THE CONTRIBUTION OF VARIOUS NIGERIAN ADMINISTRATION TO INDUSTRIALIZATION AND EXPORT DIVERSIFICATION

THE CONTRIBUTION OF VARIOUS NIGERIAN  ADMINISTRATION TO INDUSTRIALIZATION AND EXPORT DIVERSIFICATION

BY

OBASANMI, OMOKAFE VINCENT

Ahmadu Bello University, Zaria

Kaduna state, Nigeria

vobasanmi@yahoo.com

INTRODUCTION

Successive administrations in Nigeria, whether civilian or military, have felt the need to outdo the previous regime with extravagant plans to industrialize the nation. Once the hopes of the citizenry are raised to astronomical levels of absurdity, however, the plans repeatedly go unimplemented, and the administration quickly returns to business-as-usual of rent collecting. Emma Adoghe 2010.

             Industrialization brings about increase in the volume of production in industrial activities such as construction and manufacturing that brings about increase in the gross domestic and the national income of the country. Development comes as a result of industrialization and  is a policy established by the government to increase production through the use of manpower and machinery in production, which will yield more output in production.

Here I will present an overview of the Nigerian followed by her administration contributions in industrialization and export diversification by listing and discussing their successes and failures. But first let me outline an overview of our nation Nigeria.

Nigeria

            Nigeria is located in Western Africa, and borders the Gulf of Guinea, between Benin on the west and Cameroon on the east. It has a compact area of 923,768 square kilometres (356,376 square miles). The country's land mass extends from the Gulf of Guinea in the south to the Sahel (the shore of the Sahara Desert) in the north. Abuja, the capital city of the Federal Republic of Nigeria, replaced the former capital city, Lagos, in December 1991, because of its more central location, among other reasons. Lagos remains Nigeria's commercial capital. Other major Nigerian cities include Ibadan, Kaduna, Kano, Maid-uquri, Jos, Port Harcourt, Enugu, Calabar, and Aba.

POPULATION

            According to Nigeria statistical office or Census Bureau the total population of the country was last recorded at 162.5 million people in 2011 from 45.2 million in 1960, changing 260 percent during the last 50 years. Population in Nigeria is reported by the World Bank. Historically, from 1960 until 2011, Nigeria Population averaged 92.0 Million reaching an all time high of 162.5 Million in December of 2011 and a record low of 45.2 Million in December of 1960. The population of Nigeria represents 2.35 percent of the world´s total population which arguably means that one person in every 43 people on the planet is a resident of Nigeria.

            Nigerian has been ruled by military and civilian administrations, and in view of the reins of the military and civilian governance, they have made successes and much failures in the administration of the economy growth and development of the nation.

Here I will examine some of the contributions of these administration to industrialization and export diversification. But first: what is the meaning of the term industrialization and export diversification.

INDUSTRALIZATION AND EXPORT DIVERSIFICATION

What is industrialization?

   The most important need of man is food, but once man is free from the pang of hunger he starts to think of clothe to wear, house to live in, and a host of other things such as bicycle, cars, radiogram, aero plane, ships, many to mention but a few.

The nations encyclopaedia defines Industrialization as the process by which manufacturing industries develop from within a predominantly agrarian society. Characteristic features of industrialization include the application of scientific management methods to solving problems, mechanization and a factory system, the division of labour, the growth of the money economy, and the increased mobility of the labour force both geographically and socially.

Industrialization can also be seen as the effort and ability of a nation to fully utilize it raw materials of agriculture (cocoa pods, timber, rubber, food crops and fruits) also natural resources (rocks, limestone, tin, gold, coal, petroleum) Nigeria among other nation is categorised as a third world country, that mean they are yet to be fully developed and having more reliance to the control of other developed nations.

Industrialization can therefore be defined as the presence of heavy industries and manufacturing companies of primary, secondary and tertiary category that is responsible for the creation and development of local and international grade products that can be obtained for use as consumers goods or services.  by the introduction of industries, given Nigeria in focus,

Contribution of Military and Civilian Administration

1. The planning of economic growth and development.

2. Expansion of Education at all level

3. Infrastructure of roads, railway and communication networks

4. Hydroelectric dams were constructed at (Kenji, Shiroro, Jeba, Hadeija)

5. The development of iron and steel industries ‘Ajakuta

6. Secondary industries and automobile assembly plants were established. (Kaduna,

kauri industrial area and lagos).

