promoting this very important sector of the national economy.The chapter is divided into 15 parts as outlined below. Following this introduction, Part II highlights the importance of Small Business in the Nigerian Economy. Thereafter Parts III to XIII contain an analysis of the different initiatives undertaken by Government under the structural adjustment programme to boost the development of small and medium enterprises in Nigeria. This is followed in Part XIV with a Critical Appraisal of the various SME © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5_11

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Development Programmes in Nigeria during the period under review, leading to the Conclusions in Part XV.

2 Small Business and the Nigerian Economy Historically, thousands of small businesses abound in Nigeria. However, since no up-to-date statistics are available, only estimates of their number can be made. A study conducted by the International Finance Corporation (IFC) in 1972 estimated the number of modern sector SMEs (i.e. those in the formal sector) at 90,000 and this was extrapolated to 125,000 in the 1980s. Based on this estimate and more recent studies conducted by the World Bank [1], Osoba [2], and other researchers, SMEs in the country are currently believed to number between 200,000 and 300,000. This number excludes the thousands of informal sector businesses scattered all over the country. It is generally believed that SMEs (both in the formal and informal sectors) contribute about 20% of the Gross Domestic Product and account for about 70% of industrial employment. Excluding peasant agriculture, these enterprises dominate the rural cottage industrial landscape in virtually every field of human endeavour. On the other hand, in the urban areas such enterprises are commonly found in such activities as baking and pastry making, carpentry, shoe-making and repairs, printing, motor vehicle repairs, tailoring, welding and metal working, furniture making, food processing, block making, road haulage and transportation, photography, wholesale, and the retail trade. Thus small scale enterprises play a significant role in both the rural and urban economies of Nigeria. Over the 10 year period under review, from 1986 to 1996, a major objective of the Federal Government of Nigeria was to transform the small and medium enterprise sector into one of the main drivers for economic growth and development. This is in recognition of the fact that the sector accounts for a significant part of national output, employment, and productivity. The sector is also recognized as a major source of technological innovation and entrepreneurship development at the grass roots. In recognition of the foregoing facts the Federal Government spearheaded several new policies and initiatives as well as reinvigorated existing ones to fast track the development of a vibrant SME sector under the structural adjustment programme. The most prominent of these initiatives are reviewed in this chapter as outlined below.

3 Entrepreneurship Development Programmes It is now universally recognized that the entrepreneur plays a crucial role in socioeconomic transformation especially in free societies where private enterprise predominates. Part of what makes the difference between a resource-scarce but rich

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society such as Japan and a resource-rich but poor society such as Nigeria is the difference in the level of entrepreneurship. The development of entrepreneurial skills, especially at the small and medium enterprise level, in societies like Nigeria is thus seen as crucial in achieving rapid socio-economic development. It is in this context that the various entrepreneurship development programmes were launched in Nigeria. The two key institutions that were involved in training for entrepreneurship development include: • The Federal Ministry of Industries through the “Work for Yourself Programme” (WFYP). • The Nigerian Bank for Commerce and Industry (NBCI) through the “Entrepreneurship Development Programme” (EDP). The Work for Yourself Programme had its origin in the collaboration agreement with the Durham University Business School under a technical assistance project between the Federal Ministry of Industries and the British Council. The programme was formally launched in Nigeria in 1986. Between 1986 and 1993, the programme consisting of 6 weeks’ training was mounted successfully in five pilot states, namely Ondo, Niger, Imo, Cross River, and Plateau, respectively. On the other hand, the “Entrepreneurship Development Programme” was initiated in 1986 by the Nigerian Bank for Commerce and Industry (NBCI), the then apex institution for the development of small and medium scale enterprises. The programme was based on the Indian model of Entrepreneurship Development. The model was developed by the Entrepreneurship Development Institute of India with the assistance of the International Labour Organization (ILO). In 1987, a decision was taken to merge the two programmes for greater effectiveness. This gave rise in February 1988 to a joint organizing committee comprising officials of FMI /NBCI which harmonized the contents of the two programmes to meet the realities of the Nigerian situation. The EDP/WFYP was seen as a formal and comprehensive training package for potential and existing entrepreneurs. The programme was aimed at bridging the credibility gap between the entrepreneurs and banks so as to enhance their access to credit facilities. The programme was also aimed at developing entrepreneurship culture in Nigeria. The programme was especially targeted at the following: • unemployed graduates of tertiary institutions; • retired and retrenched private and public sector officials, unemployed professionals and ex-servicemen; • those already engaged in informal small business. Between 1986 and 1994, 22 workshops were conducted all over the country, and a total of 613 persons were trained. However, only 72 projects (11.75% of the total) out of the 613 have been funded and operational. It was estimated that 40% of the total number of projects were in the manufacturing and food processing industries. The total amount so far disbursed to EDP trainees

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was put at about N I 1.5 million. (An indication of the value of Naira over the period 1985 to 1996 is given as follows: 1985, N0.77 ¼ $1; 1988, N4.50 ¼ $1; 1992, N17.40 ¼ $1; 1996, N85.00 ¼ $1.) This amount was provided by the Federal Ministry of Industries out of its budgetary allocation and channeled through the NBCI for on-lending to successful applicants. The average capital investment per project was estimated at N175 000, whilst average annual turnover was put at NI05 000 with average employment generation of 12 persons. The major problem which faced the programme was a lack of funds for on-lending to the remaining 514 trained entrepreneurs. There was a reluctance by commercial and merchant banks to lend to this class of people because of the perceived high risk of default by SME loan beneficiaries. Thus the NBCI (which itself has been moribund since 1994) was virtually the only source of funds to EDP trainees. In view of these problems, the Federal Ministry of Industries requested state governments to fund a minimum of five projects out of the entrepreneurs trained within each state, whilst attempts were also being made to involve other financial institutions in the scheme. Because of these difficulties, the programme has recorded only a limited success, in spite of the initial promise of the scheme.

4 National Directorate of Employment The National Directorate of Employment (NDE) was established in I986 to tackle the problem of mass unemployment which had reached unprecedented levels in the country arising from the economic crisis which started during the early 1980s. The Directorate has the following mandates: • to design and implement programmes to combat mass unemployment; • to articulate policies aimed at developing work programmes with labour-intensive potential; • to set up and maintain a data bank on employment and vacancies in the country with a view to acting as a clearing house to link job seekers with vacancies in collaboration with other government agencies. Initially emphasis was placed on creating employment opportunities for graduates of tertiary institutions and young school leavers. However, the activities of the NDE have since been broadened to cater for all categories of unemployed people. The programmes of the Directorate were subsequently organized into four major areas as follows: • Vocational Skills Development Programme. The major schemes under this programme include the open apprenticeship, school on wheels, waste to wealth and resettlement loan schemes.

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• Small Scale Enterprise Programme. The programme combines entrepreneurship training with loan facilities, namely graduate job creation loans, mature people’s and motorcycle loan schemes. • Rural Employment Programme. The programme was aimed at providing employment in agriculture for school leavers and graduates with degrees or diplomas in agriculture and related disciplines through a variety of loan schemes. • Special Public Works Programme. The special public works programme was designed to provide temporary employment to unemployed young people until they secured wage employment or became self-employed through a number of public works schemes. Since its launching, the NDE has created employment opportunities for thousands of Nigerians under its various programmes. However of particular interest from the viewpoint of this chapter is the Entrepreneurship Development Programme for Small Scale Enterprise. The primary objective of the small scale entrepreneurship development programme of the NDE was to promote self-employment by assisting applicants to set up their own businesses. This objective was achieved through a combination of providing loan facilities and entrepreneurship training. Under the scheme, the NDE had a working relationship with a number of banks where it had deposited funds to serve as guarantees for loans made by these banks to successful applicants. At the inception of the programme in 1987, for loans of between N5000 and N35,000 applicants were required to submit originals of their certificates and testimonials in place of collateral. For loans of between N35,000 and N50,000, the banks also require a personal guarantor. The loan is repayable over a five-year period at 13% interest rate with varying periods of moratorium. The programme was particularly targeted at graduates of tertiary institutions so that they can become self-employed. A variant of the above scheme, called the Mature People’s Programme, was aimed at retirees or people who are preparing to retire from paid employment. Bankable projects of up to N150,000 can be supported under the scheme, but applicants must provide security of up to 50% of the total loan package. The distinguishing feature of the NDE loan schemes is that all applicants were required to undergo a two-week training programme in entrepreneurship development before they could be eligible for the loan. During the training programme, participants were taught entrepreneurial skills, including self-evaluation, business identification, market research and feasibility studies, the marshalling of resources to start a business, obtaining a bank loan, managing a business, record keeping and accounting, marketing management, and legal aspects of business. The programme ran into bottlenecks between 1989 and 1991 due to problems encountered with loan disbursement and monitoring, coupled with a poor rate of loan repayment by beneficiaries. However, the government was able to secure the assistance of the International Labour Organization in 1991 to revitalize the scheme, leading to a marked improvement in the quality of training programmes and business proposals.

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As at December 1994, the number of loan beneficiaries was put at 2803 with a total disbursement of N43.3 million. In 1994, the number of EDP trainees was put at 43 026, consisting mostly of Youth Corp members. It was also estimated that the gross turnover of enterprises benefiting from the programme was in excess of N200 million in 1994 with employment being provided for over 10,000 families. However, the major obstacle to the full realization of the potential of the programme is a shortage of loanable funds as well as the high rate of default by loan beneficiaries.

5 World Bank-Assisted SME II Programme The SME II programme was a follow-up to a pilot SME 1 Project which ended in 1985. The SME II Project came into existence in 1987 following an agreement between the World Bank and the Federal Government of Nigeria for a loan of US $270 million to be made available to Nigeria under the Private Small and Medium Enterprise Development Project. Under this project, an integrated package of financial support programmes, investment promotion, technical assistance and extension services was made available for the development of SMEs in Nigeria. The breakdown of the loan facility was as follows:

On-lending to SMEs Technical assistance through Central Bank of Nigeria (CBN) Nigerian Bank for Commerce and Industry (NBCI) Technical assistance to Federal Ministry of Industries (FMI) Total

$ million 265.7 2.5 1.0 0.8 270.0

As indicated above, the bulk of the facility, namely $265.7 million, was to be made available for on-lending to SMEs through eligible participating banks. The aim of the project was to stimulate productive activity in line with Nigeria's resource endowment and to generate a sustained supply response amongst private productive SMEs in the context of the new policy environment created under the structural adjustment programme. To ensure the successful implementation of the project, an SME Apex Unit was set up within the Central Bank of Nigeria to monitor and coordinate the programme components, consisting of the following: • Lines of credit to finance fixed assets and the working capital needs of SMEs. • A pilot programme for the corporate restructuring of viable SMEs which were in financial difficulties. • A pilot Mutual Credit Guarantee Schemes for microenterprise lending in collaboration with selected non-governmental organizations (NGOs).

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• An equipment leasing component to provide an alternative and flexible source of long term financing to SMEs. • An integrated package of technical assistance involving: an SMEs’ pilot studies facility; the strengthening of Central Bank of Nigeria’s SME Apex Unit; improving the entrepreneurship development programmes and undertaking of studies/ training by the Federal Ministry of Industries; and strengthening the operation of the Nigerian Bank for Commerce and Industry for effective credit delivery to SMEs. The line of credit was to support the establishment of new potentially viable SMEs as well as to assist in restructuring existing ones through the provision of loans for fixed asset rehabilitation and upgrading, and financing permanent working capital. To benefit from the scheme, eligible enterprises were expected to meet the following conditions: • The enterprise must be 100% Nigerian owned (this was later amended to a minimum of 51% Nigerian ownership). • The total fixed assets (excluding land) of the enterprise plus cost of the project to be financed should not exceed N10.00 million (ten million Naira) in constant 1988 prices. • Projects to be financed would include those in manufacturing and agro-allied industries, mining, quarrying, industrial support services, equipment leasing, and other related service activities. • New manufacturing enterprises were required to source at least 40% of their raw materials locally with a view to achieving 60% by 1992. However, existing enterprises could source their raw materials locally or from overseas countries. The interest on loans to beneficiaries was initially fixed at 22.5% (based on the average of the prime lending rate of the four biggest commercial banks in Nigeria). The maturity of loans was fixed at a maximum of 12 years, including a three-year grace period. The loan became effective in July 1988 when the first draw down was made. The SME Apex Unit, the coordinating agency, did not deal directly with entrepreneurs but rather entrepreneurs were expected to submit their project proposals to eligible participating banks which appraised such proposals and also bore the credit risk. There were 28 participating banks initially, but the number of eligible banks increased in the later years of the scheme. Even though the number of eligible participating banks increased, it was discovered that the banks were not generally interested in the scheme because of the high credit risk exposure. The only exception was the Nigerian Industrial Development Bank (NIDB), which funded several projects under the scheme. In 1992, the project was subjected to a major amendment when the initial loan package of $270 million was scaled down to $142.0 million, partially to reduce the commitment charges payable and also arising from the under-utilization of the facility. As at the end of 1992, the cumulative value of the projects approved

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under the scheme was $72.8 million whilst the cumulative number of benefiting enterprises was 143. By 31 March 1994, the credit component came to a close and the SME II project was wound up. At the end of the project life, it was estimated (as at May 1994) that 283 project proposals were received by the participating banks, out of which 201 were approved. The total amount disbursed by that date stood at $81.38 million, whilst a total of $127.18 million had been committed. However, further details as to the total capital employed by benefiting enterprises, employment generated, and so on, were not available at the time of field research. Given that the original loan package was $270 million, less than half of that amount was disbursed at the end of the project life. The reasons given for this poor performance include: • A lack of interest by participating banks because of the credit risk exposure. Amongst the participating banks themselves, some were having internal difficulties, making loan recovery difficult. • Insufficient bankable projects by entrepreneurs. • Arguments over who bears the foreign exchange risk exposure. • The weakness of the SME Apex Unit to pursue vigorously the various components of the scheme. • An unsettled socio-economic and political climate prevailing in Nigeria since 1992. • The rapid depreciation of the Naira which made long term investment planning difficult. • Sharp practices by some entrepreneurs, leading to the diversion of funds to non-project related activities.

6 National Economic Reconstruction Fund The National Economic Reconstruction Fund (NERFUND) was established in 1989 to stimulate the rapid rise of real production enterprises in the country. The mandate of NERFUND encompasses the following: • To correct any observed inadequacies in the provision of medium to long term financing of small and medium scale industrial enterprises, especially in manufacturing and agro-allied enterprises and ancillary services. • To provide medium to long term loans to participating commercial and merchant banks for on-lending to small and medium scale enterprises for the promotion and acceleration of productive activities in such enterprises. • To facilitate the provision of loans with 5–10 years maturity including a grace period of one to 3 years, depending on the nature of the enterprise or project. • To provide such loans either in naira or in foreign currencies or both, according to the sources of funds available and the requirements of the eligible enterprises.

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To qualify for funding from NERFUND the project must be engaged in manufacturing and agro-allied industries, mining, quarrying, and industrial support services. In addition, the enterprise must be wholly owned by Nigerians; and must be small or medium scale with fixed assets other than land (but including those requiring funding from NERFUND) not exceeding N36 million. Finally, in the case of a manufacturing enterprise, at least 60% of its raw materials and other production inputs must be locally derived. NERFUND did not provide credit facilities directly to entrepreneurs, but rather such facilities were made through participating banks. Participating banks were responsible for evaluating eligible project proposals, the approval of loans in accordance with normal banking practice as well as disbursement, monitoring and the recovery of loans. The major source of funds for NERFUND was the African Development Bank (AfDB) which accounted for over 90% of funds so far disbursed. As at the end of 1995, the funding position of NERFUND was as follows:

Central Bank of Nigeria Federal Government of Nigeria African Development Bank Total

Naira 0.10 billion 0.22 billion 3.10 billion N3.42 billion

% 2.9 6.4 90.6 100.00

Attempts were made to secure more funds from the AfDB. The loans were denominated in U.S. dollars, with the foreign exchange risk exposure being borne in the first instance by the Federal Government of Nigeria, but ultimately by the borrowers. As at the end of 1993, the cumulative number of projects approved by NERFUND stood at 240, with a total investment outlay of N3.3 billion (made up of US$93.77 million and N1.23 billion). Following on from project approval, by 1993 NERFUND's cumulative commitment amounted to N2.83 billion (made up of $93.76 million and N768 million). Total employment generation capacity (direct and indirect) of approved projects was estimated in excess of 66,000. Out of the total number of projects approved by the end of 1993, 186 (77.5%) were new, whilst the remaining 54 were for existing projects which needed either the rehabilitation of ageing plant and machinery, the expansion of existing production lines or the diversification of existing lines for enhanced profitability. By the end of 1995, the number of projects approved had risen to 481 with disbursements made to 213, out of which 131 had become operational. The total value of cumulative approvals was $289.29 million and N1238.6 million whilst disbursements amounted to $113.90 million and N468.2 million. Over the same period, total direct employment generated was 20,500 whilst indirect employment was estimated at 86, 500. It was apparent from the foregoing that many of the entrepreneurs have not been able to take advantage of NERFUND’s loans, even where approvals have been secured, because of their inability to come up with the minimum equity capital

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requirement of 25%. It was also observed that many of the eligible participating banks were unwilling to fund SMEs because of the foreign exchange risk and high rate of default by beneficiaries. Another problem arose from the underfunding of NERFUND itself as it was unable to on-lend enough funds to the participating banks to back up approved projects. This problem was being tackled through attempts to source more funds from the AfDB and additional grants from the Federal Government. Thus there was a need to reappraise NERFUND's activities with a view to fine-tuning its operations so as to enable it to discharge its mandate, namely to bridge the gap in SME financing and thereby stimulate real production in this very important sector of the economy.

