INTRODUCTION
What
does it mean to industrialize? Obviously the replacement of hand tools by machine
and power tools is the sine qua non of an industrialized society. But
industrialization also involves vast economic and social changes, e.g., a
tendency toward urbanization, a growing body of wage earners,
increased technical and advanced education. By studying these and other
concomitants, one can detect the sign of incipient industrialization in Nigeria.
INDUSTRIALISATION
IN NIGERIA
– A QUICK APPROACH
Historically,
the pattern of settlement in Nigeria
has been, for the most part, one of farmers living in towns and cities,
traveling many miles a day to tend their fields. Today the forces of
urbanization are serving to accentuate this existing tendency. With an
estimated population of 160,000,000, approximately 10% live in 56 cities
of more than 20,000,000 each. The Western Region is the most highly urbanized
section of the country, containing six of the seven largest cities.
There are two large sources of existing and potential wage earning peasant
farmers who either begins to produce a surplus for sale, or who go to work for
another farmer, and the ever increasing number of school graduates. Most
of these young literate Nigerians feel that peasant farming offers no future,
and yet the majority of them have not been trained for any specific job.
Although all young developing economies suffer from the problem of
underemployment and unemployment, the situation has been aggravated in Nigeria by the
increased pace of basic education. Advanced education is still somewhat of a
novelty, and tends to become a status symbol rather than a force for economic
progress. The Nigerian economy simply cannot at present absorb the existing
labor supply. In spite of the large amount of labor available, Nigeria is greatly
handicapped by the paucity of skilled labor, its obstacle to more rapid
development. Managerial skills are In short supply.
Very
few Nigerian businessmen are willing to launch a manufacturing venture at their
own risk. This is largely due to limited capital and to the lack of
an industrial tradition. Although ideally, government 8 role in economic
development should be, for the most part, one of help and encouragement to the
private sector of the economy, the great shortage of entrepreneurial skills at all levels
has forced the Nigerian government not only to assume that role but also be
manager and consumer. Therefore, though there is no doubt that
public investment can lead to private investment, in Nigeria public
investment must not only act as a stimulus but also "lead the way." Nigeria is also
handicapped by a lack of data. Statistics on the economy before 1950 are
completely inadequate, and still leave much to be desired. Population figures
are only estimates because a census has never been
successfully taken. This lack of data handicaps government planning, and
also tends to discourage potential foreign investors. To encourage foreign
investment, the U. N. provided the money for reinvestment studies of
large-scale projects, and the Rockefeller Brothers Fund has sought industrial
possibilities and local entrepreneurs and then looked for private foreign
investment to match. Industry requires good transportation facilities. At the
time of independence, Nigeria
had only 5,300 miles of paved roads and approximately 1,770 miles of railway
track. However, both of these are being constantly extended. At present,
steamer traffic on the inland waterways system is governed by the time of year,
i.e., going farther up-river at flood time. Nigeria does not have a good
natural port. The two man ports are Lagos and Port Harcourt. Another
hindrance to economic development is the fact that in most of Nigeria
confused land laws make it difficult to secure land for factory construction.
Even when land is obtainable, not all manufacturers care to, or can build.
There is also a dearth of space for rent. In order to meet the need for
industrial sites, some cities in Nigeria have begun to create
industrial estates. To offset these liabilities, Nigeria possesses a great many
assets. One of the greatest of these is her stable, conservative government.
Although beset by regionalism, the federal government has kept Nigeria free
from the political chaos that has had such a detrimental effect on some other new
African states. Because skills can be acquired, the large labor supply should
be considered as an asset. One of the prerequisites for economic development is
the willingness of the labor force to migrate to areas where economic
opportunity is greater, and further, to remain mobile being willing to change employment
when income can be increased. This seems to be true in Nigeria.
LIMITATIONS OF
INDUSTRIALIUSATION
Since
1999, the civilian government has stepped up measures to promote industrialization.
Beside the drafting of a new industrial policy—with the array of incentives,
Government has also embarked on two new bold, albeit controversial, initiatives
to boost industrialization--- the setting up of the new Bank for Industry
(BOI), and the Small and Medium Industries Equity Investment Scheme (SMIEIS).
The bank was introduced as a development institution to accelerate Nigeria‘s
industrial development through the provisions of term loans, equity finances
and technical assistance to industrial enterprises. It is a combination of the
Nigerian Industrial development Bank and Nigerian Bank for Commerce and
Industry (NBCI). The orientation has been developmental in nature to make a
considerable impact in terms of long-term (sanctions and disbursement),
employment generation, industrial dispersal and promotion of indigenous
entrepreneurship. It inherited under its fold the Industrial and Insurance
Brokers (IDIB), Leasing Company of Nigeria Limited (LECON), NIDB Consultancy
Limited and NIDB Trustees Limited, which belong to the old NIDB. The Nigerian
Bank for commerce and Industry another bank which it inherited was established
in 1973 with an authorized share capital of N200.00 million while its
capitalization was expected to be N600.00 million at the conclusion of the
re-structuring in 1999 to enhance its delivery capacity. The bank was
established to provide financial, technical and management support services to
Small and medium scale industries.