7. Textile Industry

8. The Marketing Board (1960-1977)

1. The planning of economic growth and development.

From independence in 1960, the state under the civilian administration took up the direction and planning of economic growth and development for the purpose of achieving standards that can be found in other developed nations of the world where there is evidence of  more advanced technology and economy of living. These plans and development programs could not come to a robust fruition because of instability of the system of governance and the coup and counter coupe de et.

2. Expansion of Education all level

There was much emphasis on basic education for the Nigeria citizen especially for the young child to attain the knowledge to read and write. Universities, polytechnics, monotechnics and colleges of education was established and the drive for an educated citizenry was set on course.

Most of our early scholar today had their education within abundance of support and opportunities that was offered to student to further their education abroad; in countries like united kingdom ( Manchester University Uk), University of Toronto, USA  and many others.

Education was progressively expanded at all levels leading to reduction in the rate of illiteracy and to provide the requisite skills (entrepreneur) and labour force for industrial and development.

3. Infrastructure of Roads Railway and Communication Networks

              Communication networks of roads were constructed far beyond what was inherited from colonial rule.  Have a trunk A and the trunk B roads, that serves as federal and states own roads. There was also contraction railway tracks that extended from Lagos to Kano, Maid-uquri, Jos and Kaduna state. This construction was for the purpose of conveying people and commodities from the southern part of Nigeria to the North, also to aid the linkage of the southern community traders to enable inter regional trade accessibility with the southern commercial traders, and also to transport commuters and goods ranging from foods material (garri, beans, rice, yams etc), raw materials i.e. rubber, timber coal, columbite etc , for industrial  use in the industrialized regions of the nation.

4. Hydroelectric dams were constructed

             Hydroelectric dams were built to generate electricity, for the existing industries, manufacturing company that saddled with the responsibility of providing producing products and services need electrical power to maintain its activities and the machines used for the process of production are reliant to electric voltage. , as any industry and  also to cities for peoples consumption. There are efforts made by the government to increase the level of the generated power so as to support the existing dams and met the needs of the increasing urbanization and population.

The development and construction of there infrastructure has provided employment and and has increased industrial development in the country.

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CONTRIBUSION OF EXPORT DIVERSIFICATION

1.      Export incentive regime in Nigeria

              As explained above, apart from macroeconomic policy measures, fiscal compensation arrangements constitute another method through which government had supported exports. In line with the objectives of the SAP, government promulgated the Export (Incentives and Miscellaneous Provisions) Decree No. 18 in 1986. The decree not only abolished import licensing, but it also introduced comprehensive incentive measures for Nigerian exporters. Some of these incentives are described hereunder.

2.      Currency retention scheme

As initially conceived, the currency retention scheme allows exporters to keep 25% (or

 any percentage that government prescribes, from time to time) of their foreign exchange

proceeds in their domiciliary accounts in Nigeria. This has since been increased to 100%.

The foreign exchange so retained enables exporters to pay for some approved export related

activities such as overseas travel to conclude export contacts, quality determination/

deterioration costs, importation of inputs, etc.

3.      Export development Fund (EDF)

            This is a special fund provided by government to give financial assistance to exporting companies to cover part of their initial export promotion activities. Such activities include advertising and publicity campaigns, export market research studies, products designand consultancy, etc.

4.      Export expansion grant fund (EEGF)

            The fund is designed to provide cash inducement to exporters who attain a minimum

annual export turnover of N50,000 worth of semi manufactured and manufactured

products. The inducement is to enable them to achieve increased volume of the export

and diversify their export products.

5.      Duty drawback/suspension scheme

             Under the scheme, exporters can import raw materials free of import duty or other indirect taxes and charges.

6.      Tax relief on interest income

            The relief exempts from tax the interest income accruing to banks from export-lending

activities. The incentive aims to encourage banks to provide credit support to the export

sector.

7.      Export credit guarantee and insurance scheme

             The scheme guarantees loans granted by Nigerian banks to exporters for the production

of export goods. It also provides credit facilities to foreign importers of Nigerian exports

and insurance cover against default in payment by foreign importers.

8.      Other incentives

            Apart from the above incentives, the manufacture-in-bond and export processing zone schemes were introduced in 1991 with the common objective of making non-oil export goods (especially manufactures) competitive, in price terms, through a waiver of duties and/or taxes.