7 Empretec Nigeria The Empretec Project was initiated in March 1989 under the co-sponsorship of the Federal Government of Nigeria and the UNDP/UNCTC(the UN's Centre for Transnational Corporations) to develop and institutionalize entrepreneurship in Nigeria. The programme aimed at the development of indigenous entrepreneurs with a view to promoting the creation and growth of SMEs. The Empretec Programme consisted of four main parts, namely: the selection of participants; their training, preparation of a business plan; and post-start-up support. The training period was over 2 weeks and focused on the development of entrepreneurship skills, culminating in the preparation of bankable business plans. At the end of the training programme, Empretec assisted the trainees (called Empretecos) to source funds from financial institutions to finance their projects. As part of the post-start-up support, Empretec also assisted the entrepreneurs by linking them up with transnational corporations as well as assisting in joint ventures with local and international partners. In order to carry out its activities effectively all over the country, Empretec operated from three zonal offices located in Lagos (West), Kano (North), and Owerri (East), with overall headquarters in Lagos. By December 1993, Emprete was reported to have trained 344 entrepreneurs, some of whom had secured bank loans to start their projects whilst others were already running their businesses before attending the training programme. However, a significant proportion of trainees were constrained by an inability to provide the required equity to start their own businesses. A major problem affecting the future of the Empretec project in Nigeria was the decision by UNDP to discontinue funding assistance by the end of 1993. Thus the project had been in crisis since 1994 owing to the inability of the Federal Ministry of Industries to sustain the project financially. Consequently the Empretec Board and FMI considered making Empretec a private sector self-sustaining agency. Meanwhile the Kano and Owerri zonal offices have been closed down in order to reduce costs.

8 Technology Business Incubation Centres

277

8 Technology Business Incubation Centres This was a project sponsored under the aegis of the UNDP in collaboration with the Federal Ministry of Science and Technology. The project aimed at developing technology oriented small and medium-sized enterprises using the business incubation concept. The technology business incubation concept is an innovative approach to nurturing small and medium-sized technology oriented enterprises by providing entrepreneurs with the assistance needed to develop a business idea from its conception through to full commercialization. The key features of a technology incubation centre include the following: • The provision of a comprehensive range of common services including workspace, enterprise counselling and training, shared secretarial support, startup financing and assistance with product development and marketing. • Strict admission and exit rules. Exit rules generally limit tenancy to a period of 3–5 years, thereby ensuring a reasonable turnover of tenants. • Professional management, which involves monitoring tenant businesses closely against their business plans and ensuring that the incubation centre itself operates in a business like manner, with the prospect of becoming financially selfsustaining. In the Nigerian context, the technology business incubation concept was conceived as a means of tapping scientific and technological know-how from the universities, research institutes and technology oriented large scale firms, and making such knowledge available to Nigerian entrepreneurs for commercialization. Thus technological innovation and entrepreneurship development at the small and medium enterprise level was at the core of the scheme. With assistance from the UNDP/UNFSTD, (The UN’s Science and Technology Department) a pilot technology incubation centre was established in Agege, Lagos State. Established at a cost of about $1.51million, the centre became operational in 1993 with the admission of the first batch of 23 tenants (entrepreneurs) who were provided incubator units in ready built-up factory buildings. In addition to the pilot centre in Lagos, two other centres were established at Kano and Aba, respectively. When fully completed it was expected that the incubation centres will stimulate the growth of technology oriented SMEs in Nigeria by tapping into the R&D results of universities, polytechnics, and research institutes as well as innovative individuals in large scale enterprises.However, the programme was still to take off properly in 1996 because of funding constraints following the partial withdrawal of UNDP from further financial participation in the project. The government was expected from then on to shoulder the full burden of project implementation.

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9 People’s Bank of Nigeria The People’s Bank was established in 1984 and commenced business with an initial capital of N30 million from the Federal Government. Fully owned by government, the bank served the banking needs of the grass-root level. The bank extended credit facilities to both rural- and urban-based low-income traders, craftsmen and microenterprises. To start with, the loans offered were very modest, ranging from N50 to a maximum of N2000, with a repayment period of up to 1 year and bearing an annual interest of only 5%, just to cover administrative costs. Loan beneficiaries were also expected to be members of an approved craft union. Following the rapid depreciation of the Naira, the amount of loan obtainable from the bank was reviewed upwards, ranging from N5000 to N20000. As at the end of 1996 over N350 million had been disbursed by the People’s Bank to about 650,000 beneficiaries all over the country. However, since 1995, the operation of the bank has been more or less grounded due to poor loan recovery, the embezzlement of bank funds and poor management.

10

Community Banks

The law establishing the community banking system was promulgated in 1991 and the first set of community banks came into existence in 1992. By the end of September 1994, over 750 community banks had been provisionally licensed nationwide, out of which 648 were fully operational. The community banks were spread all over the country with about 60% located in the rural areas. Community banks were especially targeted at the grass roots, being jointly owned by community development associations, co-operative societies, clubs, and private individuals in the locality. The minimum equity capital of a community bank was initially fixed at N250,000 with a lending limit of 20% of paid up share capital (later reduced to 10%). Thus virtually all the loans and advances granted by community banks went to micro enterprises and small scale businesses. A review of the operations of community banks in 1993 indicated that many of the banks have equity capital of between N250,000 and N1million. However, there were plans to raise the minimum equity of community banks to about N3million in order to strengthen their financial base. By September 1993, the total authorized share capital of community banks was estimated at N678.2 million out of which N407.7 million was fully paid up. Loans and advances were put at N2082.6 million. The sectoral allocation of the loans showed commerce with 35.1%, manufacturing 18.5%, and agriculture 17.7%. As at December 1996, it was reported that several of the community banks were facing difficulties due to fraud, poor management, and an inability to recover loans from beneficiaries. In the circumstance, the National Board for Community Banks

12

Industrial Development Centres

279

was mandated to review their operations with a view to strengthening the community banking system. Also efforts were made to expand the scope of the activities of the Board to cover other SME lending programmes, with a view to promoting entrepreneurship development at the grass roots.

11

Model Industrial Estates

The establishment of model industrial estates was an initiative of the Federal Ministry of Industries designed to stimulate the growth of SMEs. Under the scheme, it was expected that one model industrial estate will be built in each state of the Federation. Unlike the past when industrial estates consisted of mere parcels of land subdivided into plots with minimal infrastructural facilities, the new model industrial estates were expected to contain industrial “nurseries” (incubators) with ready built factory buildings and ancillary support services, appropriate infrastructural facilities such as tarred roads, electricity, water and telecommunications. In addition, the model estate would also contain industrial plots to be sold to graduates of the “nurseries” and other interested entrepreneurs wishing to establish in the estate. By the end of 1995, about N120 million had been given to 18 states to embark on the development of model industrial estates. However, given the high rate of inflation in the country, the sums released have been inadequate to develop the proposed estates. Consequently, virtually all the proposed model estates have been grounded for lack of funds, with most of them at the land preparation stage. It was estimated (as at 1997) that about N100 million will be required to develop each model industrial estate with the requisite facilities.

12

Industrial Development Centres

The establishment of Industrial Development Centres (IDCs) in each state of the Federation was another initiative of the Federal Ministry of Industries designed to stimulate the growth of SMEs in the country. The IDCs were created to provide grass-root managerial, technical, and other assistance to SMEs. The IDCs were expected to provide on-the-spot assistance, guidance on process techniques, equipment selection, training and management to small scale industries. From the initial three IDCs established in the late 1960s to early 1970s at Oshogho, Zaria, and Owerri, respectively, there are now 22 IDCs spread over 21 states and 15 liaison offices for the remaining states where IDCs are still to be established. The new IDCs are currently being equipped with functional workshops containing various types of equipment. As part of its extension services, between 1993 and 1994, the IDCs covered 800 companies, whilst over 5000 sick and dying SMEs were identified and assisted.

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Also, feasibility studies for some would-be entrepreneurs in different industries were prepared. The major problems militating against the effective performance of the IDCs include underfunding, inadequate staffing, a lack of vehicles to make field visits, low staff morale, a lack of co-operation from state governments and resistance to change by some entrepreneurs. In spite of these problems, if properly funded and with the right complement of trained staff, the IDCs remain one of the most effective channels for providing counselling and extension services to SMEs at the grass-root level.

13

UNDP-Assisted SME Development Programme

Under the Fourth Country Programme, the UNDP made available to Nigeria a package of technical assistance for the development of SMEs. Started in 1995, the project covered the following major sub-programmes: • policy, planning, and institutional strengthening for SME development; • industrial infrastructure facilities and services, such as industrial development centres, industrial estates, and incubators; • entrepreneurship development; • investment financing and promotional services; and, • the development and application of science, engineering, and technology. Given the infancy of the programme as at the time of this review, it was considered too early to make an assessment of its performance.

14

Critical Appraisal of SME Development Programmes

Compared to the pre-SAP period, bold and imaginative initiatives have been taken to develop entrepreneurial skills at the SME level. However, the degree of success achieved in terms of the establishment of new enterprises and the expansion of existing ones leaves much to be desired given the resources that have been committed to the programmes and the potential that exists in the country. The major impediments preventing the full realization of the benefits of the various SME development programmes and the steps to be taken to improve overall performance are briefly summarized below. Rationalization of Entrepreneurship Development Programmes At the moment there are at least four agencies organizing entrepreneurship development programmes in the country. With limited resources, there is a need to consolidate the activities of some of the agencies in order to avoid an unnecessary duplication of effort. It is recommended that one central entrepreneurship development agency

14

Critical Appraisal of SME Development Programmes

281

should be established to take over the activities of FM1, NBCI, and Empretec. The agency should concentrate on the development of entrepreneurial skills for potential and existing SMEs, as well as mature people such as skilled professionals, retired and retrenched civil servants, and private sector employees. The programmes of the agency should complement those of other public sector training organizations and private consulting firms. On the other hand, the NDE Programme should continue to focus on young school leavers and graduates of tertiary institutions. In addition, attempts should be made to include a course on entrepreneurship in the curriculum of secondary schools, polytechnics, and universities. Upgrading the Quality of EDP Programmes There is a need to upgrade the quality of entrepreneurship development programmes. In this regard the assistance of international donor agencies such as the UNDP and ILO should be sought, building on the experience of the last 10 years. Furthermore, the EDP trainers should be exposed to more specialized training at home and abroad, whilst the assistance of foreign experts on secondment to Nigeria should be sought. Building and Strengthening of Institutional Framework Without doubt, the inadequacy of the existing institutional framework is a major obstacle to the full realization of SME development programmes. The need for the establishment of an appropriate SME apex agency to coordinate activities in the sector cannot be over-emphasized. In this connection the plan by the Federal Ministry of Industries to establish the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) is welcomed. Such an agency, with membership of the Board drawn from both the public and private sectors, will act as a catalyst by coordinating the activities and programmes of all relevant institutions involved in SME development, including federal and state governments, international agencies, the financial institutions, non-government organizations (NGOs), and so on. Under Funding of SME Programmes A major recurring problem is the perennial underfunding of the various EDP/SME development programmes. A situation whereby most of the trainees benefiting from the EDP programmes are unable to execute their projects is a waste. Also the abandonment or non-completion of some laudable SME development projects, such as the model industrial estates and business incubation Centres, should be avoided in the future. This calls for proper costing of projects from the start and the allocation of funds to see such projects to completion. The Lukewarm Attitude of Financial Institutions A major drawback to the execution of SME development programmes is that most of the commercial and merchant banks are risk averse given the high rate of default by loan beneficiaries. Yet for the EDP programmes to succeed, full co-operation and support are needed from participating banks and other financial institutions involved in credit delivery. As a matter of deliberate policy, representatives of such banks and financial institutions should be involved in SME programme packaging from the beginning, so as to

282

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Small and Medium Enterprise Development Under the Structural Adjustment. . .

prepare the groundwork implementation.

for

effective

credit

extension

during

project

Furthermore, senior members of such financial institutions should also be exposed to EDP training so as to make them better appreciate the problems and needs of SMEs. Extension and Counselling The activities of the Industrial Development Centres should be strengthened so that they will be better equipped to provide extension services all over the country, especially at the grassroots. In addition, the activities of the IDCs should complement those of universities/polytechnics, the State Ministries of Commerce and Industry and NGOs in the locality. Enabling Environment The socio-economic and political climate in the country needs to be improved in order to promote SME development. The uncertainties brought about by the hostile economic and political environment, especially in the last 5 years(1992–1996) have not been conducive to SME development. This situation has led to a high rate of failure of existing SMEs and a low level of new business start-ups. Data Bank and Information Flow There is a dearth of data on the SME sector. Thus there is an urgent need to develop a comprehensive data bank on the sector, for use by policy makers, entrepreneurs, banks, and other interested parties. In addition, profiles of viable SME projects should be prepared and circulated widely to prospective and existing entrepreneurs as well as financial institutions and other relevant agencies interested in SME development. The proposed Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) when established is best placed to undertake this function. Tapping the Resources of Donor Agencies For more effective results, the government should explore avenues for greater collaboration and support from international donor agencies such as UNDP, ILO, UNIDO, British Council, and similar institutions. However, such assistance should be harmonized with government programmes in order to avoid duplication and a waste of scarce resources. Given the magnitude of the task to be accomplished, and the rather slow pace of utilizing the resources provided by donor agencies, it is recommended that a special project management and monitoring unit be established to monitor the disbursement of funds and the execution of programme components under such technical assistance projects. Need for Performance Audit and Monitoring One reason for the poor performance of SME development programmes is the failure periodically to audit the performance of programmes in relation to the objectives that informed their establishment. In the absence of such a periodic evaluation system, most programmes, after a promising start, are soon grounded, whereas under a proper monitoring system, danger signals and unexpected developments would have come to the fore and preemptive steps taken to remedy the situation. For example, the activities of the Nigerian Bank for Commerce and Industry have been grounded since 1991 owing to

References

283

poor performance, and it was only in 1996 that steps were being taken to bring the bank back to life. In the absence of sustained effort, goals however challenging cannot be achieved.

15

Conclusion

The overall conclusion that can be drawn from the review of EDP/SME development programmes and related initiatives taken over the period 1986 to 1996 is that, despite some measure of success, Nigeria has still a long way to go in order to realize the full potential of the SME sector. Given the modest achievement recorded so far in most of the initiatives, there is a need to fine-tune the various on-going programmes as well as rationalize or revitalize the institutions involved in SME development. There is also the need for greater private sector involvement in all the SME development programmes. It is only within such a context that the contribution expected from SMEs in promoting rapid socio-economic development can be realized.

