The Federal Executive Council has approved the establishment of the Nigeria Industrial Policy and Competitiveness Advisory Council to enhance the performance of the Nation’s industrial sector. The Minister of Trade, Industry and Investment, Mr. Okechukwu Enelamah, made this known in Abuja at the end of the council meeting presided by President Muhammadu Buhari.
Read also: Those who wish Buhari dead By Jide Ayobolu
Enelamah said the Advisory Council, to be chaired by Vice-President Yemi Osinbajo, would assist the government in formulating policies and strategies for enhancing the Nation’s industrial sector. Minister of Industry, Trade and Investment, Okechukwu Enelamah “We received approval for the establishment of Nigeria Industrial Policy and Competitiveness Advisory Council.”
The main aim of this council is to assist the government in formulating policies and strategies that will enhance the performance of the industrial sector in furtherance of the country’s industrialization programmes.
“So, the purpose of the Industrial Council is to create platform for partnering with the private sector and other interests to work together to make sure that we achieve our industrialization goals.
“The Council will be chaired by the Vice-President and it will include a number of ministers and also leading members of the private sector.”
Despite all the efforts of the government, at least in principle, to kick-start and sustain rapid industrialization in Nigeria, attainment of required level of industrialization that can produce the much needed dynamic change in the economic structure of Nigeria with attendant substantial benefits trickling down to the people has remained an up-hill-task. For over three decades now, economic indicators of level of industrialization in Nigeria are unimpressive.
Nigeria’s industrial sector has been characterized by high import content of industrial inputs, dwindling capacity utilization, high cost of production, low value added, declining output growth, low employment generation and inadequate linkages with other sectors of the economy.
Industrialization is about the introduction and expansion of industries in a particular place, region or country, It is a situation where many industries are established in different parts of the country.
As many industries are established in a country many different types of products are produced. Industrialization therefore, is a process of building up a country’s capacity to produce many varieties of products –extraction of raw materials and manufacturing of semi-finished and finished goods.
Thus industrialization could be described as the process of transforming raw materials, with the aid of human resources and capital goods into (a) consumers goods, (b) new capital goods which allows more consumers goods (including food) to be produced with the same human resources, and (c) social overhead capital, which together with human resources provides new services to both individuals and business.
Industrial policies are sector-specific, unlike broader macroeconomic policies. Examples of the latter, which are horizontal, economy-wide policies, are tightening credit and taxing capital gains. Traditional examples of industrial policy that involves vertical, sector-specific policies include protecting textiles from imports and subsidizing export industries. More contemporary industrial policies include measures such as support for linkages between firms and support for upstream technologies. Industrial policies are interventionist measures typical of mixed economy countries.
Many types of industrial policies contain common elements with other types of interventionist practices such as trade policy and fiscal policy. An example of a typical industrial policy is import-substitution-industrialization (ISI), where trade barriers are temporarily imposed on some key sectors, such as manufacturing.
By selectively protecting certain industries, these industries are given time to learn (learning by doing) and upgrade. Once competitive enough, these restrictions are lifted to expose the selected industries to the international market.
As stated in the NEEDS document, the key features of the macroeconomic policy encapsulated by NEEDS are:
•Sustain a rapid, broad-based GDP growth rate outside the oil sector that is consistent with poverty reduction, employment generation, and a sustainable environment;
•Diversify the production structure away from oil and mineral resources;
•Make the productive sector internationally competitive;
•Systematically reduce the role of the government in the direct production of goods, and strengthen its facilitating and regulatory functions;
•Adopt policies that are consistent with raising domestic savings and increasing private investments;
•Promote exports and diversify exports away from oil;
•Gradually liberalize imports, harmonize tariffs with the Economic Community of West African States’s (ECOWAS) common external tariffs, and use import levies and import prohibitions to protect local industries;
•Maintain a competitive but stable exchange rate regime by establishing a market-determined nominal exchange rate regime, and avoid overvaluation of the real exchange rate;
•Maintain low real lending interest rates.
Also, the Federal Government of Nigeria has passed an aggressive free zone law which has created a business-friendly environment benefiting from the following incentives:
•Complete tax holiday for all federal, state, and local government taxes, rates, custom duties, and levies;
•One-stop approval for all permits, operating licenses, and incorporation papers;
•Duty-free, tax-free import of raw materials for goods destined for re-export; Duty-free introduction of capital goods, consumer goods, components, machinery, equipment, and furniture;
•Permission to sell 100 per cent of manufactured, assembled, or imported goods into the domestic Nigerian market;
•When selling into the domestic market, the amount of import duty on goods manufactured in the free zones is calculated on the basis of the value of the raw materials or components used in assembly, not the finished product;
•100 per cent foreign ownership of investments;
•100 per cent repatriation of capital, profits, and dividends;
•Waiver of all import and export licenses;
•Waiver on all expatriate quotas for companies operating in the zones;
•Prohibition of strikes and lockouts; and
•Rent-free land during the first six months of construction.
The manufacturing sector became highly dependent on imported inputs and vulnerable to economic fluctuations of countries where the inputs were imported as well as on foreign exchange earnings of the country.
There was serious drain on foreign exchange as manufacturing output was dependent on the ability of the other sectors of the economy ,especially export of crude oil, to provide the foreign exchange needed for the importation of the raw materials, machines and spare parts.
With the collapse of international oil market and subsequent drastic declined in foreign exchange earnings, Nigerian economy was under serious stress as there was insufficient foreign exchange to pay the high import bills of raw materials, spare parts and components of import-substitution industries.
The oil revenue, which provided about 90% of the foreign exchange earnings. This necessitated rationing of available foreign exchange among manufacturers; leading to acute shortage of essential raw materials, spare parts and components in many industries. Consequently, many industries reduced their capacity utilization and employees drastically, while others were compelled to close down their factories.
The motives of industrial policies was to address the macro problem of economic growth, unemployment, balance of payment deficit by reducing imports and raising manufacturing exports, technology transfer and technical progress.
The performance of industrial sector in relation to industrial policies objectives is examined using industrial performance indices such as index of industrial and manufactured production, percentage contribution and value added to the Gross Domestic Product, manufacturing capacity utilization, percentage growth rate, manufacturing share in total export, import and employment.
The examination of industrial sector performance involves its‟ sectorial components. The components of industrial sector are manufacturing, mining, electricity, construction, water and gas. Nigeria’s industrial policy and strategy was not necessarily a unitary, closely coordinated or planned programme of the state intervention; rather it consisted of an improvised amalgam of ad hoc objectives and instruments intended to influence the behaviour of firms and other stakeholders. Besides, the industrial programmes were not well implemented.
To sustain industrialization in Nigeria, manufacturing production should begin to focus on the production of capital goods. Government should make conscious and deliberate efforts to negotiate and acquire available technology in the world in specific areas.
The acquisition of technology should be a national issue and not a local firm affair. There should be massive public investment in the provision of electricity, roads, rail system and other infrastructure. National security should be strengthened and tightened. Therefore, the council set up is very appropriate and timely for industrial growth and development.
Ayobolu, a public affairs analyst contributed this piece from Lagos State.