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ABC Of FES Report That Exposes Lapses, Charts Way Forward For Nigeria’s Industrialization

By Ajibola Abayomi,

August 14, 2015.

The Friedrich-Ebert-Stiftung (FES) has released a detailed report that evaluated the state of the Industrialization and core economic policies in Nigeria.

The well researched document examined the policy formulation, implementation and the impact on the nation’s industrialization and charted new path way to national development.

The center in Nigeria is a private, non-profit organisation committed to the values of Social Democracy has released a report on state of economy.

In 2016, the FES commissioned a study to broadly examine past and existing socio-economic and political policies affecting the state of industrialization in the nation.

The body is a private, non-profit organization committed to the values of social democracy and economic advancement.

It was founded in 1925 as Germany’s first political foundation and bears the name of the first democratically elected president of Germany, Friedrich Ebert. Ebert, a Social Democrat, had risen from being a simple craftsman to hold the highest political office in the country.

The presentation of FES was relayed by Omo Aregbeyen, Ph.D, Department of Economics, Faculty of Economics, University of Ibadan,  Oyo State.

Below is the full text of the report as presented in Lagos.

 

 


STUDY REPORT ON INDUSTRIAL POLICY AND STATE OF INDUSTRIALISATION IN NIGERIA

  • By OMO AREGBEYEN, Ph.D.
  • DEPARTMENT OF ECONOMICS
  • FACULTY OF ECONOMICS
  • UNIVERSITY OF IBADAN, IBADAN
  • Motivation for the Study
  • Achieving economic development through rapid industrialization has remained a major challenge.
  • Surprisingly the quest for industrialization has been a principal focus of the various administrations in the country.
  • Indeed, different economic development policies (with each having a bearing on the industrial sector) and several approaches to industrialization have been experimented with.
  • There is therefore the concern as to why the several economic/industrial development policies failed to achieve the desired outcomes over time.
  • This consideration motivated the need for this study.
  • Objectives of the Study
  • The broad objective of this study is to explore past and existing economic/industrial policies and the state of industrialization in Nigeria.
  • The specific objectives include to:

(i)   Discuss the different phases of economic development strategy, the place   and priority of industrial development policy, particularly geared towards   the manufacturing sector.

(ii)  Examine past and present industrial policies, especially with regard to   promoting manufacturing, discuss the success and failures of these   policies and   the associated reasons;

(iii)  Investigate how economic policies are being formulated and   implemented;

(iv)  Identify the means and with what instruments are economic policies and   more   specifically industrial policies currently being implemented;

(v)  Identify the key actors, and Ministries, Departments and Agencies (MDAs)   involved in industrial policy formulation and implementation and discuss   their   roles;

  • Objectives of the Study Contd.

(vi)  Identify the shortfalls of the current and past economic policy   formulation and implementation, why these shortfalls exist and how   they   could be addressed;

(vii)  Ascertain the extent of connection or disconnect between   democratic   governance and development of the country, and   suggest how the link between both can be strengthened and   improved upon;

(viii)  Take stock of the role of the legislature in economic policy;

(ix)  Look into the political economy undertone of economic   management and industrial policy administration; and

(x)  Collate key stakeholders perceptions and suggestions; and

(xi)  Identify the spoilers of economic development and industrialization   agenda and the channels of spoilage.

  • Data/Information Collection
  • Both and primary data/information were collected.
  • The secondary data pertain to all the industrial policies to date, and key indicators of industrial development over the years.
  • Primary information/data were sourced from focus in-depth interviews with officials of purposively selected Ministries, Departments and Agencies (MDAs), organized private sector institutions, labour unions leaders, senior academics and the members/leadership of the National Assembly as key stakeholders’.
  • Structure of the Report
  • The Report is structured as follows:

Section II:    presents an overview of the literature on industrialization   and industrial policy.

Section III:   The characterization and discussions of the economic   development ideology/strategy, industrial policy/incentives and   development.

Section IV:   examines the challenges of economic and industrial policies   formulation and implementation.

Section V:   explores the political economy of policies formulation and   implementation

Section VI:   documents key stakeholders’ views on economic and industrial   policy formulation and implementation.