References 1. The World Bank 1990, Nigeria: A Diagnostic Review of the Small and Medium Scale Enterprise Sector, Washington D.C. 2. Osoba, A.M, ed 1987. Towards the Development of Small Scale Industries In Nigeria, Nigerian Institute of Social and Economic Research, Ibadan

Chapter 12

Business Incubators and Small Enterprise Development in Nigeria

1 Introduction It is now recognized in both developed and developing countries that business incubators are important instruments for promoting entrepreneurship development and technological innovation at the small and medium enterprise level. Pioneered in Western Europe and North America there are now thousands of business incubators all over the world established with the primary objective of stimulating the emergence of a steady flow of successful small and medium scale enterprises, thereby promoting entrepreneurship and innovation in particular and socio-economic development in general. Within this context, business incubators have established a successful track record in Western Europe and North America over the past three decades and are now recognized as being one of the most effective ways of promoting entrepreneurial activity and local economic development. Studies to evaluate their performance indicate that they can reduce the failure rate amongst new business start-ups to below 10% over a 3 year period, as compared with 60–80% for small business generally. It is against the foregoing background that several developing countries, including Nigeria, have adopted the business incubation approach to accelerate the development and promotion of small and medium scale enterprises. In assessing the development and status of business incubators in Nigeria, the chapter is divided into seven parts. Following this introduction Part II reviews the Business Incubation Concept. This is followed in Part III with an analysis of the Types and Roles of Business Incubators in Nigeria. In Part IV the findings of a Survey of Business Incubators in Nigeria are presented. Thereafter, Part V contains a Needs Assessment of Business Incubators in Nigeria. This is followed with an analysis of Policy Issues and Recommendations in Part VI, leading to the Conclusions in Part VII.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5_12

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2 Business Incubation Concept It is useful at the outset to define and explain the concept of business incubation. A business incubator may be defined as an organization that facilitates the process of creating successful new small enterprises by providing them with a comprehensive and integrated range of services, including: (a) Incubator space in fully built-up factory buildings on flexible and affordable terms. (b) The provision of a comprehensive range of common services, including enterprise counselling and training, shared secretarial support, start-up financing and assistance with product development and marketing. (c) Strict admission and exit rules, which are designed to ensure that the incubator concentrates its efforts on helping innovative, fast growth business start-ups that are likely to have a significant impact on the local economy. Exit rules generally limit tenancy to a period of between three to 5 years, thereby ensuring a reasonable turnover of tenants. (d) Professional management, which involves monitoring tenant businesses closely against their business plans, and ensuring that the incubator itself operates in a business-like fashion with the prospect of becoming financially self-sustaining. (e) “Hands on” assistance, including R&D advice and risk capital, usually through a network of external providers. By providing entrepreneurs with the foregoing services on a “one-stop” basis, and enabling tenants to reduce their overhead costs by sharing facilities, business incubators are able to significantly improve the survival and growth prospects of new start-ups. However, it should be pointed out that in its generic sense, the term business incubator is also used to describe a wide range of organizations that in one way or another, help entrepreneurs to develop their ideas from inception to full commercialization and the launching of a new enterprise. Thus, a broad definition of the term embraces on the one hand technopoles and science parks, which are essentially real estate operations and on the other hand, organizations which have no single location and concentrate instead on managing a network of enterprise support services, the so-called incubators without walls.In view of the spectacular growth of business incubators there is a growing volume of literature on the subject. In this regard, the writings of such authors as Abetti [1], Deberesson [2], Gibb [3], Smilor and Gill [4], Sternberg [5], Timmons [6], Vesper [7] and a host of others readily come to mind. The overall conclusion from the review of literature is that business incubators are now a major force to be reckoned with in stimulating: (a) Entrepreneurial activity and the emergence of new small and medium scale enterprises. (b) Technological innovation and adaptation. (c) Regional development and local economic activity.

3 Types and Roles of Business Incubators in Nigeria

287

Furthermore, at the practitioner level, several conferences have been organized by national and multilateral bodies at which thought provoking papers have been presented to compare situational similarities and differences as well as the emerging challenges facing business incubators in different settings. Some of the bodies that have been active in this area include the United Nations Fund for Science and Technology Development (UNFSTD), the German Association of Technology and Business Incubation Centres as well as the National Business Incubation Association in the USA.

3 Types and Roles of Business Incubators in Nigeria In the Nigerian context two broad types of business incubators can be distinguished, namely:

3.1

Industrial Business Incubators

These are generalized industrial nurseries for nurturing new business start-ups with a view to promoting entrepreneurship and stimulating the emergence of industrial establishments at the small and medium enterprise level. Generally, there are no restrictions on tenant admission beyond the minimum basic requirements as may be stipulated in the admission procedure.

3.2

Technology Business Incubators

Technology business incubators are primarily aimed at innovative, technology oriented small and medium scale enterprises desirous of commercializing R&D results, especially from the research institutions, with a view to promoting technological innovation and entrepreneurship development. In the foregoing context, they are specialized business incubators, with well laid down criteria for tenant admission. Both types of incubators are expected to perform a number of roles and functions in Nigeria thereby stimulating the growth of small and medium enterprises (SMEs) as well as accelerating the pace of socio-economic development in general. Thus, the business incubation movement in Nigeria is being spearheaded by two Federal agencies as discussed below. The Federal Ministry of Industries, the apex institution for promoting industrial development in Nigeria is already committed to a programme of establishing several industrial incubators all over the country in order to stimulate the emergence of an increasing number of small and medium scale manufacturing establishments able to

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utilize the abundant supply of human and material resources available in the country. Under the programme it is envisaged that one model industrial estate/incubator will be established in each of the 36 States of the Federation and the Federal Capital Territory. On the other hand the Federal Ministry of Science and Technology, the apex institution for the promotion of science and technology in Nigeria has also drawn up a plan to establish a network of technology business incubation centres in selected locations throughout the country in order to encourage the establishment of innovative, fast growth technology oriented SMEs which are able to capitalize on R&D results from the various research institutes and institutions of higher learning. Within the foregoing context, the business incubators are expected to perform the following roles and functions in accelerating the development of SMEs. (a) Act as a catalyst in promoting the emergence of an increasing number of small and medium scale establishments. (b) Reduce the failure rate of new business start-ups through the establishment of incubation centres where entrepreneurs are offered a superior base of operation in their formative years. (c) Generate a multiplier effect in the SME sector in general through outreach programmes aimed at small scale entrepreneurs beyond the confines of the incubator centres. (d) Serve as pilot demonstration centres which will lead to the establishment of several business incubators all over the country. (e) Promote entrepreneurship development and technological innovation, especially at the grassroots. (f) Galvanize the nation’s abundant supply of human and material resources in productive endeavours through an increasing number of SMEs. In terms of contribution to national development the following benefits are expected to accrue from the implementation of the business incubation programme in Nigeria. 1. Strengthening the indigenous industrial base of the country by accelerating the creation of locally owned small scale enterprises. 2. Accelerating the commericalization of R&D results, which can help reduce Nigerian industry’s dependence on foreign know-how and improve productivity in both the primary and secondary sectors of the economy. 3. Promoting economic diversification through the creation of dynamic enterprises in the agro-allied, information technology, and manufacturing sector, which will help to reduce Nigeria’s over dependence on the oil industry as a major source of revenue. 4. Providing large-scale manufacturing concerns with reliable local sub-contractors capable of supplying import substitutes thereby reducing foreign exchange requirements. 5. Creating employment opportunities in enterprises which have good long term prospects.

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6. Assisting in the exploitation of locally available raw materials and resources. 7. Promoting the development of indigenous technology and training of skilled and semi-skilled intermediate manpower. 8. Stimulating overall socio-economic development in Nigeria through integration of the urban and rural sectors of the economy.

4 Survey of Business Incubators in Nigeria Against the foregoing background a survey of business incubators in Nigeria was undertaken with a view to: 1. Ascertaining the number of such incubators in Nigeria and the facilities available. 2. Finding out how successful the incubators have been in promoting entrepreneurial activity and technological innovation. 3. Assessing the needs of such incubators in the context of government declared policy on their role in national development. 4. Isolating the key policy issues which ought to be addressed in promoting the development of business incubators in Nigeria and making recommendations as appropriate. In undertaking the survey the methodology adopted included a combination of the following: (a) Physical inspection of sites and facilities to observe the status of each incubator on the ground. (b) Structured interviews with the managers of the incubator centres to obtain information on all areas of interest to the study. (c) Exchange of views with some of the entrepreneurs operating from the incubators to ascertain their experience as tenants of these centres. The information and data collected from the field survey provided the background material for the research findings as presented in this chapter. The survey revealed that there are at present only seven business incubators operating in Nigeria. The characteristics of these incubators as summarized in Table 12.1. From the table it will be observed that the incubators are grouped into two broad categories, namely: Industrial business incubators and Technology business incubators. The facilities and services available in both types of incubators as well as their current operational status are reviewed as outlined below.

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Table 12.1 Operational status of business incubators in Nigeria as at 31st December 1998

1

Name/Location of incubator centre Yaba Industrial Estate Yaba—Lagos State

Year started 1958

Sponsor Lagos State Ministry of Commerce and Industry, Ikeja

Area covered 1.112 ha

Facilities E, T, TR. W, RD. RST, SS, and built-up factory sheds

2

Matori SME Estate, Fatai Atere Way. Mushin, Lagos State

1975

Ditto

2.079 ha

E. T. TR, W, RD, SS and build-up factory sheds

3

Isolo SME Industrial Estate, Cheeseborough Way, Isolo Lagos State

1993

Ditto

0.28 ha

E, T, TR, W. RD, SS and built-up factory sheds

4.

Eastern Nigeria Industrial Estate Uwani. Enugu, Enugu State

1964

Enugu State Ministry of Commerce and Industry. Enugu

0.50 ha

E, TR. T. W. SS RST, RD and built-up factory sheds

General remarks All 46 factory sheds in 3 size lots (45 m2, 60 m2 and 120.2 m2) are allocated. Rents average about N253/m2/ annum. 32 of the tenant firms offer services whilst 14 are engaged in manufacturing All 45 factory sheds in 3 sizes (108m2, 162.2 m2 and 364.5 m2 are allocated. Rentals vary from N47.040 to N90,000 per unit per annum All of the 20 sheds, each of 60 m2, have been allocated. The rental is N20,160 per annum -about N336/m2/ annum. All existing tenant firms are engaged in manufacturing 25 incubator units of 130 m2 each available and allocated to 15 SME tenant firms. Rental per unit is N6.000 per annum (continued)

4 Survey of Business Incubators in Nigeria

291

Table 12.1 (continued)

5.

Name/Location of incubator centre Lagos Technology Business Incubation Centre. Agege— Lagos State

Year started 1993

Sponsor Federal Ministry of Science and Technology and Lagos State Government

Area covered 1.05 ha

Facilities E. T. TR. W, SS. RD. built-up factory sheds

6.

Kano Technology Business Incubation Centre, Kano, Kano State

1996

Federal Ministry of Science and Technology and Kano State Government

2.00 ha

E, TR, W. T. SS built-up factory sheds

7.

Aba Technology Business Incubation Centre, Aba, Abia State

1996

Federal Ministry of Science and Technology and Kano State Government

4.00 ha

E, TR, W. SS. T. Builtup factory sheds

General remarks All 30 units in phase I are allocated and occupied, factory shed dimensions vary from 62 m2to 130 m2. Rental is graduated to vary from N40/m2 in the first year to N120/m2 by the third year. However, the open market value is over N200/m2 Currently under development, 10 incubator units already available at temporary site. 18 additional factory units and 15 offices to be provided at permanent site when completed Currently under development, 25 incubator units to be made available under the first phase of the development plan for the Centre. About 10 units already completed and occupied

Key: E electricity, W water, TR tarred road, RST restaurant, T telephone, RD refuse disposal, SS security service

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Table 12.2 Distribution and size of incubator units Incubator Yaba Matori Isolo Uwani–Enugu

4.1

Number of units 46 45 22 25

Predominant size of units 60m2, 120m2 108m2, 162 m2 60 m2 130 m2, 260 m2

Industrial Business Incubators

There are currently four in Nigeria. They are located at Yaba, Matori, Isolo (all in Lagos State), and Uwani–Enugu in Enugu State. Of the four industrial incubators, Yaba, the oldest was established in 1958, followed by Uwani in 1964, Matori in 1977 and Isolo in 1993. The four industrial business incubators are more or less generalized industrial nurseries admitting a broad spectrum of enterprises engaged in any aspect of the conversion process from simple to complex manufacturing activities. The facilities available in the four industrial incubators include the following: 1. Fully built-up factory buildings partitioned into incubator units for allocation to SME entrepreneurs. 2. Infrastructural support facilities, such as good access road, electricity, water, telephone, restaurant, waste disposal, and security services. 3. Provision of technical and management support services to tenant firms, albeit on a limited scale. The distribution and size of incubator units available in each of the four incubators are as indicated in Table 12.2. Overall the units range in size from 60m2 to 260m2. The primary objective of setting up the industrial business incubators was to promote indigenous entrepreneurship by providing entrepreneurs with a superior base of operation in fully built-up factory buildings with the supporting infrastructural facilities as well as technical/management support services. The incubators were designed to serve as industrial nurseries where after a few years residency (say three to five years) tenant firms should have developed their enterprises to the stage where they can set up their own factories in one of the new industrial layouts being planned by the relevant state governments. Thereafter, new tenants can take up their places and in turn develop to the stage where they too can launch out independently. Thus, these incubators are expected to nurture over time a steady flow of successful productive small scale enterprises. Another purpose of setting up these pioneer industrial incubators was that they should serve as pilot demonstration projects of the commercial viability of incubators in Nigeria. It was hoped that the commercial success of the incubators would lead to the private establishment of similar industrial incubators.

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A critical appraisal of the industrial incubators revealed that all of them have failed to achieve the primary objective of turning out a steady flow of successful enterprises. This situation arose out of the refusal of tenant firms to move out of the incubators even after they have outgrown the initial space provided and are successful in their business endeavour. Thus most of the tenants have remained in the incubators for periods of over 20 years. The main reason claimed by tenants for their inability to move out is the failure of government to provide suitable alternative locations. However, a more apparent reason is the very low rentals charged for the units occupied, which works out at less than 50% of the open market prices. Since the incubators are not run on commercial basis, none of them is selffinancing and they have to depend on government for subvention. The incubators are also characterized by weak management, being run more or less as departments of the Supervising Ministry with all the attendant red-tape and bureaucratic ineptitude.

4.2

Technology Business Incubation Centres

As at the time of the study there were three technology business incubation centres in Nigeria. These have been set up at Lagos, Kano, and Aba, respectively. The Lagos Technology Business Incubation Centre, the oldest of the three, was established in 1993 under an initiative sponsored by the United Nations Fund for Science and Technology Development (UNFSTD) in collaboration with the Federal Government of Nigeria. During the first phase of the project about 30 tenants were offered admission into the centre in fully built-up factory buildings partitioned into incubator units ranging in size from 62m2 to 130m2. All the required infrastructural facilities, such as good access road, electricity, water, telephone, etc. are available at the centre. However, both the Aba and Kano Centres were still being developed, with 10 tenants operating from Kano and about a similar number from Aba. When completed, it is expected that 30 tenants will be admitted into the Kano centre and 25 tenants into the Aba centre. The main features of the three technology business incubation centres include the following. (a) Emphasis on innovative technology oriented new business start-ups. (b) Strict admission and exit criteria as reflected in the tenancy agreement duly entered into between the contracting parties. The tenancy period is limited to 3 years in the first instance with provision for a further 2 year extension bringing the total to 5 years. Beyond 5 years tenants are made to pay the full commercial rent of incubator units in order to encourage voluntary movement out of the centre.

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(c) Training programmes in management principles and techniques are offered to tenants periodically in order to upgrade their skills and encourage professionalism. (d) Provision of shared secretarial support including telephone and other office support services. (e) Linkage with research institutes, universities and financial institutions in the locality. Since the technology incubation centres are still relatively young, it is too early to make a definitive assessment of their performance. However, based on a preliminary assessment of the three pioneer centres, it appears that the same set of problems confronting the older industrial incubators are corning to the fore. These include the following. 1. Reluctance of tenant firms to move out at the expiration of their tenancy period. For example, at the Lagos Technology Incubation Centre, only nine tenants out of the 30 offered admission, have graduated after a period of 6 years. Even then the nine graduating tenants were faced with the problem of finding suitable and affordable alternative accommodation. 2. Lack of funding by the government to complete the facilities planned for each centre. Consequently all the centres need substantial capital injection to complete their factory buildings and also to purchase equipment and related facilities. 3. Inability of the Incubator Centres to generate sufficient funds from operational activities, which encourages dependence on government for subventions and cast doubt on their long term viability. 4. Weak organizational arrangements as the three centres are still operating more or less as departments within the parent supervisory ministry, whereas what is needed is some measure of autonomy that will encourage proactive management and commercial focus. In addition to the foregoing, the envisaged commercialization of R&D results from the various research institutes has not taken place. Indeed, many of the tenants admitted into the centres are engaged in low technology manufacturing activities. Another observation is that some of the tenants are operating at very small scale artisanal level with very little value added. Therefore, there is ample room for technology upgrading, size enhancement, and skill acquisition by the proprietors of tenant firms if the objectives which informed the establishment of the centres are to be realized.

