Efem Nkam Ubi, Research Fellow, Nigerian Institute of International Affairs

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Factors for successful Nigerian industrialisation 13 Mar 2018

Innoson Vehicles
A view of the plant of the indigenous automobile manufacturer, Innoson Vehicle Manufacturing

After more than 57 years of independence, Nigeria is yet to be an industrialised nation. The country remains an exporter of raw materials and commodities. Over 90 percent of export earnings and 70 percent of government revenues are derived from crude oil export. While this may not be a deliberate policy of government, the Nigerian leadership has not been able to crack this knotty problem. Notwithstanding, the need to promote industrialisation in Nigeria remains as strong as ever.
A brief overview of Nigeria's development history shows that, over the years, the government has implemented various policies geared towards industrialising the country. Some of these policies have been integral parts of Nigeria's National Development Plans. Key among such policies were the Import Substitution Industrialisation (ISI) Strategy, and Export Promotion Industrialisation (EPI) Strategy. ISI was enshrined in Nigeria's First National Development Plan of 1962-1968. The strategy was inward-looking and focused on the economic self-sufficiency of the country. Under ISI, Nigeria chose to promote domestic production of manufactured goods that were hitherto imported.

However, one of the many reasons for the failure of this policy was that it led to the creation of assembly plants for the manufacturing of foreign products in Nigeria, rather than building indigenous manufacturing industries that produced made-in-Nigeria goods. Another reason the policy failed was that it required a great deal of foreign capital. Unfortunately, the government did not show enough political will to support the industries with access to domestic capital.

The failure of ISI led the Nigerian government to institute the EPI strategy or Export-Led Industrialization (ELI). Unlike the former, the ELI strategy had an outward orientation and it sought to promote development by working within, rather than in isolation from the global economic system. ELI had been adopted in the 1960s and 1970s by several developing countries, particularly the newly industrialized countries (NICs) of South East Asia, such as South Korea, Singapore, and others.

As part of this strategy, these countries gave substantial financial support to firms for the purpose of exporting their products. Also, by undervaluing their currencies, these countries' exports were made cheap, while imports were costly. In less than two generations, these countries transformed into industrialised nations. It was the success of this policy in the NICs that led several other developing nations like Nigeria to adopt it. Unfortunately, the policy failed to make any impact in Nigeria.

But both the ISI and EPI policies have been iterated in Nigeria in various subsequent development plans, with more recent examples being the Vision 20:2020 inaugurated by late President Umaru Musa Yar'Adua; Transformation Agenda by President Goodluck Jonanath; and Economic Recovery and Growth Plan (ERGP) by President Muhammadu Buhari. A key plank of the Jonathan administration's plan was the Nigerian Automotive Industry Development Plan (NAIDP), designed to revive the domestic local manufacturing of automobiles. It was launched as part of the Nigerian Industrial Revolution Plan (NIRP). Under the Buhari administration, the government developed an import substitution strategy to preserve scarce foreign exchange and an export promotion plan to diversify the economy. None of these policies have had much traction.

The current administration also inaugurated the Nigeria Industrial Policy and Competitiveness Advisory Council on May 30, 2017. The Council's terms of reference include driving an ambitious industrialisation programme aimed at increasing the contribution of manufacturing to GDP by 250% over five years, making Nigeria a manufacturing hub in West Africa, and diversifying the economy from its over-dependence on oil. Other terms of reference for the Council include proposing targets for national industrial output and investments across major industrial sectors; and tracking the progress made on specific public and private sector initiatives aimed at transforming the industrial sector and meeting industrialisation targets.

However commendable this Council's mandate might appear, industrialising Nigeria goes beyond setting up of advisory councils and committees. Besides, this Council might just fade away like others before it. Critical success factors for any credible industrialisation programme must include considerable political will and commitment to policies; credible and appropriate development plans; deep pool of human capital; and substantial stock of infrastructure.

The first step to surmounting the challenges and problematique that have hindered Nigeria's industrialisation over the years is to provide political will and show commitment to policies. Rather than continue with the development plan of a previous government, successive administrations have tended to come up with new industrialisation programmes that are eventually abandoned, even if not entirely, by their successors.

Professor Precious Kassey Garba, former Chief Economic Adviser to President Jonathan and member of the Presidential Committee on Power Generation, Transmission and Distribution, noted that one of the several challenges that have militated against Nigeria's development efforts has been the lack of capacity to build a development-oriented nation state that serves the interest of its people. Indeed, such capacity cannot be built without political will. There needs to be total shift from the immense power the political class currently wields over Nigeria's national wealth for their personal aggrandizements, to a focus on achieving broad-based industrialization for the benefit of the entire nation.

For any plan to succeed, there has to be political will across the spectrum of the industrialisation programme, including planning, trade protection, development finance, and public investment in strategic industries. The role of the state in industrialisation is indispensable.

The second key success factor for Nigeria to attain its industrialisation goal is reforming the education system and developing human capital. It is important to note here that without a large pool of well-educated citizens or adequate supply of human capital, adopting and adapting the technological innovations necessary for industrialisation will be problematic. This is what the late Japanese economist, Kazushi Ohkawa, and American historian, Henry Rovosky, referred to as “social capability.” This connotes the general level of education and technological competence of a country; it also entails the abilities of its commercial, industrial, and financial institutions to finance and support businesses, among other political and social factors.

In other words, for Nigeria to develop and industrialise, the government should not only be cognizance of the need to structure institutions and create policies; it should also address issues of education and human resource development by investing in science and technology, research and development (R&D).

The importance of human capital development was emphasized recently in Kigali, Rwanda, where a high-level forum on Higher Education for Science, Technology and Innovation met. The participating countries and partners called for an ambitious target to double the share of African University graduates in the fields of science and technology by 2025. The goal is to transform Africa into a knowledge-driven continent within a generation. This is exceedingly important because it will be difficult for any African country to grow economically or sustain its economic growth without the requisite human capital.

For Nigeria to be industrialised, the third success factor is the creation of appropriate economic models and development strategies. Any expert or analyst worth his salt does not need to be told that the country is bereft of effective economic models and robust development strategies designed to drive industrialisation, with Nigeria's socio-economic dynamics in mind. This is why various administrations keep testing different models, without success. The development plans are often ad hoc remedies and lack legislative backing. It is time for the Nigerian government to fashion out a well thought out plan for Nigeria's industrialization.

The fourth agenda or success factor for industrialisation to take place in Nigeria is the accumulation of infrastructure stock. Today, Nigeria is symbolic of Africa's dismal infrastructural problems. With so much revenues that have accrued over the decades from abundant natural resources, Nigeria still lacks adequate social and productive infrastructure. This is part of what has constituted a major limitation to its economic growth and development. Efficient and adequate provisions of infrastructure such as transportation, water supply, electricity supply and telecommunications are what give impetus to industrialisation. The quantity and quality of available infrastructure affects production cost, thereby impacting the profitability of businesses.

A lot of people see corruption as the bane of Nigeria's development and industrialisation. While endemic corruption has been a major impediment to Nigeria's development, China, India and a lot of the newly industrialized countries of South East Asia have made significant strides in industrialisation while still grappling with systemic corruption.

What Nigeria needs the most – even while conceding anticorruption should be part of government policy – is strong political will in creating and implementing the appropriate economic models for industrialisation. The country also needs a strong commitment in building a substantial stocks of human, social and physical infrastructure. This can be achieved with a clear economic vision as well as through strategic development and private-sector partnerships.

Efem N. Ubi, PhD, is a Research Fellow and Head, Division of International Economic Relations, at the Nigerian Institute of International Affairs, Lagos.