Section VII:   contains the summary, conclusion and recommendations


  • Phases of Economic Development Ideology/Strategy in Nigeria

  • Industrial
    Policy Profile
  • Industrial policy formulation and implementation in Nigeria has straddled many approaches.
  • Four distinct approaches and phases are discernible. These are:

(i)  processing of raw materials available in the country   (prior to 1960);

(ii)   Import Substitution Strategy (1960-1985);

(iii)  Export-Oriented Adjustment Strategy (1985-1998);   and

(iv)  Foreign Private Sector Led Initiative (1999 to date).


  • Chronological List of Industrial Development Policies 1952 to Date

  • Industrial
    Development Profile

Industrial Sector Contribution to Gross Domestic Product (GDP)


  • Industrial Development Profile Contd.

  • Industrial Development Profile Contd.

Structure of Industrial Production

  • Structure of Manufacturing Production 1981-2015

  • Industrial Development Profile Contd.

Manufacturing Sector Performance 1943-2015

 


  • Industrial Development Profile Contd.

Comparative Manufacturing Sector Performance in Selected Countries


  • Industrial Development Profile Contd.

Factors Militating Against the Manufacturing Sector

  • A number of factors has militated against the manufacturing sector. These include:

(i) operations & management practices,

(ii) multiple taxation,

(iii) lack of credit/access to credit,

(iv) low technological development/over dependence on foreign machines,

(v) inadequate raw material,

(vi) production of sub-standard goods,

(vii) illiteracy/inadequate skilled manpower,

(viii) lack of basic infrastructures,

(ix) political instability and militancy/terrorism,

(x) distribution&Logistics,

(xi) low Inter-industry linkage,

(xii) counterfeiting and smuggling,

(xiii) poor regulatory environment  and most significantly

(xiv) poor macroeconomic environment.

  • The Challenges of Economic and Industrial Policies
  • The general poor macroeconomic and business environment is associated with failures of economic policies over the years.
  • Economic policies have failed at virtually every stage of the policy management process in the following areas:

(i) identification and articulation of the problem,

(ii) specification of the objectives and targets,

(iii) design of strategies and policy instruments,

(iv) implementation,

(v) evaluation, and

(vi) feedback.

  • The Challenges of Economic and Industrial Policies Contd.

Failure of Economic Policies.

  • Failures in all these areas are generally ascribed to:

(i) poor policy formulation;

(ii) inadequate financial resources;

(iii) poor sequencing;

(iv) frequent policy shifts;

(v) top-down (instead of bottom-up) approaches;

(vi) multiplication of policy process on the same matter;

(vii) interagency jurisdictional disputes;

(viii) pervasive system wide corruption; and

(ix) weak political will

  • The Challenges of Economic and Industrial Policies Contd.

Causes of Economic Policies Failure

  • According to Phillips (1997), the causes of economic policy failures and indeed all other associated and/or sector policies in Nigeria are largely non-economic, multidimensional and interrelated.
  • The list include:

(i) non-accountable governments- the most significant,

(ii) preoccupation of rulers with tenure and security,

(iii) unstable polity,

(iv) over-centralization and forcible uniformity,

(v) infallibility syndrome,

(vi) decision makers’ love for “There is no Alternative” (TINA)-resulting in impatience and intolerance of other policy views,

  • The Challenges of Economic and Industrial Policies Contd.

(vii) untimeliness-considerable haste or considerable delay,

(viii) abhorrence of systems,

(ix) square pegs in round holes,

(x)  scant attention to the ultimate goals of the economy,

(xi) often inappropriate ideological/theoretical base,

(xii) relative lack of holistic and multidisciplinary approaches,

(xiii) inadequate data,

(xiv) foreign debt burden and the consequential lenders impositions,

(xv) culture of escapism,

(xvi) policy instability, and

(xvii) ethnic divisiveness and distrust.

  • Political Economy of Economic Policies Formulation and Implementation.
  • All of the foregoing identified challenges are rooted in the political economy of policy formulations and implementations over the years.
  • The political economy considerations that have shaped /defined economic policies formulation and implementation over time include:

v ideological/paradigm shifts,

v regional/international trade relations,

v leadership and governance issues, and

v institutional framework.