5 Needs Assessment of Business Incubators in Nigeria Based on the survey of business incubators in Nigeria as highlighted above and on the structured interviews held with the key stakeholders interested in the programme, a number of needs have to be addressed urgently before the incubators can make the

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desired impact in promoting entrepreneurship development and technological innovation. These needs are discussed below. Inadequacy of Numbers Arising from the review made above, the first observation is the inadequate number of existing incubators, given the high demand for units by prospective tenants. For a country as big as Nigeria, it is quite apparent that the seven existing incubators are completely inadequate to meet the needs of small and medium scale entrepreneurs. Consequently there is a pressing need to establish more incubator centres all over the country. Post-Incubator Location and Refusal of Tenant Firms to Vacate Premises One of the major failures of the existing programme is the refusal of tenants to move out of incubators after the initial period of incubation, thus defeating the objective of nurturing a steady flow of successful productive enterprises. The main reason given by tenants for refusing to move out is the failure of government to provide suitable alternative locations. Whatever may be the reason, there is a need to ensure that appropriate policies are put in place to ensure a periodic turnover of tenants in order to facilitate new intakes so that the programme can have the desired multiplier effect. For example, parcels of land, say about 5.0 ha each, in designated industrial estates can be set aside and laid out into plots for allocation to tenants graduating from the incubator centres. Public Ownership and Lack of Private sector Participation All the existing business incubators are owned by the government, whereas one of the major objectives for establishing the pioneer nursery at Yaba was to demonstrate the commercial viability of such nurseries in Nigeria so as to promote private establishment of other industrial incubators. Given the high level of potential demand for incubator units and dwindling public revenue, a major need to be addressed is the issue of private sector participation in the establishment and/or management of the incubators. Non-viability of Existing Incubators Closely related to above is that the incubators as presently operated are not commercially-viable, hence the inability to attract private sector operators. Part of the problem arises from poor project conception and implementation as well as a failure to address squarely all the issues relevant to the establishment and operation of such incubators within the Nigerian sociopolitical setting. Some of these issues relate to land ownership and cost of acquisition, provision and cost of infrastructure, cost of capital and inaccessibility to institutional credit. Weak Management Structures Virtually all the business incubators in operation are characterized by weak management structures, most operating on the basis of part-time or ad hoc organizational arrangements. It should be emphasized that the key to the success of any incubator is the manager who is charged with the responsibility for its day-to-day management. Rather than be a passive administrator of the incubator, the manager must play a dynamic and proactive role to ensure its long term success and viability.

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Lack of Objectivity in Tenant Admission One of the major factors impeding the periodic turnover of tenants from the incubators is the absence of objective criteria in tenant admission procedures. More often than not, tenants are offered admission on the basis of political connections rather than on merit and the potential commercial success of projects to be incubated. In some instances, genuine entrepreneurs are denied admission in favour of speculators, political appointees, and top government functionaries. For the future, to ensure periodic turnover of graduating tenants, there is a need to streamline admission procedures. Inadequate Support Services to Tenant Firms Apart from offering space to tenant firms in fully built-up factory premises, existing incubators provide little or no additional support services to tenants. Even in the newly established technology incubator centres, the level of support services offered to tenants is very meagre. In order to guarantee the success of enterprises locating in the incubators, an array of support services should be provided in the following areas. (a) (b) (c) (d)

Enterprise counselling and monitoring. Management training and assistance. Financial assistance and seed capital funding. Technical assistance, e.g. in the acquisition of suitable equipment and processes as well as solving production problems. (e) Marketing and promotion of products. (f) Linkage with large-scale enterprises, research institutes and Universities.

Inconsistent Government Policy and Poor Funding of the Incubator Programme A major reason for the inadequate number of incubators in the country is the inconsistency in government policy over the years, leading to serious underfunding of the incubator programme. Whereas lip service was paid in the various plan documents to the establishment of industrial incubators for SMEs with all the supporting infrastructure and facilities, government policy/funding of the programme shifted from 1 year to the other. Given this vacillating attitude, all the proposed model incubators being promoted by the Federal Government in collaboration with State Governments have been grounded for lack of funds. Failure to Set Challenging, But Attainable Goals Closely related to the above is the failure to set realistic and clearly defined objectives backed with the required commitment and resources to assure success. Consequently, no spectacular results have been recorded in the incubator development programme in Nigeria. To ensure the success of the programme in future, there is a need to set clearly defined objectives especially as to what is feasible and achievable (given limited resources) within a defined time period - say 5–10 years. Such a programme must be backed up with proper project studies, appropriate implementation strategy as well as periodic review and evaluation. Finally the role of the three tiers of government, namely, Federal, State and Local, must be clearly spelt out in the implementation programme.

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6 Policy Issues and Recommendations The key policy issues, which ought to guide the future development of business incubators in Nigeria as well as the recommendations arising therefrom are highlighted as follows.

6.1

Ownership and Sponsorship

There is a need to have a coherent policy on ownership and sponsorship of incubator centres. In this regard, the role of the three tiers of government, namely Federal, State, and Local should be clearly spelt out. It is recommended that the Federal Government should play the role of a facilitator and be responsible for broad policy matters and operational guidelines. On the other hand the State and Local Governments should be encouraged to own and sponsor the establishment of business incubators in collaboration with interested parties. In addition, the universities should be encouraged to establish technology business incubator centres especially targeted at commercialization of R&D results. Furthermore, private sector participation in the incubation programme should be encouraged by creating an enabling environment which supports private ownership of incubator centres. To make this feasible, government should provide appropriate incentives in such areas as land acquisition, soft loans, and infrastructural facilities (e.g. water, electricity, access road, etc.)

6.2

Legal Status

For those business incubators promoted by government agencies, such incubators should be incorporated as companies limited by guarantee, i.e. not for profit organizations. However, they should strive to break even and be commercially driven in order to reduce dependence on the treasury for subvention. For incubators promoted by the private sector, these should be incorporated as limited liability companies, and should be profit making in order to guarantee an acceptable rate of return on capital employed to justify the investment.

6.3

Size of Incubators

In order to reach a critical mass and have the desired impact, it is recommended. the incubators should be designed to accommodate between 20 and 50 tenants.

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However, the development of facilities could be phased out in order to moderate the initial capital outlay required to establish each centre.

6.4

Linkage with Industrial Estates

Wherever possible, the incubation centers should be located near or within an industrial estate in order to minimize start-up costs. The possibility of using abandoned factory buildings and warehouses in such estates should also be explored.

6.5

Post Incubation Location

Plots of land in dedicated industrial estates should be set aside for allocation to graduating tenants from the incubators. Such plots should be allocated provisionally at the same time as the tenancy agreement for incubator units is being signed in order to guarantee compliance with exit regulations.

6.6

Coordination with Other SME Support Institutions

The activities of relevant government agencies such as Industrial Development Centres, Entrepreneurship Development Programmes, Research Institutes, Development Finance Institutions, etc. should be coordinated with the incubator development programme in order to maximize results. The incubation centers should not he regarded as enclaves but rather as an integral part of the efforts being made for the development of small and medium enterprises.

6.7

Management of Incubators

This should be outside the main stream of the civil service and should preferably be private sector driven. Even where government retains ownership, it is recommended that a Management Board consisting of persons from the private sector should oversee the running of the centre. In addition, it should be emphasized that the key to success of the incubator centre is the Incubator Manager who will be responsible for its day-to-day management, long term development, and viability. Consequently every effort should be made to attract the right calibre of personnel to manage the incubator centres.

6 Policy Issues and Recommendations

6.8

299

Admission and Exit of Tenant Firms

There should be well laid down criteria for admission of tenants, in order to maximize the economic benefits accruable from the establishment of such centres. In this regard, every effort should be made to discourage admission not based on objective criteria as this is likely to compromise the viability of the incubator centre itself. Similarly exit rules must be clearly spelt out in the tenancy agreement in order to facilitate a steady flow of tenants out of the centre at the end of the incubation period.

6.9

Potential for Self-Financing

Proposed incubator centres must have the potential for self-financing within five years of their establishment. Consequently the income and expenditure profiles of each proposed incubator centre should be closely scrutinized in order to achieve this objective.

6.10

Subsidization of Rent and Other Facilities

This should only be for the first two to three years of admission into the centre. Thereafter, market determined rates should apply in order to expose tenants to the realities of the market place.

6.11

Cooperation with Large-Scale Firms

This should be encouraged in order to promote linkages and opportunities for sub-contracting between SMEs located within the centre and large-scale enterprises operating in the locality.

6.12

Opportunity for Outright Purchase of Incubator Units

In view of the reluctance of a large number of tenants to move out of the incubator centres, arising partly out of the prohibitive cost of erecting factory building beyond the financial resources of SME entrepreneurs, consideration should be given to the option of outright purchase of incubator units by the tenants. This could be done under deferred payment arrangements. However, the selling price of units should be

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close to market values in order to generate funds to build additional incubator units to meet the pressing needs of new SME start-ups for factory space.

7 Conclusion The survey of business incubation centres in Nigeria revealed that there are only seven in operation as at the time of the survey. Out of the seven, four are industrial business incubators whilst the remaining three are technology business incubators. The incubators are designed to promote entrepreneurship development and technological innovation at the small and medium enterprise level by nurturing a steady flow of successful productive enterprises after an incubation period of three to five years. However, a review of the present operational status of the incubation centres revealed that most of the tenants have refused to move out of the centres with several having stayed for periods in excess of 20 years, thus defeating the objective of nurturing a steady flow of successful small and medium scale enterprises. Given this unsatisfactory state of affairs, there is an urgent need to streamline the organizational, legal, management, financial and operational aspects of the incubator programme in order to avoid the mistakes of the past and ensure effective realization of the overall objective of promoting small enterprise development in Nigeria.

8 Postscript 8.1

Recent Developments on Technology Business Incubation Centres in Nigeria

At the time the survey on which the material contained in this chapter is based was undertaken, the Technology Incubation Programme in Nigeria was still at its infancy. At that time there were only three TICs in Nigeria, namely the ones in Lagos (1993), Kano (1994), and Aba (1996), respectively. Since then several more TICs have been established under the coordination and supervision of the National Board for Technology Incubation (NBTI), a parastatal under the Federal Ministry of Science and Technology located in Abuja with a mandate to nurture the growth of TICs in Nigeria. As at the end of December 2019, NBTI has successfully implemented the establishment of at least one TIC in each of the 36 States in the Federal Republic of Nigeria. It is gratifying to observe that the TICs have indeed become centres for nurturing a steady flow of successful technology oriented and innovative small scale enterprises in different locations throughout the country. It should also be noted that unlike the past when several of the tenant firms were operating at the artisanal level,

References

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it is comforting to note that many of the current tenant firms have come up with projects that are truly innovative and technology oriented. However, a major criticism of the programme is that virtually all the existing TICs are in the public domain having been established by State Governments in collaboration with the Federal Ministry of Science and Technology. In future every encouragement should be given to Universities, Polytechnics, Research Institutes, and Private sector firms to own and operate TICs so as to spread the web to reach more entrepreneurial talents as well as harness the abundant potentials and opportunities available in the country.

References 1. Abetti, P. A., 1989, Linking Technology and Business Strategy, New York: American Management Association. 2. Deberesson, C., 1989, 'Breeding Innovation Clusters: A Source of Dynamic Development, World Development17(1), 1-16. 3. Gibb, J M. (ed). 1985, Science Parks and Innovation Centres:Their Economic and Social Impact, Amsterdam: Elsevier. 4. Smilor, R. W. and M. D. Gill, 1986, The New Business Incubator: Linking Talent, Technology and Capital Know-how, Lexington, MA: Lexington. 5. Sternberg, O. D., 1996. 'Technology Policies and the Growth of Regions, Small Business Economics 8(2), 75-86. 6. Timmons, J. A., 1990, New Venture Creation, ed., Homewood, IL: Irwin. 7. Vesper, K. H., 1990, New Venture Strategies, Englewood Cliffs, NJ: Prentice Hall.

Chapter 13

Policies and Strategic Issues in Promoting Rapid Industrial Development in Nigeria

1 Introduction This concluding chapter highlights some of the key policies and strategies which ought to be pursued by government in order to achieve the goal of rapid industrial development in Nigeria. This is considered to be of paramount importance because without such a well defined and articulated framework, policy formulation and execution are likely to be opportunistic without any underlying strategic focus or commitment to long term goals. Fortunately the importance of a well defined policy and strategic framework for the rapid development of the industrial sector has always been appreciated by government as reflected in the various national development plans. Beyond the plans, government has also issued policy statements from time to time to stimulate the development of the industrial sector in particular. Thus, in 1988 the Federal Government issued a policy document on “Industrial Policy of Nigeria” [1] to guide and accelerate industrial development in the country. Also in 2012, the government issued another policy document titled “Nigeria Industrial Revolution Plan” [2], aimed at fast tracking industrial development. At the core of these documents is the objective of making the industrial sector the prime mover of the economy in order to accelerate overall socio-economic development. Within the foregoing context, government has continued to adopt a number of policy measures and strategic initiatives aimed at jump starting the economy in general and accelerating the pace of industrial development in Nigeria. Unfortunately in spite of the lofty pronouncements contained in the policy documents, achievements have been far below expectations due to lack of visionary leadership and political will to drive the process on a sustained basis. Thus Nigeria, as compared to the newly industrialized countries of South East Asia, still has a long way to go for the goal of rapid industrial development to be realized.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5_13

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It is against this background that the broad policy issues, challenges, and strategic choices critical to achieving the goal of rapid industrial development in Nigeria are discussed in the subsequent sections of this chapter. However, it should be pointed out that a more detailed and rigourous treatment of each of these issues should be one of the primary concerns of the country’s industrial development planners and policy makers. Before proceeding to discuss the specific policy and strategic issues highlighted in this chapter, two important and related matters considered crucial to achieving predetermined goals in the industrial sector are examined below.

2 Visionary and Enlightened Political Leadership As a starting point it should be pointed out that a visionary and dedicated political leadership is of critical importance to drive the process of industrial and socioeconomic development. Without such a dedicated leadership class visions and goals will amount to no more than mere wishful thinking. Sadly the history of post-independence Nigeria, especially at the Federal level, has been one characterized largely by incompetent political leadership soaked in unimaginable corruption and bureaucratic ineptitude. This state of affairs contrasts sharply with the leadership class in other contemporary emerging economies such as China, Singapore, South Korea, and Malaysia. Going back to history it will also be observed that the leadership class played important and catalystic roles in the transformation of the economies of Britain, France, Germany, USA, and Japan. Needless to say until a dedicated and visionary political class which is fully focused on the goal of rapid transformation of society rather than on personal aggrandizement and crude enrichment emerges, Nigeria will continue to wallow in economic retrogression, stagnation, and underdevelopment.

3 National Development Plan and Strategy It should also be pointed out here that the goal of rapid industrial development is more likely to be realized within the context of a well articulated national development plan and strategy. Such a plan, apart from setting goals and targets in the various socio-economic sectors, will also seek to define what kind of nation the country wishes to be in the comity of nations including national values and aspirations stated in such a way as to capture where the country is now and where the country wishes to be in future. Needless to say, a well articulated national development plan and strategy should be based on a realistic set of assumptions about the country, including national resource audit, strengths and weaknesses, opportunities, and threats on the one hand and institutional structure and relationships (especially political, legal, and economic

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institutions) as well as institutional processes and behaviour necessary to ensure effective implementation of predetermined national goals. Of course a dedicated leadership class assisted by a competent bureaucracy will be needed to drive the agreed national development plan and strategy over a long period such that the gains made are sustainable and irreversible. In this regard, the recent announcement by Government of setting up a machinery for the long term development plan of the country, tagged Agenda 2050, to chart the way forward over the next 30 years is a step in the right direction. However, it remains to be seen whether this will be any different from previous attempts. It is within the foregoing context that we now proceed to discuss in a summary manner some of the key policies and strategies considered essential in order to realize the goal of rapid industrial development in Nigeria as outlined below.

4 Infrastructure Support for Industrial Development A major handicap constraining the growth of the industrial sector in Nigeria is the inadequacy of the basic infrastructure required for sustainable development. Thus urgent attention is needed to develop and nurture the emergence of a durable substructure of infrastructural support to sustain rapid industrial development, most especially in the areas of economic, political/legal, and social infrastructure as outlined below. In the area of economic infrastructure there is an overwhelming need for the upgrading of assets/facilities so as to ensure the following: • Uninterrupted and adequate supply of electricity. • Efficient intermodal transport system comprising a network of all weather roads, railways, waterways, and air transport. • Regular public water supply. • Adequate postal, information, and communication technology services. The present situation whereby manufacturers have to generate their own electricity, provide their own water supply, maintain roads to the factory gate, and undertake the provision of other municipal services which ordinarily should be provided by the various tiers of government lead to high cost of doing business in Nigeria and render the output of domestic producers uncompetitive with imported products. A glimpse at the magnitude of infrastructure deficit in Nigeria was given by the African Development Bank which estimated that the country will need to invest about $3.00 trillion on infrastructure development over the period 2018–2040 in order to ameliorate the situation. Of this amount, it was estimated that over $1.00 trillion will be required for the transport sector. In the area of political/legal infrastructure, there is need for a stable political order which guarantees the following.

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Stable government and predictable policy environment. Durable political architecture that engenders good governance. Orderly change of government through acceptable democratic process. Enlightened and visionary political leadership. There is also an urgent need to strengthen the following.

• Public institutions such as the Ministries, Departments, and Agencies of Government for the efficient discharge of their functions with minimal corruption. • Security Agencies for effective maintenance of law and order. • Independent Judiciary to uphold the rule of law as well as due process. As for social infrastructure the key areas requiring urgent attention include the following: • • • • •

Universal basic education and eradication of illiteracy. Functional educational system capable of producing a pool of needed manpower. Availability of basic health services. Social safety net to prevent extreme poverty. Waste disposal and management.

