LOCAL PRODUCTION AND IT IMPACT IN NIGERIA ECONOMY.
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LOCAL PRODUCTION AND IT IMPACT IN NIGERIA ECONOMY.
Chapter one
INTRODUCTION
1.1 Background of the Study
Nigeria’s economic structure is characteristic of an impoverished country. The primary sector accounts for more over half of GDP, with agriculture still a major contributor.
The oil and gas sector, in particular, is a major economic driver, accounting for more than 95% of export earnings and over 85% of government revenue between 2011 and 2012.
In 2011 and 2012, the sector contributed 14.8% and 13.8% of GDP, respectively. It also increased its reserves to 37.119 billion barrels (bbs) in 2012 from 36.042 bbs in 2011.
In contrast, Nigeria’s industrial sector (which includes manufacturing, mining, and utilities) accounts for a mere 6% of economic activity, with the manufacturing sector contributing only 4% of GDP in 2011.
This is despite legislative efforts over the last 50 years, particularly those made more recently, to aid the industrialization process. In this study, we investigate the evolution of Nigeria’s industrial sector during the last 50 years.
To provide context, we begin by outlining the policy framework for industrial development from the 1960s to the present day. Agriculture was the mainstay of the Nigerian economy when it gained independence in 1960, supplying food and jobs for the populous, raw materials for the emerging industrial sector, and generating the majority of government revenue and foreign exchange profits.
Following the discovery of oil, as well as its exploration and commercial exporting, agriculture’s fortunes dwindled as crude petroleum took over as the primary source of revenue and export earnings.
This is despite a push for industrial development1 in Nigeria dating back to the early 1960s, with the first National Development Plan for 1962–68.2 Under the First Plan, the country embraced import-substituting industrialization (ISI)3 with the goal of mobilising national economic resources and allocating them on a cost-benefit basis among competing projects as part of a systematic attempt at industrial development.
During the course of this plan, energy projects such as the Kanji dam and the Ughelli thermal plants were completed, providing a critical infrastructural backbone for the emerging industrial sector.
An oil refinery, a development bank, and a mint and security firm were among the other key industrial infrastructures built during this time period, which were thought to be critical in catalysing Nigerian industrial growth.
Even though the primary goal of the ISI strategy was to stimulate industry start-up and growth while also increasing indigenous participation by changing the ownership structure and management of industries, it was distinguished by a high degree of technological dependence on foreign knowhow to the point where the country’s domestic factor endowments were grossly neglected.
The emphasis on an ISI strategy as the foundation of industrial development activities during the First Plan period appeared to have overlooked many of the components essential for managing the emerging industrial sector, particularly the management of technologies transferred or acquired.
The Second National Development Plan (1970-74) sought to solve the constraints of the ISI strategy by emphasising ‘the upgrading of local production of intermediate and capital goods for export to other industries’.
This was the first deliberate endeavour to build an industrial framework based on agriculture, transportation, mining, and quarrying. The Second Plan coincided with Nigeria’s newly established status as a significant petroleum producer.
As the economy profited greatly from massive foreign exchange inflows, the government pursued ambitious and costly industrial projects in industries like as iron and steel, cement, salt, sugar, fertiliser, pulp and paper, and others.
4 According to the plan, the establishment of industrial projects during this period was motivated by the need to increase the population’s earning power, reduce social tension by creating more jobs, make essential goods more easily accessible, and lay the groundwork for a self-sustaining economy.
The shallow nature of Nigeria’s technological capabilities, however, prevented the economy from progressing beyond the early stages of these initiatives, and nearly all of these projects are now either closed or operating at extremely low capacity.
1.2 Statement of the Problem
The lack of visionary leadership and long-term planning has hindered locally produced items and other local industrial clusters from becoming global manufacturing hubs.
Nonetheless, the country’s current economic realities have prompted the national and subnational governments to begin turning inward. Aba-made products are currently garnering some notice.
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