It is important to mention, however, that the implementation of these incentives has been fraught with problems, among which are institutional inadequacy, avoidable rivalries among implementing institutions, and administrative/ bureaucratic tardiness. The abolition of the erstwhile publicity owned Commodity Boards in 1986 seems to have achieved only minimal results.

The boards were abolished to enable the private sector to take over the internal and external marketing of agricultural produce and to minimize the distortion of international market price signals to farmers. This policy, coupled with currency depreciation, raised the naira prices that farmers received for their export produce. However, other internally generated problems such as inadequate storage facilities and soaring domestic production and transportation costs remained as stumbling blocks to realizing the objectives of the measures. The absence of a good quality-control system also led to export of ungraded and poor quality products.

In addition to the creation of a conducive environment for export and the adoption of an appropriate incentive structure, government also established or re-focused several institutions in the period preceding (as well as after) the inception of SAP to implement the incentives put in place to boost exports. The institutions whose functions impinge on exports directly or indirectly include the Central Bank of Nigeria, Nigerian Export Promotion Council, Federal Board of Inland Revenue, Customs and Excise Department, Nigerian Standards Organization, Nigerian Export Processing Zone Authority, the Nigerian Committee on Trade Procedures (NITPRO), and the Nigerian Export-Import

Bank (NEXIM).

Nigeria, especially since the early 80s has been confronted with a magnitude of economic problems. These economic problems, in brief, include stagnant growth, rising inflation, unemployment, food shortage and mounting external debt. Nigeria therefore like most other nations, has been battling with how to achieve its major economic objectives. These objectives include full employment, price stability, economic growth and healthy balance of payments. It has not been easy for Nigeria to realize the above objectives. Some of the factors responsible for this are

                1. Poor Performance of the preferred sectors (Agriculture and Manufacturing sectors). These sectors are not doing well because of the following reasons:

                2. Unwillingness of investors to invest in our manufacturing sector due to political instability

                3. Over dependence of Nigerian Economy on a single commodity i.e. oil.

                4. Management problems

                5. Social problems

                6. Inadequate statistical data for policy formulation

                7. Inadequate infrastructural amenities

                8. Gaps in the judicial and law enforcement agents

                9. Lack of effective implementation policy

               10. Lack of enabling environment

               11. At the root of all these problems is Corruption. As Obasanjo (2004) rightly observed,

            Nigeria had practically institutionalized corruption as the foundation of governance. Hence institutions of society easily decayed to unprecedented proportions as opportunities were privatized by the powerful. This process was accompanied, as to be expected, by the intimidation of the judiciary, the subversion of due process, the manipulation of existing laws and regulations, the suffocation of civil society, and the containment of democratic values and institutions. Power became nothing but a means of accumulation and subversion as productive initiatives were abandoned for purely administrative and transactional activities.  The legitimacy and stability of the state became compromised as citizens began to devise extra-legal and informal ways of survival. All this made room for corruption.

Analysis of trade data obtained from different sources in Nigeria and elsewhere using

techniques such as export-import similarity measures, revealed comparative advantage

and other indexes reveals the following:

1.      The market that hold the “best” promise for Nigeria (among the countries considered

by the study), as far as diversifying her non-oil exports markets, are Mexico, Morocco,

Japan, South Africa and to a lesser extent, Algeria, Egypt and Kenya. These countries’

import structures correspond relatively well with Nigeria’s export structure. They

are also relatively fast growing and, by and large, seem to have the necessary liquidity

for import payment.

2.      Between 1985 and 1990 there appears to have been a noticeable change in the products

in which Nigeria has comparative advantage in exporting. Comparative advantage diminished (although it was not lost) in the export of cocoa and cocoa butter. For other cooca products like cocoa powder and cake, comparative advantage was lost over the period. Comparative advantage was eroded (not lost) in the export of cottonseed cake, palm kernel cake and palm kernel oil. Gains in cooperative advantage were made in sesame seed, palm oil, rubber and cottonseed, while promising trends were observed for beer and manufactured fertilizer.

3.      Most of the products in which Nigeria had comparative advantage in exporting in 1990 were those in which demand had been declining and whose unit values were also falling. However, a number of products in which comparative advantage is emerging appear to have bright prospects especially beer, sesame seed and textile fibers.

These conclusions form the basis of the policy suggestions made hereunder. However, before proceeding with the suggestions, it is important to point out some of the limitations of the analysis from which the suggestions emanate.