It goes without saying that the goal of rapid industrialization will continue to remain a tall dream without a functioning and efficient sub structure of institutions on which to build the superstructure of modern industrial establishments.

5 Priority Industries to Drive Industrial Development In order to galvanize and accelerate rapid industrial development in Nigeria, it is necessary to isolate a number of top priority industries which should provide the bedrock for self-sustaining industrial growth. In the next phase of development, it is recommended that priority be accorded to four types of industries as indicated below: 1. 2. 3. 4.

Domestic resource based industries. Export oriented industries. Intermediate and Capital goods industries. Small and medium scale industries.

Given that Nigeria is well endowed with an abundance of natural resources it goes without saying that initial emphasis should be placed on the development of domestic resource based manufacturing industries in order to encourage value added output and exports. The foregoing advocacy is in sharp contrast to the current state of affairs which is based more or less on the colonial trading pattern which sees the country as a producer and exporter of primary commodities. Next, export-oriented industries should be developed and nurtured on the basis of comparative as well as competitive advantages, resource endowment, and export

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market opportunities. In this regard the Federal Ministry of Industry, Trade and Investment working in collaboration with the Nigerian Export Promotion Council should draw up a list of the sub-sectors and product groups which qualify for export development and promotion in the medium to long term. This should be backed up with appropriate strategies and incentives to ensure the development of such identified sub-sectors and product groups. Furthermore, in order to ensure sustained industrial development, whether import substituting or export-oriented, it is imperative that supporting intermediate and capital goods industries should be developed to provide needed support to local industries. Based on the current state of development and anticipated future requirements of the manufacturing sector it is recommended that efforts be made to complete and operate efficiently such key industrial projects as in iron and steel, petro-chemicals, pulp and paper, machine tools, aluminium smelting, etc. all of which are vital to performance in the downstream industrial sub-sectors. Indeed, the next stage in the evolution of the manufacturing sector in Nigeria should be a movement from simple processing and assembly type operations to more sophisticated manufacturing operations involving the production of intermediate and capital goods. As compared to the Newly Industrialized Countries (NICs), one area of major weakness in Nigeria’s manufacturing sector is the absence of a strong and virile small and medium enterprise (SME) sector capable of providing inputs and services to the large scale industries on a cost-effective basis. Over the next 20 years, a more vigorous strategy for the development of this vital sector must be pursued. The various SME initiatives currently being pursued and/or implemented by government will need to be reviewed and fine-tuned for more effective results.

6 Incentives for Industrial Development The role of an appropriate regime of incentives in attaining long term development objectives in the manufacturing sector cannot be over emphasized. In this regard there are two broad categories of incentives currently applicable in the country, namely: 1. Investment incentives featuring, amongst others, pioneer industry status, accelerated depreciation allowance, investment tax allowance, etc. 2. Export promotion incentives such as duty draw back scheme, export expansion grant, export development fund, retention of export proceeds in foreign currency, export free trade zones, etc. It should be pointed out that the range of incentives contained under these two broad categories are by and large comprehensive and similar to those prevailing in the newly industrialized countries. However, at a second stage what is required are industry specific incentives designed to attract the required investments into the designated priority sub-sectors and product groups.

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Thus for the future, it is necessary to package additional incentives to promote accelerated development in the identified priority sub-sectors. However, it must be recognized that such additional incentives represent a cost to be borne by the host country and such costs must be weighed against the benefits expected to accrue from the incremental investment. In addition it should be pointed out that more spectacular results are likely to be achieved by eliminating a number of well known disincentives in the Nigerian business environment such as endemic corruption, bureaucratic ineptitude, inadequate infrastructural facilities, etc. From the viewpoint of the foreign investor the elimination of these disincentives is a major attraction when deciding between competing alternative overseas locations for direct investment.

7 Employment and Manpower Development Here two major issues call for special attention. First is the need to encourage labour intensive industries which will make use of the nation’s abundant supply of human resources. This approach makes sense not only in economic terms but also in social terms as this will help to reduce the high rate of unemployment, underemployment and other social problems associated with a high level of idle citizenry. Second is the need to fine-tune current policies aimed at high level manpower development in order to ensure an appropriate mix of the right types and number of personnel, especially in science, engineering, and technology. The current high level of unemployment amongst polytechnic and university graduates gives cause for concern. This is in spite of the fact that industry faces critical shortages of specialists and technicians in virtually all areas of engineering and technology. At the technician and artisan level, the activities of the vocational schools and technical colleges will need to be streamlined to meet the requirements of the new industrial development strategy. Furthermore, the activities of the Industrial Training Fund will need to be re-examined especially as it relates to the training of junior and intermediate technical manpower for industry. Here the establishment of sub-sectoral Training Councils to meet the training needs of specific industrial groups, e.g. textiles, leather, wood works, etc. is a step in the right direction. In addition the possibility of establishing a National Vocational Training Board to coordinate vocational training throughout the country should be examined.

8 Technology Acquisition and Development For industrial development to become self-sustaining it has to be backed up by. indigenous technological capability. Here several issues call for special mention and attention, namely

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1. The most cost-effective process of acquiring and domiciling foreign technology. 2. The development of indigenous technological capability and entrepreneurship. 3. The training of a pool of technological manpower at engineers and technicians level. 4. The role of research and development (R &D) in manufacturing industries and the commercialization of research findings. 5. The absorptive and adaptive capability of technology in the manufacturing sector. 6. The nature and structure of incentives necessary to induce private sector investment in R & D and technology activities. 7. The contribution, whether negative or positive, of multinational corporations to technological advancement in Nigeria’s industrial sector. 8. The fashioning of a technology policy for Nigeria and the institutional mechanism for ensuring orderly and sustainable technological development. Detailed discussion on each of the foregoing issues is beyond the scope of this chapter. Suffice it to say that Nigeria's inadequate technological capability remains the weakest link in the quest for rapid industrial development.

9 International Competitiveness As Nigeria continues to liberalize her economy, domestic producers will become more exposed to the rigours of competition from foreign goods. At the same time, manufactured goods from Nigeria should strive to gain acceptance in export markets, especially in the African region and selected overseas markets. For this desirable state of affairs to materialize, goods produced in Nigeria must be internationally competitive. Thus unlike by-gone years, Nigerian industries, whether import substituting or export oriented, must shift their horizon from a local focus to an international perspective in order to capture the dynamics of world trade in manufactured products. It is against this background that appropriate business strategies must be formulated. Obviously this new international orientation along with that of export promotion means that an increasing number of Nigerian enterprises must learn the rudiments of international business including international marketing, international finance and more sophisticated management techniques to be able to operate within an international context. It is noteworthy to observe that some dynamic Nigerian companies, especially banks and insurance companies have shown the way by going international with subsidiaries in several foreign countries. It is hoped that Nigerian manufacturing companies will follow the example of Dangote Cement by establishing subsidiaries abroad, especially in the African continent.

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Policies and Strategic Issues in Promoting Rapid Industrial Development. . .

Foreign Direct Investment

One of the major aims of current economic policy is to increase the level of foreign direct investment in Nigeria, thereby increasing the level of capital formation and production capacity in the country. To this end, a number of policy reforms have been put in place including the setting up of the Nigerian Investment Promotion Commission (NIPC) to serve as a “one stop agency” for attracting foreign direct investment. Some measure of success has been recorded following these reforms. However, a lot still remains to be achieved in order to boost the overall level of foreign direct investment in Nigeria, especially in the industrial sector, given the magnitude of the task to be achieved. A major criticism of the current approach is that the incentives now in place are too general in nature to achieve optimal result. There is an urgent need to work out more specific packages aimed at attracting the different types of foreign investors. Here it is instructive to know that the motivation to invest is not uniform for all categories of foreign investors. Broadly speaking and according to Farmer and Richman [3], there are four types of foreign investors and their motivation to invest can be distinguished, as follows: (a) The Raw Material Seekers, i.e. those in search of raw materials such as the oil and mining companies. (b) The Market Seekers, i.e. those who are seeking new (foreign) markets for their products or services. (c) Lower Cost of Production Seekers, i.e. here the major attraction is lower cost of production, for example, in the form of lower wages or cheaper input cost such as energy. (d) Portfolio Investors, i.e. those wishing to invest in the capital market in any part of the world where they can get an assured rate of return on their investment. Investments under this classification are not normally counted as FDI as they can be liquidated at short notice as opposed to fixed long term capital investment. Given the foregoing, over and above the incentives of general application, additional incentives are needed to woo the different classes of foreign investors as indicated above.

11

Foreign Aid and Technical Assistance

One of the major underlying source of success of the Newly Industrialized Countries is the level of foreign aid and technical assistance they received at the early stages of their industrialization programme. Thus as part of its economic diplomacy, Nigeria should seek to increase and widen the level of foreign aid and technical assistance from multilateral agencies such as the UNDP, The World Bank Group, European

13

Local Content and Raw Materials Development

311

Union, etc., as well as bilateral agreements, especially with friendly advanced industrialized countries of both West and East. However, in order to achieve optimal results, such assistance should be channeled to areas of highest priority in the industrial development programme of the country. Thus the present uncoordinated approach to foreign aid and technical assistance programmes should be streamlined and rationalized for optimal impact.

12

Foreign Exchange Rate Policy

Until the adoption of the foreign exchange auction market in 1987, the country had a history of relatively stable official exchange rate. However, since then the value of Naira has depreciated considerably from a high of Nl¼:$l.80 in 1980 to levels varying between N400 and N450 in 2016. The floating of the exchange rate in 1987 was a welcome relief, given the overvaluation of the Naira since the oil boom era of the 1970s. Furthermore, the strong value of the Naira, by encouraging imports at the expense of non-oil exports led to massive distortions in resource allocation within the economy, the consequences of which are still being felt till the present time. It is also worthwhile pointing out here that a competitive exchange rate policy often involving a sharp initial devaluation had been one of the key features of the Newly Industrialized Countries at the beginning of their industrialization programme. However, with time, typically over 10–20 years, their currencies became gradually stronger as they moved from import substitution to that of an outward export oriented industrial development strategy. As economic reforms take root in Nigeria it is to be expected that the value of the Naira will start to appreciate in response to marked improvements in the underlying strength of the economy. This route is to be preferred to that of arbitrarily fixing the exchange rate of the Naira.

13

Local Content and Raw Materials Development

Nigeria is blessed with a vast array of agricultural, forestry, and mineral resources which ought to provide a solid foundation for the development of several domestic resource based manufacturing industries. Unfortunately, over the years this resource potential had remained largely unexploited owing to a low level of investment in local raw materials development and/or inadequate research and development efforts. As a result of the foregoing, several of the industries in Nigeria are highly import dependent. Thus current efforts aimed at increasing the local content of industrial output in Nigeria through backward integration of existing industries should be pursued with renewed vigour. Furthermore, the activities of the various research

312

13

Policies and Strategic Issues in Promoting Rapid Industrial Development. . .

institutes and other agencies such as the Raw Materials Research and Development Council (RMRDC) aimed at developing local raw materials and/or substitutes should be intensified. At this juncture, it should be pointed out that the activities of RMRDC and other Research Institutes should be more focused, through the prioritization of their research agenda by concentrating initially on priority areas with demonstrable results and/or sub-sectors with the highest net benefit to the economy. In addition government should harness the research potential of the various universities and research institutes by supporting them with funds to undertake both basic and applied research in local raw material development.

14

Industrial Dispersal and Infrastructure

One of the basic aims of industrial policy of Nigeria is to ensure balanced economic development throughout the country through a conscious effort at industrial dispersal and provision of infrastructure. Currently a high proportion of industrial establishments are concentrated in the Lagos Area, and to a lesser extent in Kaduna/Kano and Port Harcourt/Aba industrial Axis, largely as a result of their superior infrastructure and other locational advantages. In addition, in order to ensure a more balanced development, special incentives are being offered by government to industries that locate in economically disadvantaged Local Government Areas (LGAs), most especially in areas lacking in basic infrastructure such as access roads and electricity However, given limited resources, some caution is called for in pushing this policy too far as infrastructure development requires substantial fixed capital investment. Thus a gradualist approach which builds upon existing and planned infrastructure is to be preferred. First, initial attempts should be made to encourage industries to locate away from congested urban areas to nearby towns rather than in costly far away remote locations .Second the railway system (including the planned east to west network) should be modernized to form the hub for industrial dispersal. Given a good network of railways with supporting highways, electricity, water, telecommunication services, etc., industrialists themselves are more likely to opt for newer locations away from congested and costly urban centres.

15

Information Flow and Market Mechanism

A major deficiency of industrial development planning and management in Nigeria today is the absence of reliable, timely, and easily accessible socio-economic and industrial data. For the market system to function effectively in the allocation of resources, the creation, dissemination, and use of relevant economic information

16

Private Sector Participation

313

become crucial. Such information must be freely and readily available to guide the economic activities of the private sector. Here the Federal Government has a critical role to play in ensuring that its various Ministries, Department and Agencies (MDAs) are well organized and funded for the production and distribution of information to guide decision making by policy makers in both the public and private sectors. In addition the universities and private sector trade associations should be encouraged to collect and disseminate relevant industrial and socio-economic statistics. In the area of information flow, Nigeria still has a long way to go as compared to the NICs. With Nigeria adopting a more market oriented approach to resource allocation, every effort should be made to generate and disseminate important economic data to the main actors in order for the country to reap the full benefits of the market system. It is gratifying to note that the data output and relevant publications of the National Bureau of Statistics and the Central Bank of Nigeria have improved significantly over the past decade.

16

Private Sector Participation

One of the major planks of the new industrial policy in Nigeria is the emphasis on increased private sector participation in economic activities through the privatization and/or commercialization of public enterprises, and greater private sector involvement in economic activities in general. This is a most welcome development given government’s limited resources and ever increasing socio-economic responsibilities to a rapidly increasing population. Beyond the privatization and commercialization agenda, government should take more positive steps to ensure that an enduring relationship is built with the captains of commerce and industry. It is only then that the concept of “Nigeria Incorporated” can begin to take root. Recent initiatives to involve the captains of industry in government sponsored industrial/trade organizations through appointment into the boards of Agencies such as the National Economic Advisory Council, Nigerian Export Promotion Council, Nigerian Investment Promotion Commission, etc. are steps in the right direction. Furthermore, the privatization of several government owned manufacturing establishments such as those in iron and steel, cement, pulp and paper, automobiles, fertilizer, etc. are all meant to strengthen the private sector as important drivers for future industrial development. On the other hand the government is expected to concentrate on providing the required infrastructure and nurture an enabling environment for enhanced private sector development. Apart from government increasing recognition of the vital role of the private sector in industrial/economic development, there is a need for the organized private

314

13

Policies and Strategic Issues in Promoting Rapid Industrial Development. . .

sector itself to strengthen the efficacy of their trade associations in terms of the quality and range of services they render to their members and the public at large.

17

Enabling Environment and Supporting Institutions

Under the current economic dispensation, it is now increasingly recognized that the role of government in industrial development is to create the enabling environment and supportive institutional arrangements for economic activities to thrive. The right enabling environment is one that promotes a conductive business climate which engenders investors’ confidence, whether local or foreign. It is also characterized by a stable policy environment, efficient infrastructure, and virile administrative machinery free of bureaucratic ineptitude and corruption. Though the government has in recent times taken several steps to make the business climate more attractive, Nigeria still has some catching up to do as compared to the NICs. However, with time and sustained effort it is expected that marked improvements in the business environment will take place in parallel with increasing industrialization. With regard to institutional arrangements, it is worthwhile pointing out here that the government deserves to be praised for some of the bold initiatives it has taken in recent years to create the right institutional environment for industry to flourish by establishing new organs such as the Nigerian Investment Promotion Commission (NIPC) and the newly created Ministry of Industry, Trade, and Investment. Also worthy of commendation is the overhauling and reinvigorating of existing institutions such as the National Agency for Food and Drug Administration and Control (NAFDAC), the Standard Organization of Nigeria (SON), and the National Bureau of Statistics (NBS). However, what is currently missing is the institutional mechanism needed at the very top echelon of government to monitor and review industrial and export performance on a regular basis. Here it is instructive to know that at some point in Malaysia quarterly national trade promotion meetings chaired by the Prime Minister with captains of industry in attendance were held to review industrial/export trade performance against targets. Given the present level of development in Nigeria and the need to nurture the spirit of “Nigeria Incorporated”, it is recommended that a National Industrial Development Council be inaugurated to meet quarterly under the Chairmanship of the President or Vice President. The composition of the Council should include Ministers and senior officials of the main economic ministries and selected captains from commerce and industry. The major task of the Council which will be consultative in nature is to review industrial, export and investment performance against planned targets as well as identification of problems, constraints, and emerging opportunities. More importantly, by bringing together the political leadership of the country and the

18

Industrial Master Plan and Strategy

315

major actors in the private sector, such an arrangement is likely to promote a unity of purpose which will no doubt help in accelerating industrial and socio-economic development in Nigeria.

