Sector Policy
Industrial Policy can be defined as a systematic government involvement, through specifically designed policies in industrial affairs, arising from the inadequacy of macroeconomic policies in regulating the growth of industry. Instruments of industrial policy include subsidies, tax incentives, export promotion, government procurement, and import restrictions. Other policies such as direct government investment or nationalization of foreign investment formed the core of industrial policy from the 1970s to 1986. However, macroeconomic policies such as exchange rate, monetary policy, trade policies, still shape investment decisions.
The development of the Nigerian industrial policy involved through two key stages. They are as follows:
The first period (1970–1985) covers the state–led import substitution industrialization strategy. The main focus is on the economic role of government through direct investments, administration of a protectionist trade regime, and the introduction of schemes such as indigenisation and preferential credit to nurture indigenous entrepreneurs. It is argued that the roles assumed by the government, gave it a leadership role in the economy and direct control over the welfare of individual private businesses. The government’s strategy during this period simply involved attracting and encouraging foreign capital to engage in manufacturing activities. The role of the government was limited to providing infrastructure and other public utilities, as well as administering industrial incentives.
Immediately after the civil war, a new approach became manifest. The Nigerian government emerged with a new nationalistic vigour. This was embodies in the Second National Development Plan. The government would now pursue a policy of progressive elimination of foreign dominance, both in terms of ownership, management and technical control. To this effect the Nigerian Enterprise Promotion Decree was enacted. Government investments would no longer be limited to public utilities and dying industries, but would be directed into other dynamic sectors. The government increased its participation in industry through new investments and nationalization of some categories of foreign-owned businesses. Expansion of agro-industry, petroleum and petrochemicals, diversification of the textile industry, development of iron and steel industry, care assembly plants and export oriented industry were top of the list. This new strategy was encouraged and facilitated by the 1973–1975 „oil boom”, which saw government’s total revenue increase by 500% in just one year.
The second period (1986–Present) lays emphasis on the economic liberalization policies that replaced the state-led import substitution industrialization strategy and nationalization policy. Government’s policy in this period focuses on privatization, deregulation of foreign investments, trade liberalisation, deregulation of credit policy and the introduction of the Foreign Exchange Market (FEM). Privatization and deregulation has resulted in the reliance of market, rather than state regulation, and is reducing the role and power of government relative to the private sector.
Economic liberalization in Nigeria was introduced as part of the Structural Adjustment Programme (SAP). This was necessitated by a balance of payment crisis, which was caused by a world oil market glut in the early 1980s. At that stage, government had invested heavily in a diversified portfolio of industrial projects. The poor returns of these projects, however, could not justify the enormous public funds that had been committed to their execution. In fact, many industrial projects in which huge amounts had been expended remained largely uncompleted. This led to government’s realization that its accelerated industrial development hinges critically on increased private sector participation.
Industrial Policy PDF, 1 102Kb, 12 April 2006
Sugar Sub–Sector Policy PDF, 818Kb, 12 April 2006