For one thing, the degree of similarity in the commodity composition of exports and

imports of the product considered is only one of the factors determining the intensity of

trade between a pair of potential trade partners. The calculated measures refer to expected,

rather than actual, trade intensity and are static, reflecting a situation of the past (in this

case 1985 and 1990). The values of the measures may change overtime.

The measures were computed using SITC commodity classification adopted by the

FAO Trade Year Book. This has two major limitations. One is that at the level of disaggregation, many commodity classes may still consist of quite different products.

The other is that some countries report in terms of “general trade” while others report in terms of “special trade”. This use of different modes of reporting may have introduced biases to trade data used.

Furthermore, the countries identified as the “best” in terms of commodity correspondence may after all not be the “best”. The sub-set of countries from which the “best” were identified by this study might possibly exclude some others that could be the actual “best”. This problem may be accommodated, however, if one conceives of this study as empirically testing the conventional wisdom that Nigeria should attempt to diversify to certain countries. All the countries considered in this study are frequently cited in export policy circles in Nigeria as potential markets.

As for the measures of comparative advantage adopted, the major limitation is connected with the fact that the values are sensitive to the level of subsidy in exporting countries, or protection in importing countries. Since for most of these products, tariff levels are direct function of processing levels, the measures calculated for some processed commodities may have been lower than they would have been otherwise. Allowing for these limitations, a number of policy issues emerge from the study.

Firstly, it must be noted that this study has been able to identify export potential to selected markets. The next logical step is the assessment of the identified markets. This will involve carrying out market studies to identify products to target in each market based on the demand for the product in that market and Nigeria’s potential to produce the product at a comparatively cheaper cost. Other issues such as a survey should determine are the nature of the competitors and their marketing strategies in such countries including packaging techniques and so on. The results of the survey should be made available to the organized private sector who will then be assisted in tailoring their production programmes to identified niches. The funding of the survey should come from the Export Development Fund of the government. This fund, which is a financial aid to exportes, covers the following export promotion activities (Onah, 1983/84):

·         participation in training courses, symposia, seminars and workshops in all aspects of export promotion;

·         advertising and publicity campaigns in foreign markets;

·         export market research and studies;

·         product design and consultancy;

·         participation in trade missions, buyer-oriented activities, trade fairs, exhibitions and store promotions;

·         costs of collecting trade information; and

·         organisation of joint export groups.

The next step may be to initiate trade missions to these countries, and in the process attempts to identify importers of selected Nigerian products identified by the market research. Identification of the importers will create opportunities to listen to them about particular problems they may face in marketing Nigerian products and hence enable the authorities to design facilities to ameliorate the problems. While the above are going on, a strong public enlightenment programme should be started to educate exporters that selling to non-traditional markets is as good as – if not better – than targeting traditional markets.

To quicken the pace of market diversification, a further impetus to product development is needed. This is because the commodities in which Nigeria has comparative advantage in exporting appear to be those facing bleak market prospects in terms of the growth rates of their prices and demand. Diversification into fast-growing commodities is necessary. Necessary production policies to attaining this objective should be articulated and followed.

To facilitate diversification, an export diversification fund (EDF) is suggested.

 This fund, which should be financed by the federal government, Central Bank of Nigeria, Nigeria Export-Import Bank (NEXIM), the state government and other bodies that may be identified, should be managed by NEXIM. The purpose of the fund will be to ensured that export credit for exports going to identified new markets is given at lower rates than for those going to traditional markets. The rationale is that exports going to traditional markets are passing through beaten paths while those to non-traditional markets are still trying to make inroads. The efforts of selling to such markets should be compensated with lower interest rates. This EDF may also be used in a discriminatory fashion to encourage the production for exports of promising non-traditional export commodities.

Conclusion

From the result of this examination, it can be seen that new markets identified, except for Japan and Saudi Arabia, are not as liquid as the traditional markets, implying that risks of exporting to them may be higher. To improve exports to such countries, some kind of credit facility may need to be extended to the importer. Trading under such deferred payment terms increases the risks of default. Thus, appropriate risk bearing and financing facilities such as export credit insurance, guarantees and forfeiting are needed to support the diversification effort. These facilities should be provided by NEXIM with active support of the government, which must introduce a special risk fund to protect NEXIM from the risks inherent in providing these services. Overall, Nigeria’s export diversification drive should be operated in the spirit of mutual trade. Deliberate efforts should be made to buy from the markets Nigeria wishes to

Diversify into.

REFERENCE

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