18

Industrial Master Plan and Strategy

The benefits accruable from most of the issues raised in the preceding sections of this chapter can best be actualized and optimized within the context of an industrial master plan. Consequently the time is long overdue for Nigeria to fashion out an industrial master plan to guide and accelerate development in the industrial sector with the objective of achieving industrial takeoff on a self-sustaining basis within a period of 20–30 years. It is a matter for regret that the initial effort made in this area with assistance from UNIDO in the late 1980s fizzled out due to lack of funding and political will. Needless to say, without an industrial master plan with well laid out goals and strategies, the growth of the sector is likely to remain lacklustre and uninspiring. Here Nigeria has a lot to learn from the experience of the older industrialized nations such as France which transformed its industrial sector after World War 11 under the various industrial-economic development plans from 1947 to 1975. Furthermore, Nigeria can learn from a developing country such as Malaysia which was at the same level of development with Nigeria at the time of independence in 1960 but which today has leapfrogged to join the ranks of newly industrialized countries.A key element in the success of Malaysia’s industrial development is the adoption, with assistance from UNIDO, of a Medium and Long Term Industrial Master Plan over the period 1986–1995 which guided their national goals and aspirations. The Nigerian Government should as a matter of utmost urgency take steps to constitute a body to be charged with the responsibility of overseeing the preparation and execution of an Industrial Master Plan for Nigeria based on the country’s abundant resource endowment, comparative and competitive advantages as well as drawing on the experience of other countries that have been successful in this area. For this purpose it is recommended that a National Industrial Development Council, as earlier recommended, be set up immediately and constituted along the lines stated in the Nigerian Industrial Revolution Plan with membership drawn from key government MDAs and leaders of the organized private sector, but with the President and Vice President ultimately responsible and accountable as Chairman and Vice Chairman, respectively, of the Council. In the light of the foregoing, the mandate and modus operandi of the recently constituted Nigeria Industrial Policy and Competitiveness Advisory Council should be revisited for greater effectiveness. In addition, such a Council should continue with unrelenting reforms of the Nigerian

316

13

Policies and Strategic Issues in Promoting Rapid Industrial Development. . .

economy on all fronts as highlighted in Okonjo-Iweala’s book [4] on “Reforming the Unreformable”.

19

Concluding Remarks and Lessons of Experience

In concluding this chapter and against the background of the issues raised in the preceding sections, it is worthwhile to summarize by way of emphasis some of the lessons to be learnt from the newly industrialized countries of South East Asia which have been successful in achieving a faster rate of growth in their industrial development effort. The key lessons to be learnt from the spectacular success stories of these NICs include, but not limited, to the following: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Development of good and relatively modern infrastructure. Development of well educated and disciplined labour force. Adoption of measures to promote political stability. Adoption of outward-oriented policies coupled with export policy consistency and predictability. Adoption of market friendly economic and financial policies. Promotion of private sector led development and market friendly government intervention when deemed necessary. Efficient market supporting institutions and mechanisms. Establishment of a conducive and friendly environment for foreign capital inflows. Implementation of stable macro-economic policies. Promotion of policies to increase autonomous productivity growth. Adoption of economic and financial policies to increase mobilization of domestic savings and raise national saving rates. Establishment of institutional framework to develop and absorb new technology. Policies to control explosive population growth rate in order to promote sustainable industrial and rapid socio-economic development.

No doubt Nigeria can benefit immensely from the experience of the NICs by judiciously implementing some of these battle tested policies and strategies. However, for Nigeria to achieve the much desired national objective of rapid socioeconomic development in general and of industrial development in particular, will require the emergence of a selfness and visionary leadership class that is fully dedicated to the goal of rapid transformation of society. Sadly, in the Nigerian case, in spite of available human and material resources, this remains a missing link and hence the lacklustre performance so far recorded in the country’s industrialization effort.

References

317

References 1. Federal Ministry of Industries, 1988, Industrial Policy of Nigeria, Abuja 2. Federal Ministry of Industry, Trade and Investment, 2012 Nigeria Industrial Revolution Plan, Abuja 3. Farmer R and Richman B, 1971 International Business, An Operational Theory, Cedarwood Press, Bloomington, Indiana 4. Okonjo-Iweala N 2012 Reforming The Unreformable, MIT Press, Cambridge MA

Appendices

Appendix 1: Nigeria’s Gross Domestic Product at 2010 Constant Basic Prices (N0 Billion) 2010–2019

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5

319

Activity Sector 1. Agriculture (a) Crop Production (b) Livestock (c) Forestry (d) Fishing 2. Industry (a) Crude Petroleum and Natural Gas (b) Solid Minerals Coal Mining Metal Ores Quarrying and Other Mining (c) Manufacturing Oil Refining Cement Food, Beverage, and tobacco Textile, Apparel, and Footwear Wood and Wood Products Pulp, Paper, and Paper Products Chemical and Pharmaceutical Products Non-Metallic Products

2011 13,429.38 12,017.19 999.40 142.46 270.32 12,874.25 8598.64 59.42 3.87 2.71 52.84 4216.19 271.00 238.20 2466.51 571.85 130.27 28.52 38.94 99.04

2010 13,048.89 11,683.90 979.56 135.72 249.71 12,033.20 8402.68

51.88 3.22 2.35 46.30

3578.64 255.16 221.09 2298.52

352.54

123.38

24.36

25.17

59.55

112.06

61.90

30.35

157.34

815.29

4783.66 223.52 270.35 2628.31

71.13 4.58 2.89 63.66

2012 14,329.71 12,919.54 972.76 146.09 291.31 13,028.05 8173.26

148.21

92.64

44.02

171.31

1096.39

5826.36 344.71 376.45 2938.61

82.87 5.50 3.33 74.04

2013 14,750.52 13,247.80 1030.94 154.31 317.47 13,014.51 7105.28

198.96

127.77

50.24

193.07

1438.34

6684.22 311.38 488.28 3104.00

95.21 6.59 3.88 84.75

2014 15,380.39 13,793.45 1086.85 161.34 338.75 13,791.25 7011.81

227.23

150.99

53.67

205.21

1423.02

6586.60 200.88 596.17 2937.06

102.54 7.27 7.4.16 91.11

2015 15,952.22 14,274.94 1151.32 167.26 358.70 13,319.10 6629.96

234.50

152.79

51.43

196.93

1407.50

6302.23 205.97 564.21 2752.90

87.61 7.34 5.02 75.24

2016 16,607.34 14,894.45 1185.12 171.64 356.13 12,062.05 5671.21

239.10

153.99

51.49

197.98

1419.07

6286.90 148.92 551.78 2817.56

87.74 7.24 6.10 74.40

2017 17,179.60 15,437.05 1204.21 177.33 360.91 12,312.69 5938.05

237.96

154.93

53.23

201.35

1443.03

6420.57 143.00 576.63 2900.15

96.60 6.82 7.70 82.08

2018 17,544.15 15,786.44 1208.13 182.75 366.83 12,523.13 6005.96

241.95

155.47

53.93

205.23

1441.68

6469.81 98.12 594.58 2963.08

91.77 7.71 6.60 77.46

2019 17,958.59 16,182.0 1210.06 187.47 379.06 12,832.41 6270.86

320 Appendices

Plastic and Rubber products Electrical and Electronics Basic metal, Iron, and Steel Motor vehicles and assembly Other Manufacturing 3. Construction 4. Trade 5. Services (a) Transport Road Transport Rail Transport and Pipelines Water Transport Air Transport Transport Services Post and Courier Services (b) Information and Communication Telecommunications and information services Publishing Motion Pictures, Sound recording, and Music Broadcasting

76.11 4.57 103.03 26.29

161.87 1817.83 9640.90 19,748.68 736.24 637.00 0.12 3.81 51.89 26.96 16.45 6083.05 4992.42 12.12 481.56 596.95

33.86

2.51

44.47

21.89

116.14 1570.97 8992.65 18,966.55 694.77 619.14 0.11

4.23 32.67 22.65 15.98

5955.06

4931.99

8.78 479.19

535.10

587.43

12.63 491.89

5176.56

6268.51

3.75 54.10 33.39 17.83

213.79 1989.46 9853.68 20,729.00 711.08 601.85 0.15

35.32

124.49

4.53

106.43

737.32

14.23 610.87

5420.65

6783.07

3.92 59.14 39.14 19.60

285.25 2272.38 10,507.90 22,673.41 738.08 616.13 0.16

44.40

141.11

4.76

138.51

827.37

16.05 735.77

5677.88

7257.06

4.26 60.87 44.69 21.39

367.84 2568.46 11,125.80 24,286.89 770.69 639.30 0.17

55.77

163.11

5.07

180.37

991.68

17.70 765.64

5933.09

7708.11

4.62 63.12 47.11 22.62

353.74 2680.22 11,697.59 25,374.24 805.46 667.81 0.18

52.68

168.19

5.13

212.63

1052.47

18.13 734.43

6053.66

7858.70

4.69 60.05 46.58 17.79

304.22 2520.85 11,669.06 25,071.94 808.60 679.31 0.18

37.39

169.40

4.72

220.27

1097.90

18.54 730.21

5930.24

7776.89

4.75 61.16 46.68 14.92

282.95 2545.99 11,546.45 24,904.40 839.86 712.17 0.18

29.35

169.68

4.59

222.44

1178.92

19.66 727.01

6602.08

8527.67

4.88 73.81 47.60 14.93

282.64 2605.29 11,743.79 25,657.59 956.64 815.24 0.18

28.60

168.42

4.76

225.87

(continued)

1205.95

20.16 728.49

7355.31

9309.92

4.91 83.53 48.87 14.91

283.61 2652.54 11,430.55 26,513.68 1059.27 906.87 0.18

29.26

166.18

4.83

231.94

Appendices 321

2011 294.55 250.39 44.16 268.42 1394.70 1129.56 265.13 4145.87 2031.47 13.82

2307.38 1087.67 374.12 76.81

934.60 57,511.04

2010 222.26 179.47

42.79

245.76

1908.81 1648.74 260.07 4127.99 1711.70

13.14

1998.47 826.67 330.96

30.93

900.02 54,612.26

1401.47 59,929.89

97.83

1838.73 1105.90 390.30

13.37

1687.91 1461.70 226.20 4379.94 2190.07

310.95

45.97

2012 332.94 286.97

1551.53 63,218.72

112.44

1828.84 1278.41 427.72

13.72

1833.65 1592.13 241.52 4904.64 2265.11

540.63

66.81

2013 395.58 328.76

1825.45 67,152.79

129.18

1874.94 1391.95 472.63

13.98

1982.67 1723.78 258.89 5155.73 2390.44

639.71

82.23

2014 382.44 300.21

2151.38 69,023.37

141.33

1644.78 1498.71 484.34

14.47

2123.93 1851.83 272.10 5264.10 2516.10

654.22

94.88

2015 367.31 272.43

2257.47 67,931.24

146.58

14.37 1518.93 475.69

2536.29

619.68 2027.51 1748.75 278.76 4903.60

103.68

231.57

2016 335.25 231.25

2310.55 68,490.98

152.63

1563.62 1507.98 474.24

14.47

2053.01 1782.33 270.68 4694.39 2529.68

609.47

107.99

2017 3,77.61 269.62

2360.64 69,810.02

150.48

1531.58 1507.56 472.70

14.44

2094.67 1807.43 287.24 4471.86 2544.14

620.19

115.78

2018 405.02 289.29

2405.54 71,387.83

162.94

1470.22 1519.66 474.17

14.72

2148.39 1850.84 297.55 4366.35 2547.30

637.86

122.11

2019 397.34 275.23

Source: National Bureau of Statistics (NBS) Note: /1 New GDP figures at 2010 constant basic prices. The new GDP classifications comprise 46 activity sectors; formerly, there were 33 activity sectors

Activity Sector (c) Utilities Electricity, Gas, Steam, and Air conditioner Water supply, sewage, waste mang. (d) Accommodation and Food Services (e) Finance and Insurance Financial Institutions Insurance (f) Real Estate (g) Professional, Scientific, and Technical Serv. (h) Administrative and Support Services Business Services (i) Public Administration (j) Education (k) Human Health and Social Services (l) Arts, Entertainment, and Recreation (m) Other Services Total (GDP)

(continued) 322 Appendices

Appendices

323

Appendix 2: Naira/Dollar Official Exchange Rate at Year End, 1960–2020 Year 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 11,978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

US Dollar 0.71 0.71 0.71 0.71 0.71 0.71 0.71 0.71 0.71 0.71 0.71 0.65 0.65 0.65 0.61 0.62 0.63 0.65 0.64 0.56 0.54 0.63 0.67 0.74 0.80 0.99 3.31 4.19 5.35 7.65 9.00

Source: Central Bank of Nigeria

Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

US Dollar 9.75 19.66 22.63 21.88 84.57 79.60 74.62 84.36 92.52 109.55 112.48 126.40 135.40 132.67 130.40 128.27 117.97 132.56 149.58 150.66 158.27 157.33 157.26 169.68 197.00 305.00 306.00 306.92 306.45 380.61

324

Appendices

Appendix 3: Nigeria’s External Reserves 1960–2020 As At Year End Year. 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Amount(in U.S. $ million) 217.32 212.05 214.51 180.12 216.48 230.77 199.07 100.46 95.51 123.12 156.58 281.38 243.58 377.98 3452.30 3583.70 3286.30 2814.50 1298.90 3059.80 5462,00 2441.60 1043.30 224.40 710.10 1657.90 2836.60 7504.59 5229.10 3047.62 4541.45

Source: Central Bank of Nigeria.

Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Amount(in U.S. $ million) 4149.30 1554.61 1429.59 9009.11 1611.11 3403.91 7222.22 7107.50 5424.60 9386.10 10,267.10 7681.10 7467.78 16,955.02 28,279.06 42,298.11 51,333.15 53,000.36 42,382.49 32,339.25 32,639.78 43,830.42 42,847.31 34,241.50 28,284.80 26,990.60 39,353.50 42,594.84 38,092.72 35,370.00

Appendices

325

Appendix 4: Nigeria’s 36 States and the Federal Capital Territory State Abia Adamawa Akwa Ibom Anambra Bauchi Bayelsa Benue Borno Cross River Delta Ebonyi Edo Ekiti Enugu Gombe Imo Jigawa Kaduna Kano Katsina Kebbi Kogi Kwara Lagos Nassarawa Niger Ogun Ondo Osun Oyo Plateau Rivers Sokoto Taraba Yobe Zamfara FCT (Abuja) Total

State Capital Umuahia Yola Uyo Awka Bauchi Yenagoa Makurdi Maiduguri Calabar Asaba Abakaliki Benin City Ado-Ekiti Enugu Gombe Owerri Dutse Kaduna Kano Katsina Birnin Kebbi Lokoja Ilorin Ikeja Lafia Minna Abeokuta Akure Oshogbo Ibadan Jos Port Harcourt Sokoto Jalingo Damaturu Gusau Abuja

Population Estimates(2016) 3,564,126.0 3,727,347.0 4,248,436.0 5,482,177.0 5,527,809.0 6,537,314.0 2,277,961.0 5,741,815.0 5,860,183.0 3,866,269.0 5,663,362.0 2,880,383.0 4,235,595.0 3,270,798.0 4,411,119.0 3,256,962.0 5,408,756.0 5,828,163.0 8,252,366.0 13,076,892.0 7,831,319.0 4,440,050.0 4,473,490.0 3,192,893.0 12,550,598.0 2,523,395.0 5,556,247.0 5,217,716.0 4,671,695.0 4,705,589.0 7,840,864.0 4,200,442.0 7,303,924.0 4,998,090.0 3,066,834.0 3,294,137.0 4,515,427.0 193,392,517.0

Sources: National Bureau of Statistics; National Population Commission

Index

A Abetti, P.A., 286 Aboyade, O, 166 Achievements, viii, 5, 6, 21, 22, 39, 53, 54, 60, 64, 75, 76, 80, 81, 83, 144, 148, 151, 157, 159, 160, 171, 206, 257, 262, 283, 303 Adedeji Adebayo, 64 Adenikinju, 259 Adult literacy, 7, 67, 72 Advanced fee fraud, 199 Advisory Committee, 62 African, Caribbean, and Pacific (ACP), 249, 259, 266 African Continental Free Trade Area (AfCFTA), 61, 211, 224, 225, 229, 234, 237, 244–247, 250, 264, 266 African Development Bank (AfDB), 275, 276, 305 African political leadership, 265 Agricultural commodities, 105, 106, 110, 111, 113, 117–121, 144–147, 149, 156, 214, 220, 225, 229, 253 promotion policy, 146, 147 transformation agenda, 115, 145, 147 Agriculture, 1, 9–12, 15–17, 19, 28, 35, 45, 67–69, 73, 79, 106–109, 115, 145, 181–185, 190–192, 240, 241, 250–252, 268, 271, 278, 320 Agro-allied and forest based industries, 105–151 industrial sub-sector, 105, 106, 108, 109, 146, 147, 151

industries, 57, 62, 79, 105, 106, 108, 109, 121–144, 146, 147, 149, 151, 273, 275 resources, 109–110, 140 Aharoni Yair, 202 Ajaokuta Steel Company, 56, 82–84, 91, 92 Ajaokuta Steel Company Limited (ASCL), 56, 82–84, 91, 92 Alaba, O., 259 Aladja, viii, 80, 82, 222, 256 Alhaji Musa Yar’dua, 5 Alhaji Shehu Shagari, 5 Alhaji Tafawa Balewa, 5 Alumina, 253 Angas and Ogonis, 4 Animal feeds produced, 131 Apapa Industrial Layout, 153, 156 Apex institution, 269, 287, 288 Arab-Israeli war, 11 Armed robbery, 48, 200, 259 Association of South East Asian Nations (ASEAN), 236, 237, 247, 265 Attendant red-tape, 95, 293 Audit, 282, 304

