Industrial Decentralization: Post-Colonial Nigeria’s Conundrum.

Industrial decentralization is a policy component of industrial development strategies in all countries that have a high geographical concentration of manufacturing industries in a few areas, accompanied by low and declining levels of economic activities in many others, often populous regions (Mccarthy, 1982). However, to fully grasp this concept, it is pertinent to explain in detail what industrial development entails. According to (Fliss, 1999) Industrial development is the synthesis of contributions from four major factors namely, Business, Technology, Government and Labour, successful industrial projects can be achieved only though a close cooperation and mutual understanding between these contributors.

Industrial decentralization as a policy of industrial development strategy facilitates the spread of industrialization in a country and acts as a sort of vanguard for employment, development and economic prosperity in the various locations intended.

Now that we have fully expounded on the concepts necessary for this discourse, we shall specifically observe their manifestation, or lack thereof in the Nigerian industrial space in the post-colonial era.

Industrialization, the Nigerian Post-Colonial Perspective.

Nigeria, after the colonial era has battled with industrial development strategies and it has been the preoccupation of every administration that has held the helm of affairs since independence. There have been wins and there have been serious losses and we shall examine them in a step by step approach.

At the inception of independence in 1960, the Nigerian economy heavily depended on the agricultural sector, which provided food and jobs for majority of the populace, generated revenue for the government and foreign exchange earnings (L.N.Chete, 2014). However, the young country had a rather minuscule industrial base which accounted for very little in the economy. This led to the first National Development Plan which as termed the Import Substitution Industrialization Strategy, (ISI).

ISI, henceforth, was first implemented in Latin America after the Second World War and had a huge success rate, it was adopted in Nigeria in 1960 and continued well into 1985. It was basically an inward-looking strategy to foster industrialization. ISI refers to domestic production of manufactured goods for domestic markets, it involves processing of raw materials and setting up of manufacturing factories to produce locally manufactured goods in order to reduce importation of goods usually imported, thereby increasing the viability of domestic industries (Udo.N.Ekpo, 2014). ISI requires imposition of protective tariffs, import quotas and exchange controls to protect domestic industries from foreign competition. Nigeria, like Latin American countries and other parts of the world, implemented this policy to reduce the volume of imports and increase the dependence on goods manufactured domestically, ultimately creating favorable balance of payment and a better economic climate. In pursuit of ISI objectives, in 1963 the Nigerian Industrial Development Bank was established in partnership with the International Finance Cooperation and the Federal Government of Nigeria to provide loans for Nigeran incorporated companies and the government provided a range of fiscal incentives which include tax holidays, income tax relief, capital allowance and depreciation allowance. The ISI strategy witnessed the setting up of numerous public enterprises, some of which still function till this day and many others which got funding but never saw the light of day due to abandonment at the construction stage or shut down a few years into production due to the departure of construction and maintenance expatriates or insufficient funding. Unlike Latin America, ISI proved to be unsatisfactory to Nigeria, it was intended to stimulate startup and growth of industries (L.N.Chete, 2014), instead it was ridden with a high dependence on foreign technological knowhow to such a degree that the domestic factors available were grossly neglected. The first plan failed to manage the budding industrial sector and particularly the management of technology either transferred or acquired. (L.N.Chete, 2014). It is also necessary to state that growth was visible for a short while as we could observe that manufacturing in the early 60s grew by an average 11.4 percent per annum and manufacturing as a share of GDP had grown by 6 percent per annum, Nigeria in the late 60s ended up in a civil war and despite that, the decade of the 60s could be termed as the golden era of Nigeria’s industrialization effort (Amakom, 2008).

The war ended in 1970, and that decade is remarkable for a few reasons, it was a decade of uninterrupted military rule and what is known as the oil boom. That gave the government at the time, the finances to carry out whatever development programs they deemed fit. Due to the impact of the civil war, the government carried out programs aimed at reconstruction, rehabilitation, and reconciliation. It eventually became a decade of massive direct investment into manufacturing. The government began to almost wield total monopoly on all subsectors of industry (Amakom, 2008). It ended up becoming the hand that wrote the fate of the Nigerian economy till date.

It is quite safe to say that Nigeria’s reaction to the oil boom was completely irrational and ill advised, there was minimal if any representation of the people to have a say in how such resources were used and how much money should be spent due to the fact there were no democratically elected officials, just juntas acting in the ‘best interest of their country’. According to Seers, ‘Oil is often not the blessing it appears to be, it provides great opportunities, but the very nature of the industry also makes these impossible to grasp and induces growing structural strains’. In that very decade Nigeria spent over $90 billion from oil and most of that money was directed at National Development Plans, quadrupling their spending in comparison to the previous decade, this was because of the indefinite and unresearched optimism of oil prices and government revenue (Amakom, 2008). Also, the public sector had grown to account for over 50% of GDP and 70% of employment. Oil had cast a veneer over the country’s serious problems such as foreign exchange and fiscal issues, which in turn caused irreparable damage to the agricultural and industrial sectors.