  • Policy Making Process, Actors Involved and Implementation and Coordination Framework

Policy making Process

The dominant feature of policy making process is the principle of federal supremacy which is a constitutional conditionality.

  • Under the constitution, the federal government is required to provide the overall direction and leadership in the planning process from the formulation stage through the implementation and evaluation stage.
  • Decision making under this framework requires the National Economic Council (NEC) to advise the president concerning the economic affairs of the federation, and in particular, on measures necessary for the coordination of economic planning efforts or the economic development programmes of various states governments.
  • The institutions that are involved at the early stage include the Federal Ministry of Finance (FMOF) and Ministry of National Planning and Budget (MNPB). A number of other interdepartmental and intergovernmental agencies and institutions also participate in the decision making process.
  • The most notable among them are (i) the Joint Planning Board (JPB) and (ii) the conference of Ministers and Commissioners for National and Economic Planning.
  • Policy Making Process, Actors Involved and Implementation and Coordination Framework Contd.

Actors Involved in Policy Making

  • The policy making cycle in Nigeria is characterized by the interface of three set of actors. These include the academics/technocrats, government actors and non-government actors.
  • The government actors include the legislature, executive (chief executive, cabinet, top political officials, advisers and assistants), bureaucrats (the civil servants, the administrative functionaries who are professionally trained for the public service and who enjoy permanency of tenure, promotion within service-partly by seniority and partly by merit) and judiciary, while
  • The non-government actors are the political parties, interest groups (organized private sector, labour unions, civil society organizations, non-governmental organizations, development partners, elite class, powerful business club, etc.) and citizenry.
  • Policy Making Process, Actors Involved and Implementation and Coordination Framework Contd.
  • A major drawback in the policy implementation phase is the lack of coordination framework in policy directions, which underlie policy conflict, as well as the ensuing absence of proper coordination among MDAs and their respective sub-units.
  • Persistent conflicts have characterized fiscal and monetary/exchange rate polices over time. When fiscal policy is expansionary, monetary/exchange rate would be restrictive or tight.
  • Recently, we have seen high interest rate stance (high monetary policy rate) and tight exchange rate accompanying obviously expansionary fiscal disposition by the government.
  • There is also coordination problem. There is also the problem of multiplicity of agencies involved in implementing particular policies thus leading to conflict of interest and confusion.
  • Indeed, over the years, there have been so many beautiful policies formulated by successive governments covering industry, agriculture, health, education, poverty reduction, etc. but not properly implemented or out rightly abandoned by successive government.
  • It is instructive to note, therefore, that the problem is not much of policy formulation but that of proper implementation.
  • This is rooted in the conflicting interest of the elite class who differ sharply in ideological orientation, self-serving interest and manipulation of the instruments of policy making to their advantage(s).

  • Stakeholders
    Views on Economic and Industrial Policy Formulation and Implementation

The academics

  • Of the opinion that the 1st, 2nd, 3rd and particularly the 4th development plans, laid the cornerstones of Nigeria’s industrial development for it was during these periods that the ICPs and assembly plants with deletion programmes were created. However, the governments did not faithfully insist on and implement the deletion programmes.
  • The ISI that constitute the first approach to industrial development was considered appropriate except that it started from the top (assembly) instead of the bottom (manufacture of components), and more so, given the institutional external politics of discouraging Nigeria into going into heavy industries.
  • A major truncation of the development process and industrialization was the abandonment of development programmes for prodigal privatization (between 1985-1990), leading to the emergence of individualized policies in isolation of National Development Plans.
  • The abandonment of rigorous national and regional development planning was considered the bane of economic development and industrialization in the country.
  • The ideological leaning and/or approach to economic and industrial policy formulation is not the real issue but been pragmatic and committed to a course.
  • There is the conviction that there is no longer need for classical economic and industrial policies but rather a properly aligned and coordinated National Development Plan rooted in industrial management is what is required.
  • The call was, therefore, made for the amendment of the Fiscal Responsibility Act (2007) to make medium term planning replace the Medium Term Expenditure Framework (MTEF).
  • Stakeholders Views on Economic and Industrial Policy Formulation and Implementation Contd.