B Bakery industry, 127, 128 Bakery products, 122, 127–128 Balance of payment difficulties, 263 Banditry, 48, 65, 76, 200, 259 Basic infrastructures, 44, 199, 258, 305, 312 Basic Metal Industries, 185, 188, 189, 222, 256

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 O. Adegbite, Perspectives on Industrial Development in Nigeria, Advances in African Economic, Social and Political Development, https://doi.org/10.1007/978-3-030-84375-5

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328 Bauxite, 192, 253 Behrman, J.N., 202 Berlin conference of 1885, 1, 3 Beverage and tobacco industries, 132 Bights of Benin and Biafra, 3 Blast furnace/basic oxygen furnace (BF/BOF), 83 Boko Haram religious sect, 200 Borrowers, 275 Bredo, W., 154 British colonial rule, 2, 19, 26, 79, 181 conquest, 1 Consul, 3 council, 269, 282 firms, 180 imperial rule, 3, 4 investment, 180 suzerainty, 19 British American Tobacco (BAT), 42, 134 Bureaucratic ineptitude, 45–46, 48, 66, 95, 189, 227, 293, 304, 308, 314 Bureau of Public Enterprises (BPE), 81, 82, 89 Business identification, 271 Business incubation centres, 160, 162, 165, 277, 281, 287, 288, 291, 293–294, 300–301 programme, 288 Business incubators industrial, 287, 289, 292–293, 300 survey of, 285, 289–294 technology, 287–289, 297, 300

C Carpets and Rugs, 134, 136, 221 Cement Manufacturing, 23 Central Bank of Nigeria (CBN), 7, 31, 32, 41, 121, 141, 142, 176, 178, 182, 187, 188, 190, 213, 214, 217, 272, 273, 275, 313, 323, 324 Certificates, 271 Challenge of nationhood, 2, 4–6 Cheaper imports, 25, 28, 30, 43, 47, 87, 97, 135, 258, 259 Chief Ernest Shonekan, 5 Chief James Edewor, 162 Christian missionary work, 3 Civil service, 64, 199, 298 Civil war, 5, 19, 29, 53, 157, 200 Coca Cola brand, 133 Collateral, 271 Colonial economy, 4, 156

Index government, 51, 156 period, 48, 203, 261, 265 trading pattern, viii, 48, 266, 306 Commercial banks and merchant banks, 163, 270, 273, 274, 281 Commercialization, 12, 34, 58, 73, 81, 82, 89, 254, 277, 286, 294, 297, 309, 313 Common external tariff (CET) ECOWAS, 35, 36, 47, 195, 233–247, 262 UEMOA, 35, 36, 233, 238, 240, 246 Community banking system, 278, 279 Comparator countries, 6, 28, 65, 70, 72, 75, 76 Comprehensive Progress Report, 157 Consolidation, 34, 239 Consortium of Messrs Hatch Associates of Canada and Enterprise Consulting Group of Nigeria, 88 Consultants, 88, 89 Co-operative societies, 278 Cordage, Rope and Twine, 134, 137, 221 Corruption, 5–7, 18, 19, 35, 45–46, 48, 64, 66, 75, 76, 91, 189, 198–199, 203, 239, 247, 258, 263, 304, 306, 308, 315 Corruption Perception Index (CPI), 45, 198 Cotonou Agreement, 249 Credit delivery, 273, 281 Credit facilities, 151, 196, 269, 275, 278 Crowder, M, 2, 3 Crude oil exports, ix, 5, 12–14, 20, 26, 29, 30, 38, 48, 53, 54, 63, 71, 73, 184, 188, 196, 201, 206, 209–211, 214, 219, 225, 230 Custom duties, 51, 233, 241

D Dairy/milk products, 109, 117, 121–124, 216 Danger signals, 282 Dangote cement, 309 group, 25, 128, 131, 244 Data bank, 270, 282 Debee wine, 132 Deberesson, C., 286 Delta Steel complex, 75, 81, 100–101 plant, 82, 84, 85, 92, 93, 95, 101 Delta Steel Company Limited (DSC), 59, 84–85, 98 Demographic indicators, 67, 71–72, 223 Development Programme, vii, 92, 154, 155, 157, 160, 166–172, 262, 263, 268–271, 273, 280–283, 296, 298, 311 Diamond, 253

Index Directorate, 145, 270–272 Disincentives, 175–207, 308 Dismantling schedule, 262 Distilleries and Wine Industries, 132–133 Domestic market, 36, 39, 47, 61, 101, 124, 129, 139, 141, 197, 205, 206, 211, 230, 247 pharmaceutical industry, 243 producers, 99, 145, 242, 305, 309 resource, 43, 61, 107, 210, 258, 306, 311 resource based industries, 43, 61, 107, 258, 306 steel industry, viii, 79, 81, 83, 87, 89, 92, 97, 98, 100–103 Dr. Goodluck Jonathan, 5 Dr. Mahathir Mohamad, 63 Drugs and medicines, 222, 243 Durham University Business School, 269

E Ease of doing business, 45, 199, 242, 263 East African Community, 234, 236 Economic Community of West African States (ECOWAS) market, 244, 247 origins of, 234 trade liberalization scheme, 238 treaty, 234, 238, 260 Economic development, ix, 5, 7, 20, 29, 36, 48, 52, 63, 65, 66, 70–72, 76, 77, 79, 209, 219, 237, 242, 249–251, 263, 285, 304, 312, 313, 315, 316 Economic Partnership Agreement (EPA) article 89 of, 263 sentiment, 263 Ecowas common industrial policy (ECIP), 256, 260 Edewor Industrial Area, 162 Electricity, viii, 7, 18, 27, 43–45, 57, 69, 75, 144, 151, 153, 157, 158, 163–166, 170, 172, 194, 195, 199, 217, 223, 243, 260, 279, 291–293, 297, 305, 312, 322 Employment, 1, 11, 19, 25–29, 53, 58, 60, 65, 90, 100, 106–108, 147, 155, 167, 203, 211, 219, 220, 253, 256, 268, 270–272, 275, 288, 308 Empretec board and FMI, 276 project, 276 English speaking, 238 Enterprise Consulting Group (ECG), 59, 88, 89 Entrepreneur trained, 270

329 Entrepreneurial skills, 269, 271, 280, 281 Entrepreneurship culture, 269 development, 267–271, 273, 277, 279, 280, 285, 287, 288, 295, 298, 300 training, 271, 281 Entrepreneurship Development Institute of India, 269 Entrepreneurship Development Programme (EDP) trainers, 281 EPA Development Programme (EPADP), 263, 264 Estates distribution of, 160–161 facilities/services provided in, 163 ownership and sponsorship of, 162 size of layouts, 162 types of industrial, 162 European Economic Community (EEC), 158 European Union (EU), xii, 158, 224, 225, 228, 235–237, 245, 247, 249–266 Exit rules, 277, 286, 299 Export (Incentives and Miscellaneous Provisions) Decree, 34, 39, 58, 196, 209 Export-oriented industries, 196, 206, 223, 231, 306, 311 Export processing free zones (EPZs), 192, 197 Extension services, 110, 151, 171, 272, 279, 280, 282 External financial shocks, 263 External trade, 4, 8, 11, 210, 264–265 Extra ordinary summit, 245

F Farmer, R., 310 Feasibility studies, 54, 81, 157, 159, 168, 171, 271, 280 Federal Capital Territory (FCT), 153, 159, 161, 288, 325 Federal Government of Nigeria (FGN), vii, 51, 56, 57, 81, 82, 155, 209, 246, 268, 272, 275, 276, 293 Federal Inland Revenue Service (FIRS), 195 Federal Ministry of Agriculture and Rural Development, 145 Federal Ministry of Economic Development, 52 Federal Ministry of Finance (FMF), 35, 240, 241 Federal Ministry of Industries (FMI), 161, 269, 270, 272, 273, 276, 279, 281, 287, 307 Federal Ministry of Industry, Trade and Investment (FMITI), 307

330 Federal Ministry of National Planning (FMNP), 117–120 Federal Ministry of Power and Steel, 90 Federal Ministry of Science and Technology (FMS&T), 277, 288, 291, 300, 301 Fibre products, 137 Financial institutions, 92, 261, 270, 276, 281, 282, 294, 322 Financing permanent working capital, 273 First generation of industrial layouts/estates, 166, 167 Fisheries, 116, 181–184 Fish Products, 122, 124–125 Fixed asset rehabilitation and upgrading, 273 Fledgling iron, 256 FM1, 281 Food crops, 110–115, 149 manufacturing, 122, 221 products, 117, 119, 122, 130, 131, 186, 188, 189 Food, Beverages, and Tobacco sub-sector, 23, 108, 109, 122, 188 Footwear industry, 138, 139 Foreign direct investment (FDI), 45, 52, 68, 73, 74, 175–207, 223, 244, 257, 261, 310 Foreign exchange earnings, viii, 12, 13, 19, 29, 33, 48, 58, 61, 71, 73, 106, 107, 109, 127, 147, 148, 150, 196, 201, 206, 209, 210, 214, 229, 230, 267 Foreign exchange risk, 274–276 Foreign private investment, 26, 177–186, 188, 189 Forest based Industries, 105–151 Forestry, 9, 10, 15, 16, 27, 70, 107, 110, 114, 117, 149, 181–183, 185, 311, 320 Forestry resources, 107, 116–117 Fourth Country Programme, 280 Fourth National Development Plan, 52, 53, 55, 158 Fraud, 199, 278 Fraudulent scheme, 199 Free societies, 268 Free trade agreement, 236, 237, 253, 264, 265 French speaking countries, 233 Fruit and vegetable processing industry, 124

G General Abdul Abubakar, 5 Aguiyi Ironsi, 5 Ibrahim Babaginda, 5 Muhamadu Buhari, 5

Index Murtala Mohammed, 5 Olusegun Obasanjo, 5 Park Chung-Hee, 63 Sani Abacha, 5, 92 Yakubu Gowon, 5 German Association of Technology and Business Incubation Centres, 287 Gibb, J.M., 286 Gill, M.D., 286 Globalization, 36, 74, 175, 231, 242, 247, 265 Gold, 192, 253 Government British, 1, 3, 51, 79, 282 eastern regional, 156, 157 enterprises, 12, 25, 30, 34, 38, 89 federal, vii, 5, 14, 25, 37, 51–56, 81, 82, 84, 87, 90, 155, 157–160, 162, 197, 209, 240, 246, 268, 272, 275, 276, 278, 293, 296, 297, 303, 313 income, 201 Nigerian, 36, 87, 153, 171, 205, 233, 234, 241, 246, 247, 315 owned industrial enterprises, 30, 38 policy(ies), 33, 44–45, 48, 54, 81, 90, 98, 109, 115, 117, 119, 121, 146, 154, 201, 203, 204, 223, 243, 267, 296 revenue, viii, 12, 13, 19, 29, 33, 35, 48, 53, 55, 58, 71, 73, 103, 109, 206, 209, 210, 230, 267 state, 155, 156, 158–160, 162, 163, 166, 168, 170, 270, 280, 281, 291, 292, 296, 301 three tiers of, 296, 297 Grain mill industry, 127 products, 126–127, 221 Gross Domestic Product (GDP) rebased, 14–18 Groundnut processing industry, 126 Guarantees, 48, 94, 124, 128, 149, 172, 196, 202, 271, 272, 296–298, 305

H Harrison, P., 64 Hatch Associates, 88, 89 Hausa-Fulanis, 4 High cost of funds, 45, 48, 61, 87, 135, 140, 144, 243 structure, 30, 39, 43, 47, 226–227 Hostile business environment, 45, 48, 227 Human and material resources, 63, 76, 192, 201, 288, 316 natural resources, 20, 70, 265

Index I Igbo-Ukwu bronzes, 2 Illiteracy, 72, 306 Import barriers, 259 licensing, 34, 257 quotas, 34, 257 substitution production, 42 tariffs, 34, 46, 47, 52, 192, 195, 239, 241, 243, 246, 262 Import Substitution Industrialization (ISI), viii, 22, 26, 29, 33, 34, 43, 48, 52, 195, 205, 223, 257 Incentives export promotion, 58, 192, 196, 307 investment, 128, 307 and Miscellaneous Provision, 34, 39, 58, 196, 209, 218, 230 schemes, 175, 206, 230 tax, 37, 42, 192–195 Incubators industrial, 287, 292–296 manager, 298 proposed model, 296 units, xxiv, 277, 290–293, 295, 298–300 Independence, vii, 1, 2, 4, 5, 11, 12, 19–23, 26, 29, 37, 38, 46, 51–53, 63, 64, 66, 106, 132, 154, 156, 177, 180, 184, 185, 187, 198, 200, 205, 209, 211, 257, 304, 315 Index of manufacturing production, xxi, 30–33 Indicators demographic, 67, 71–72, 223 economic, 67, 72–74 industrial, 69, 74–75 Indigenization policy, 54, 55 Indonesia, 6, 13, 28, 46, 52, 63, 65–76, 79, 80, 205, 236 Industrial development, vii, viii, ix, 1, 2, 5, 6, 13, 14, 18, 21, 22, 33, 38, 44, 46, 51–77, 79, 80, 103, 105, 108, 146–148, 153–173, 177, 189, 197, 204–206, 219, 231, 249, 250, 252, 255, 257–260, 266, 273, 279–280, 282, 287, 298, 303–316 employment, 268 fibres, 110, 115, 135, 149 fishing sector, 116, 125 indicators, 69, 74–75 inventory survey, 255, 260 layouts, xxii, 153–171, 292 layouts/estates, xxii, 37, 52, 153–173, 279–281, 288, 290, 295, 298 master plan, 105, 151, 204, 219, 256, 260, 261, 315–316

331 nurseries, 153, 156–158, 165, 167, 170, 279, 287, 292 policy, 58, 61, 146–148, 154–155, 235, 246, 256–258, 260, 303, 312, 313, 315 progress, vii, 44, 64, 74, 75, 79 projects, xxi, 18, 22, 26, 29, 33, 34, 36, 39, 42, 43, 55, 59, 65, 206, 224, 307 revolution plan, 52, 60–63, 146, 147, 150, 204, 303, 315 takeoff, 52, 63–66, 76, 154, 202, 315 training fund, 47, 54, 308 Industrial development centres (IDCs), 279–280, 282, 298 Industrial estate(s) Ahoada, 159, 165 development programme, 154, 155, 157, 166–172, 311 fibres, 110, 115, 135, 149 Idu, 165 Matori, 158 Minna, 165 model, 279 Industrialization, vii, viii, ix, 21, 22, 26, 28, 29, 33, 34, 43, 47, 48, 52, 54, 60, 61, 63, 75, 76, 79, 81, 87, 91, 107, 153, 155, 167, 168, 170, 195, 205, 235, 236, 249, 256, 257, 306, 310, 311, 314, 316 Industry, 1, 21, 51, 79, 105, 153, 175, 210, 234, 249, 267, 287, 303 Information and communication technology (ICT), 8, 210, 305 Information Flow, 282, 312–313 Inland rolling mills, 80–82, 84, 85, 92, 93, 97–100 Insecurity of lives, 48, 200, 259 International Centre for Settlement of Investment Disputes, 202 International division of labour, 266 International donor agencies, 281, 282 International Finance Corporation (IFC), 268 International Labour Organization (ILO), vii, 269, 271, 281, 282 International Standard Industrial Classification (ISIC), xxiii, 105, 121, 185, 221, 255 Investment promotion, 205, 272

J Joint ventures, 38, 206, 261, 276 John Beecroft, 3 Judiciary, 306

332 K Katsina Steel Rolling Mills Limited, 56, 85 Kidnapping, 48, 65, 76, 200, 259 Kilby, P., 26, 156 Kingdom of Kanem-Borno, 2 Knitting Mills, 134, 136, 221 Knowledge, 169, 204, 277 Kuznets, S., 7