Sadly, the merry days ended in an Icarian fashion, the 1980s were ushered in by the collapse of the international oil market and Nigeria had to go back to the drawing board, all its problems began to rise in their stench and they had to be addressed immediately. Foreign exchange difficulties became acute and the entire manufacturing sector was in dire straits. The urgent need to generate more foreign exchange, particularly from nonoil sources to meet the country’s rising import bills, rising external debt obligations, rising fiscal responsibilities of the government led to the creation of the Structural Adjustment Program (SAP) in July 1986 (Udo.N.Ekpo, 2014).

SAP was intended to revert the downward trend of the economy, increase industrial base, and generate stimuli for the manufacturing sector to increase its contribution to the country’s GDP. It must be noted that SAP reforms did not come without a fight, there was resistance to change and in Nigeria’s case it illustrated the importance of external donor agencies in the choice of policies. It also points out the importance of mainstream economic thinking. Nigerians and their government resisted and quite still resist these policies but because they must negotiate debt rescheduling with the Paris Club of Creditors, they have very little options.

Eventually, SAP gave way to what is called Export Promotion Industrialization Strategy, (EPI), otherwise called outward oriented industrialization, involves domestic production of manufactured goods for export. It is the government’s deliberate effort to expand the volume of the country’s exports through export incentives and other means in order to generate foreign exchange and improve the current account of the balance of payment (Udo.N.Ekpo, 2014) this was pioneered by the South East Asian countries, also called “newly industrialized countries”. It was intended to hasten industrial development in Nigeria and many decrees were enacted to promote ease of doing business, on policies directed at interest rate deregulation, privatization and commercialization, export promotion policies and debt conversion policies among may others. All these policies led to the privatization of many public enterprises.

However, EPI had to be discarded for the same reasons ISI was, which is over reliance on foreign technologies and inputs. Almost everything involved in the manufacturing processes had to be imported, which in turn reflected in the hiked prices of the finished goods, ultimately leading to the non-competitiveness of Nigerian goods in the international market.

Due to several years of military rule in Nigeria which lasted from 1966-1999, despite the hiccups of democratic governments at rare intervals, it was generally shut away from meaningful foreign investment. In 1999, when a civil administration came into power, it became necessary to restore faith in the system and ensure such does not happen again, to attract direct foreign investment into the country. However, there were problems of corruption and decaying infrastructure which still deterred investors. Eventually all these have managed to be taken care of by different policies aimed at reducing these problems or removing them completely. However, the problems of lack of adequate technology which ultimately leads to reliance on imported technology and raw materials still exist and this affects the profit margins of firms negatively.

Lastly, examining the average growth rate of particular industries over the years it begins to accurately portray the data in reality, during the early 70s there is a surge in industrial growth rate and this is caused by the oil boom at that period. Further down the years we can observe the drastic fall and then in the late 80s we experience a short-lived surge which is replaced by a consistent nosedive.

Conclusion

In totality, we have observed that most of Nigeria’s policy initiatives aimed at development and industrialization are not organic, basically not originating from the close observation of its peculiar economic climate, instead it has borrowed ideas from numerous other countries in hopes that it might eventually get lucky and experience a sort of eureka moment. However, the contrary has been the case and as this paper began with extrapolating the initial concepts of industrial decentralization, it is quite obvious that industrialization in itself seems to be a struggle in the Nigerian economic space and this has affected not only the growth of potential industries but reduced their propensity to decentralize and have a nationwide impact.



References.



Amakom, U., 2008. Research Gate. [Online]

Available at: https://researchgate.net/publication/228276418_Post_Independence_Nigeria_and_Industrialisation_Strategies_Four_And_Half_Erratic_Decades

[Accessed 24th August 2020].

Bradley, C. A. & Kelley, J. G., 2006. The Concept of International Delegation. Law and contemporary problems, , 71(1), pp. 1-36.

Fliss, L., 1999. The Concept of integration in industrial development. Regional African Project Management , 3-5 November.

Himal, T, 2009. Research Gate. [Online]

Available at: https://www.researchgate.net/publication/228831434_Decentralization_of -Governance_and _Economic _Development

[Accessed 24th August 2020].

L.N.Chete, 2014. Industrial Development and Growth in Nigeria, Washington: Africa Growth Initiative at Brookings.

Mccarthy, C., 1982. Industrial Decentralization- Reflections on the New Initiatives. South African Journal of Economics , 50(3).

Obeng-Odoom, F., 2011. Decentralization in Developing Countries: Global Perspectives on the Obstacles to Fiscal Devolution. Journal of Australian Political Economy, , (67), p. 157.

Rondinelli, D., 1981. Government Decentralization in Comparative Perspecive: Theory and Practice in Developing countries. International Review of Administrative Science, Volume 47(2), pp. 133-145.

Sherwood, F., 1969. Devolution as a Problem of Organisation Strategy. Comparative Urban Research ed. Beverly Hills: R.T. Daaland.

Udo.N.Ekpo, 2014. Nigeria Industrial Policies and Industrial Sector Performance: Analytical Exploration. IOSR Journal of Economics and Finance (IOSR-JEF), 3(4), pp. 01-11.

Wellings, P., 1988. International competition and industrial decentralization in South Africa: A comment. World Development, , 16(12), pp. 1547-1549.