LOCAL PRODUCTION AND IT IMPACT IN NIGERIA ECONOMY

Background of the study: The structure of the Nigerian economy is typical of an underdeveloped country. Over half of the gross domestic product (GDP) is accounted for by the primary sector with agriculture continuing to play an important role. The oil and gas sector, in particular, continues to be a major driver of the economy, accounting for over 95 per cent of export earnings and about 85 per cent of government revenue between 2011 and 2012. The sector contributed 14.8 and 13.8 per cent to GDP in 2011 and 2012, respectively. It also recorded an increase in reserves from 37.119 billion barrels (bbs) in 2012 from 36.042 bbs in 2011. In contrast, the industrial sector in Nigeria (comprising manufacturing, mining, and utilities) accounts for a tiny proportion of economic activity (6 per cent) while the manufacturing sector contributed only 4 per cent to GDP in 2011. This is despite policy efforts, over the last 50 years, and, in particular, more recently, that have attempted to facilitate the industrialization process. In this paper we explore the evolution of the industrial sector in Nigeria over the last 50 years. To set the context we begin by providing an overview of the policy framework for industrial development from the 1960s to the present day. At independence in 1960 and for much of that decade, agriculture was the mainstay of the Nigerian economy providing food and employment for the populace, raw materials for the nascent industrial sector, and generating the bulk of government revenue and foreign exchange earnings. Following the discovery of oil and its exploration and exportation in commercial quantities, the fortunes of agriculture gradually diminished while crude petroleum replaced it as the dominant source of revenue and export earnings. This is despite a drive for industrial development1 in Nigeria dating back to the early 1960s with the first National Development Plan for the period 1962-68.2 Under the First Plan the country embraced import-substituting industrialization (ISI)3 with the objective of mobilizing national economic resources and deploying them on a cost/benefit basis among contending projects as a systematic attempt at industrial development. The period of this plan witnessed the commissioning of energy projects such as the Kanji dam and the Ughelli thermal plants, which provided a vital infrastructural backbone for the nascent industrial sector. Other important industrial infrastructure developed during this period, which was considered crucial for catalyzing industrial take-off in Nigeria; included an oil refinery, a development bank, and a mint and security company. Even though, the main objective of the ISI strategy was to stimulate the start-up and growth of industries as well as enhance indigenous participation by altering the ownership structure and management of industries, it was characterized by a high degree of technological dependence on foreign knowhow to the extent that the domestic factor endowments of the country were grossly neglected. The focus on an ISI strategy as the cornerstone of industrial development efforts during the period of the First Plan therefore seemed to have neglected many of the factors required for managing the emergent industrial sector and in particular, the management of technologies transferred or acquired. The Second National Development Plan (1970-74), attempted to address the limitations of the ISI strategy, and placed emphasis on ‘the upgrading of local production of intermediate and capital goods for sale to other industries’. This was the first systematic effort to create an industrial structure linked to agriculture, transport, mining, and quarrying. The Second Plan coincided with Nigeria’s newly acquired status as a major petroleum producing country. As the economy benefited heavily from enormous foreign exchange inflows, the government embraced ambitious and costly industrial projects in sectors such as iron and steel, cement, salt, sugar, fertilizer, pulp and paper, among others.4 According to the plan, the establishment of industrial projects during this period was inspired by the need to increase the earning power of the populace; to minimize social tension by generating more employment; to make essential goods easily available; and to lay the foundation for a self-sustaining economy. The shallow nature of Nigeria’s technological capacity, however, prevented the economy from moving beyond the elementary phases of these projects, and indeed, virtually all of these projects have today either been shut down or operate at very low capacity.