L Labour intensive industries, 61, 308 Land, 107, 110, 116, 117, 140, 153, 154, 158–160, 165, 167–170, 173, 197, 201, 229, 273, 275, 279, 295, 297, 298 Land ownership, 295 Large-scale firms, 277, 299 Latin American Free Trade Area (LAFTA), 237, 265 Law and order, 5, 200, 306 Lawson Group of Companies, 162 Least developed countries (LDCs), 224, 252 Leather industry, 134, 137–138 Leather tannery industry, 138 Lee Kuan Yew, 63 Legal and court system, 201 Legal aspects of business, 271 Legislations, 51, 156 Lever Brothers Nigeria Limited, 130 Liberalization, 36, 54, 74, 175, 206, 231, 238, 242, 245, 247, 249, 253–255, 257, 259, 260, 262, 263, 265 Limestone, 7, 37, 81, 94, 95, 192, 253, 256 Lip service, 92, 296 Livestock feeds, 131–132 industry, 115, 137 population, 116, 138 Loan bank, 271, 276 beneficiaries, 270–273, 278, 281 facilities, 271, 272 interest on, 273 maturity of, 273 Lobbyists, 239 Local Government Areas (LGAs), 5, 37, 312 Local pharmaceutical manufacturers, 243 Local raw materials, 42, 131–133, 149, 194, 228, 311, 312 Lome Conventions, 249, 257, 259, 261 Low technology, 11, 29, 42, 60, 258, 294

Index M Macro-economic policies, 46, 48, 206, 258, 316 Made-in-Nigeria goods, 30, 61, 209–232, 245 Malaysia, 6, 13, 20, 28, 46, 52, 63, 65–76, 79, 80, 163, 164, 169, 201, 205, 231, 236, 304, 314, 315 Malt Liquors, 122, 132, 133, 221 Management Board, 172, 298 Managing a business, 271 Manpower, 13, 47, 53, 54, 60, 64, 65, 96, 98, 125, 149, 203, 204, 211, 289, 306, 308, 309 Manufacturers Association of Nigeria (MAN) Surveys, 42 Manufacturing, 1, 21, 51, 108, 155, 175, 210, 234, 249, 269, 287, 306 Manufacturing Value Added (MVA), 33, 69, 74, 94, 254, 255 Market African common, 102, 237, 245, 246, 250, 264–265 export, 4, 39, 47, 129, 131, 143, 210, 219, 223–227, 229, 230, 247, 309 foreign exchange auction, 311 international, 11, 12, 19, 36, 71, 184, 195, 200, 205, 206, 209, 210, 213, 227, 228, 232, 261, 267, 309 mechanism, 312–313, 316 research, 271 Marketing management, 271 Mature People’s Programme, 271 Meat Products, 116, 117, 122–123 Member States, 36, 233, 235, 238, 245, 257 Merchant banks, 270, 274, 281 Messrs Premium Steel and Mines Limited, 82, 85, 101 Tiajpromexport, 81, 92 Micro, small and medium enterprise (MSME), 25 Minerals exploitation, 251 resources, 192, 311 Mining, 27, 35, 181–185, 193, 240, 241, 253, 273, 275, 310, 320 Ministries, Department and Agencies (MDAs), vii, 313, 315 Miscellaneous Food Products, 130, 131 Modern manufacturing enterprises, 257 Modern manufacturing industries, 21, 26, 37, 202 Moran, T., 203 Multilateral Investment Guarantee Agency (MIGA), 202

Index Multinational corporations (MNCs), 42, 164, 176, 177, 202, 203, 206, 227, 261, 309 Myrdal, G., 7

N National Agency for Food and Drug Administration and Control (NAFDAC), 247, 314 National Automotive Council, 204 National Board for Community Banks, 278 National Board for Technology Incubation (NBTI), 300 National Bureau of Statistics (NBS), 7, 9, 14, 15, 17, 18, 23, 24, 27, 28, 106–108, 112, 114, 121, 177, 190, 191, 214, 313, 314, 322, 325 National Business Incubation Association of USA, 287 National Development Plan plan and strategy, 304–305 National Directorate of Employment (NDE) loan schemes, 270, 271 National Economic Empowerment and Development Strategy (NEEDS), 60 National Economic Reconstruction Fund (NERFUND) loans, 274, 275 programme, 274–276 National Electric Power Authority, 94 National Industrial Development Council, 314, 315 National Rolling Plan, 159 National Salt Company Plc, 57, 131 Natural resources, 20, 69, 70, 81, 149, 210, 252, 253, 265, 306 Nescafe brand, 131 Newly Industrialized Countries (NICs), vii, 21, 61, 210, 225, 249, 266, 303, 307, 310, 311, 313–316 New Partnership for African Development (NEPAD), 229, 244 Nigeria Incorporated, 313, 314 Nigeria Industrial Revolution Plan (NIRP), 60, 146, 204, 303 document, 60, 146, 303 Nigerian Bank for Commerce and Industry (NBCI), 269, 270, 272, 273, 281, 282 Nigerian Beverages Production Company Limited, 130 Nigerian Bottling Company, 133 Nigerian coffee industry, 131 Nigerian Customs Service, 247 Nigerian Export and Import Bank (NEXIM), 196

333 Nigerian Export Processing Zones Authority (NEPZA), 197 Nigerian Export Promotion Council (NEPC), 196, 220, 222, 230, 307, 313 Nigerian Industrial Development Bank (NIDB), 273 Nigerian Investment Promotion Commission (NIPC), 197, 202, 204, 205, 310, 313, 314 Nigerian Labour Congress (NLC), 245 Nigerian leadership, 156 Nigerian steel industry, 79–103 Nigeria’s agricultural sector, 105, 106, 118 Nigeria Yeast and Alcohol Manufacturing Company Limited, 132 NNPC Refinery, 162 Nok terracottas, 2 Non-governmental organizations (NGOs), 231, 272, 281, 282 North American Free Trade Area (NAFTA), 225, 237, 247, 264, 266 Nurseries, 153, 156–158, 162, 165, 167, 170, 172, 279, 287, 292, 295

O Ogogoro, 132 Oil boom era, 11, 106, 115, 132, 231, 311 industry, 126, 288 sector, 13, 14, 73, 229, 267 Okonjo-Iweala, N., 317 One stop agency, 286, 310 One Stop Investment Centre (OSIC), 197 Open General Licence (OGL), 239 Open market prices, 166, 167, 293 Osoba, A.M., 268 Other food products, 131 Ovwian-Aladja, 82, 222, 256 Oyejide, A., 33 Oyo Empire, 2

P Palm kernel oil industry, 126 Paperboard industries, 141, 143–144 Participating banks, 272–276, 281 Pax Britannia, 3 People’s Bank, 278 Pepsi brand, 133 Performance of the manufacturing sector, 21, 29–33, 48, 60, 244, 253–257 Personal guarantor, 271 Petroleum and gas, 252, 253 Pharmaceutical factories, 130

334 Pigato, A., 203 Pioneer centres, 294 Plant and machinery, 96, 99, 146, 193, 254, 275 Policy climate, 62, 115 documents, 60, 146–148, 258, 303 environment, 13, 30, 102, 128, 150, 188, 201–202, 272, 306, 314 independence, 51, 52, 63, 64, 66, 154, 156, 205 instability, 200 leadership, 75, 303–305, 314 makers, ix, vii, 55, 282, 304, 313 order, 55, 61, 119, 146, 223, 243, 255, 308, 316 stability, 150, 244 statements, 146, 303 structure, 33 Political entity, 1 Polytechnics, 277, 281, 282 Poor loan recovery, 278 management, 278 society, 269 Population, 4, 7, 8, 14, 19, 20, 26–28, 37, 44, 61, 66, 67, 70–72, 75, 76, 105, 107, 109, 116, 118, 119, 138, 149, 151, 166, 192, 198, 202, 223, 225, 244, 245, 247, 252, 316 Portfolio investors, 310 Post-independence Nigeria, 1, 4, 19, 37, 51, 304 Poultry industry, 123, 131 Power Holding Company, 94 Pre-independence, 51, 132 Pre-SAP period, 280 Private consulting firms, 281 enterprise, 33, 268 investors, 38, 81, 82, 84, 85, 87, 98, 100, 101, 148, xii ownership of incubator centres, 297 sector employees, 281 sector firms, 301 sector rolling mills, 83, 86–87 small and medium enterprise development project, 272 Privatization, viii, 12, 30, 34, 38, 58, 65, 73, 81, 82, 85, 89, 90, 93, 98–101, 103, 128, 131, 143, 144, 188, 202, 253, 254, 313 Production of cassava, 130 of cocoa, 115 domestic, 110, 115, 116, 123–128, 135, 136, 144, 145, 149, 259

Index food, 117–119, 145, 147, 148, 150, 151 local, 102, 126, 127, 130–132, 136, 140, 255, 259 tea, 130 Productivity, 60, 62, 65, 91, 100, 147, 220, 226, 258, 268, 288, 316 Project life, 274 Publications, 18, 250, 313 Public revenue, 169, 295 Public sector mills, 89, 101 Public sector training organizations, 281 Pulp, paper and paper products, 24, 31, 32, 108–109, 141, 143–144, 221, 320

Q Quarrying, 27, 181–185, 275, 320

R Rapid industrial development, vii, 6, 13, 14, 21, 22, 51, 52, 63, 103, 153, 177, 204–206, 231, 266, 303–316 Raw cocoa beans, 129 Raw materials, 1, 3, 11, 29, 34, 35, 37, 38, 42, 48, 51, 54, 61, 69, 84, 93–95, 97, 98, 101, 107, 110, 117–120, 122, 124, 126–141, 144, 146, 148, 149, 151, 166, 192, 194, 196, 206, 220, 223, 228, 238, 240, 246, 256, 265, 273, 275 Raw Materials Research and Development Council (RMRDC), 42, 149, 312 Record keeping and accounting, 271 Research and Development (R&D) advice, 286 results, 277, 287, 288, 294, 297 Researchers, 268 Research institutes and technology, 277 Retired and retrenched civil servants, 281 Retirees, 271 Richman, B., 310 Rivers State Government, 159 Rolling Mills Jos steel, 56, 85 Kastina Steel, 82 Oshogbo Steel, 56, 82, 85 private sector, 86–87 Rostow’s evolutionary postulations, 7 Rostow, W.W., 6, 7 Royal charter, 3 Royal Niger Company, 1, 3 Rubber Products, 24, 31, 32, 39, 62, 108, 139, 140, 147, 186, 222, 321

Index Rules of Origin, 220, 245, 262 Rural Employment Programme, 271 Russian Federation, 82, 84, 98

S Salt refining, 55, 130, 131 Schatz, S., 154 Secondary schools, 7, 149, 281 Security agencies, 306 Seekers lower cost of production, 310 market, 310 raw material, 310 Selfemployment, 271 evaluation, 271 financing, 293, 299 Sensitive products, 262, 263 Seven Up Bottling Company, 133 Singapore, 6, 46, 63, 76, 202, 225, 236, 304 Skilled professionals, 281 Small and Medium Enterprise Development Agency of Nigeria (SMEDAN), 281, 282 Small and medium enterprises (SMEs) apex unit, 272–274 development programmes, 267–268, 273, 280–283 1 project, 272 II programme, 272–274 II Project, 272, 274 Small scale enterprises programme, 271 Small scale entrepreneurship development programme, 271 Smilor, R.W., 286 Smuggling, 25, 46–48, 116, 134–136, 138–140 Soft drinks business, 133–134 Solid minerals, 9–11, 15, 16, 62, 218, 220, 222, 229, 253, 320 Solid wood industries, 141–143 South Korea, 6, 13, 20, 28, 46, 52, 63, 65–76, 79, 80, 181, 201, 225, 231, 304 Special Economic Zones (SEZs), 197 Special Industrial Layout Programme, 159 Special Public Works Programme, 271 Stakeholders, 144, 146, 151, 243, 249, 294 Standards Organization of Nigeria (SON), 54, 227, 314 Starch products, 130 State Ministries of Commerce and Industry, 282, 290

335 State owned enterprises, 58, 93, 100, 131, 188, 254 Statistical bulletins, 178, 182, 187, 188, 214, 250 Steel industry, viii, xi, 2, 3, 79–103, 256 Sternberg, O.D., 286 Stobaugh, R., 202 Stopler W.F., 65 Structural Adjustment Programme (SAP) adoption of, 12, 19, 29, 39, 46, 55, 63, 73, 102, 184, 206, 257 Sugar cane production, 128 Sugar products, 128 Supervising Ministrry, 90, 95, 193

T Takeoff stage, 7 Tanneries and Leather Finishing, 138, 221 Tariff bands, 34–36, 233, 234, 238, 242, 246, 262 barriers, 224, 228 dismantling schedule, 262 harmonization, 233–247 line, 36, 234, 239, 240, 262 policy, 21, 33–36 rates, 34–36, 239–243, 246, 247 regime, 34–36, 58, 195, 234, 238–240, 243, 246, 247 Technical assistance, 171, 223, 269, 272, 273, 280, 282, 296, 310–311 Technological innovation, 268, 277, 285, 286, 288, 289, 295, 300 Technology business incubation concept, 277 Technology incubation centre (TIC), 277, 294, 300, 301 Technology Incubation Programme, 300 Tenancy agreement, 293, 298, 299 Tenant(s) admission of, 287, 296, 299 admission procedure, 296 firm, 163, 172, 290, 292–296, 299–301 Tertiary institutions, 269–271, 281 Testimonials, 271 Textile and leather industries, 134 Textile industry, 28, 134–135 Third National Development Plan, 55, 157 Tiajpromexport, 81–83, 92 Timmons, J.A., 286 Tobacco industry, 122, 132, 134 manufactures, 134 Track record, 100, 284

336 Trade agreement, 61, 224, 236, 237, 249, 253, 259, 263–265 blocks, 236, 237, 250, 264–266 liberalization, 36, 74, 175, 231, 238, 242, 247, 249, 253–255, 257, 259, 260, 262, 263, 265 negotiations, 264, 265 restrictions, 235, 257, 263 slave, 3 Trading and Business Services, 181–185 Traditional methods, 132 Trainees, 269–270, 272, 276, 281 Training Councils, 308 Training programme, 64, 271, 276, 281, 294 Transnational Corporations, 276 Transparency International (TI), 45, 198 Treaty article 2 of the, 235 article 12 of the, 235 article 14 of the, 235 of Lagos, 235, 246 of Rome, 235 tree crop, 115 Tyre and tube industry, 140

U UAC Foods, 123 UEMOA countries non-, 240 Underemployment, 308 Unemployed people, 270 Unemployment, 12, 28, 211, 255, 259, 270, 308 Union African, 237, 245, 247 craf, 278 Custom(s), 234, 235, 238, 257 European, 158, 224, 225, 228, 235–237, 245, 247, 249–266, 310–311 Soviet, 66, 175 Union Economique et Monetaire Quest Africaine (UEMOA), 35, 36, 233, 236, 238–242, 246 Union of Soviet Socialist Republics (USSR), 81–83, 92 United Nations Development Programme (UNDP), vii, 6, 160, 276, 277, 280–282, 310 United Nations Fund for Science and Technology Development (UNFSTD), xii, 277, 287, 293 United Nations Industrial Development Organization (UNIDO), vii, xi, 81, 154, 163, 250, 254, 282, 315

Index United States Mexico and Canada (USMCA), 264, 266 Universities, 7, 28, 269, 277, 281, 282, 294, 296, 297, 301, 308, 312, 313 Unproductive investments, 13, 58, 267 UN Trusteeship, 66 Uranium, 253 U.S. administration, 66 UTC Foods Division, 123

V Vacillating attitude, 168, 296 Vesper, K., 286 Viner, J., 235 Visionary leadership, 6, 63, 66, 207, 303, 316 Vocational Skills Development Programme, 270

W Weak inter-sectoral linkages, 43, 258 Weak management structures, 259, 295 Wearing apparel, 26, 46, 108, 109, 134–137, 186–189, 221, 256 Web, 250, 301 WEMPCO Group, 86, 87 West African Common Industrial Policy Document, 258 Wholesale and retail trade, 9–13, 18, 124, 268 Wholly owned Private Nigerian Businesses, 38 Work for Yourself Programme (WFYP), 269 Workshops, xi, xii, 157, 158, 279 World automotive industry, 205 World Bank, vii, xi, xii, 34, 45, 69, 82, 88, 89, 153, 199, 250, 261, 268, 272–274, 310 The World Bank Group, 310 World Trade Organization (WTO), vii, 36, 242, 247, 249, 259 World War 11 (WWII), 315

Y Yaba Industrial Nursery, 153, 156 Yew Lee Kuan, 63 Yoruba Empire, 2 Yorubaland, 3 Young school leavers, 270, 281 Youth Corp members, 272 Youthful labour force, 202

Z Zero duty, 243 Zinc, 192, 215, 216, 219, 253