The
SMIESIS Fund, to which commercial and merchant banks are expected to contribute
about 10 percent of their profits is another scheme directed at promoting the
SMEs. The major pressure point about these measures pertains to the non-market
features and hence the susceptibility to failures as with the earlier directed
credit schemes. Given the pervasive corruption and the weak institutional
foundations, many analysts fear that the funds might end up as another piece of
‘national cake’ to be eaten up by corruption. The 12 funds are unlikely to get
to the intended beneficiaries, and the loans might end up as bad and doubtful
debts—which would cripple the operations of the funds in the future.
Performance
of SMIEIS so far in Nigeria
• 1.73
billion naira has so far been invested in 36 projects by 36 Banks.
•
The amount represents only 14
percent of the total sum
•
A total of 12.37 billion naira was
set aside by 79 Banks
• Banks
contribution to SMIEIS hits N11bn, flout guidelines
• Lagos has over 90 percent of the projects while there is
one each in Cross River, Anambra, Delta and Oyo States
respectively
• 75
percent of the total investment is in the service sector alone.
Numerous
problems are faced by SMEs while trying to assess the fund and they include:
poor management, poor internal control system, improper keeping of financial
records, high rate of business failure, lack of technical and economic
counseling, weak working capital base, non disclosure of information,
susceptibility to sudden policy changes, poor accounting standards (improper
records of business transactions), limits accessibility to institutional credit
and shortage of skilled manpower.
Summarily
the SMEIEIS funds suffer from inadequate financial resources to hire skilled
manpower, which has restrained the expansion and limits productivity. Others
include financial indiscipline, loan diversion, aversion to disclosure of
information on supply sources, production processes, production costs
(information opacity).
Constraints
to Firm Competitiveness
Firms
in Nigeria
face atypically very high transaction costs which make them highly
uncompetitive. The sources of the high transaction costs and inefficiency are
many and varied, and from diverse surveys, many factors have been highlighted.
The
private sector firms suffer from high costs and lack of competitiveness.
Relative to other African countries (evident from a survey of international
businesses working in Africa), Nigerian firms
face atypical challenges in the following areas3:
• Infrastructure: Roads,
railways, ports and airports were given the least satisfactory assessment of
twenty-four African countries by the business community;
• Customs: The average customs
clearance time reported by firms is 25 days, putting Nigeria twenty-second out of 24
countries surveyed;
• Telecommunications: Nigeria is
ranked 20 out of 24 African countries (twenty-second in internet access and
twenty-third in terms of telephone price);
• Hidden
import barriers: lack of availability of export credit, multiple licensing
and regulation requirements and the overvalued exchange rate reduced Nigeria’s
rating in these areas by businesses to 23 (out of 24);
• Security:
Negative perceptions of security and organized crime remain strongly evident
among businesses, with Nigeria
ranked twenty-third out of 24 countries;
• Education: Quality of
university education is seen by businesses as among the lowest quintile in the
sample of countries; and
• Policy:
Finally, Nigeria
was seen as the third most problematic country in the sample in terms of policy
volatility.
There
appears to be a trend in Nigeria
toward centralization of industry. The production of consumer goods seems to be well
establ18hed. But there is a growing need, particularly in the
urban centers, for service industries. But right now the government is mainly
interested in the diversification and increase of industry and the introduction
of heavy industry. The latter has been embodied in the
Six-Year-Development Plan. This plan was
inaugurated in 1962. Its expressed aim is a diversified economy with sufficient
income and savings to finance its own rate of growth. In order to achieve the
4% aimed at, about 15% of the estimated gross national product will have to go
into productive sectors of the economy. Of a total planned expenditure of 676.8
million pounds, the largest amounts will be spent on transportation (including
ports) and electricity.
Three
multi-purpose dams will be built; the first at Kainji on the Niger, the
other two at Jebba and Shiroro Gorge. Another large amount has been allocated
for trade and industry. The two chief projects will be an iron and steel mill
and an oil refinery. The mill is expected to be in operation by 1966 at the
earliest. The refinery is now under construction at Port Harcourt. Since Nigeria can supply one one-half of the money
needed, she hopes to get the rest from the U. S. and other friendly nations, the
International Bank for Reconstruction, and from private investors. It is
hoped that once the public improvements have begun, that private foreign
capital will be attracted more readily. Nigeria's economic situation has
shown definite improvement in recent years. The trade deficit was sharply
reduced in 1962, and the production of all major exports increased. Although
not impressive yet, the number of factories is increasing steadily. And perhaps most
important of all is the fact that the government continues to be stable. Nigeria hopes
to be in a position by 1977, to be able to generate capital to the extent that
foreign assistance will not be needed to finance economic growth. Foreign observers
generally say that it will take longer than this, perhaps a generation. But no
one has said that it cannot be done.