The organized private sector

  • Believe that economic and industrial policies formulated over time have good intentions and sense of economics in them but only exist on paper and always reversed by powerful influential people, i.e. state capture by vested interest groups.
  • Identify numerous challenges that need to be addressed
  • Specifically, it is felt that the trade policy is not exactly what it should be because rather than concentrate on building competitiveness in the economy, there is a lot of emphasis on import restriction and exclusion from foreign exchange market on goods, but it has not been effective.
  • In addition, it is advised that government should also relax some of the import restrictions; in that while it is considered good to put emphasis on locally made goods, but it should be a gradual move, otherwise the shock will be too much on the citizens in terms of the scarcity and costs of products.
  • There was agreement of opinions that the organized private sector groups are usually consulted (though not sufficiently) in economic and industrial policies formulation but are never part of implementation. The MAN agreed to being deeply involved in the drafting of the NIRP, 2014 as well as membership of the Tariff Technical Review Committee. However, there was the admittance of limited quality and capacity on the part of the organized private sector to engage effectively on issues of policy concerns.
  • Stakeholders Views on Economic and Industrial Policy Formulation and Implementation Contd.

The bureaucrats

  • Attributed the failures of economic development and industrialization despite over 5 decades of general economic, sectoral and particularly industrial policies formulation and implementation; to the absence of political will by the leadership to implement policies (due to political interest conflicts) and systemic corruption in the system, even though there are good policies on ground.
  • Policies inconsistency and instability have become very pervasive as policies of a previous administration is easily jettisoned without critically looking at underlying rationale.
  • Failures with respect to industrial policies were linked to not looking at things in a holistic manner; not critically examining the entire value chain; lack of continuity in policies; improper connection of industrial policy to trade policy and other sectoral policies- agriculture, technology, finance, solid minerals, etc.; and poor coordination among government agencies.
  • A number of persistent set back to industrial policy implementation that must be addressed were indicated -(i) the infrastructure challenge-power, transportation, roads, etc.; (ii) availability of raw materials; (iii) unnecessary influx of sub-standard goods from Asian Countries; (iv) competition policy to facilitate the growth of domestic firms, particularly, the SMEs; and (v) enforcement of intellectual property rights.
  • Stakeholders Views on Economic and Industrial Policy Formulation and Implementation Contd.

The legislature

  • Quite aware of their critical role for economic growth and development, and that the promotion and achievement of these a country is a product of both process and content of legislation.
  • Know that legislation facilitates accountability, transparency, certainty, competitiveness, continuous improvement, efficiency, innovations, integration, evidence-based decision making, and responsibility.
  • Aware that their influence over policy emanates from the functions of representation and expression of popular opinion, law making, control and oversight of the executive (including MDAs) and control of expenditure to ensure that government is held accountable to the people from where it derives its sovereignty.
  • Inability to perform their expected roles in enhancing the economic growth, development pace and path of the nation and the industrialization agenda, was attributed to leadership problem, political and selfish interests over national interest and corruption were indicated as the inhibiting factors.
  • The legislature contd.
  • However, it was said that a lot of reforms and changes in the operational procedures, rules and regulations are been effected towards making the legislature contribute better and expected to the process of economic and industrial policies formulation and implementation in the country.
  • Attention was particularly drawn to the fact that the current Assembly has refused to be a rubber stamp one, and hence the close scrutiny of proposals (MTEF, budget, policy stance, etc.) from the executive.
  • In addition, public opinions is increasingly influencing the activities and actions of the Assembly.
  • Stakeholders Views on Economic and Industrial Policy Formulation and Implementation Contd.

The labour unions

  • Linked the inability to develop nor industrialise despite over 5 decades of economic/industrial policies formulation and implementation to policy inconsistency, lack of synergy among the different institutions of government, infrastructure (particularly energy), high interest rates on lending, inconsistent and unfavourable tariff regimes/smuggling/counterfeiting, low patronage of made in Nigeria goods, insincerity on the part of our leaders and lack of government support for industrialization.
  • Little gains recorded with the ISI in the post-independence era up till the early 80s were squandered by the devastating impact of SAP and the unprecedented surge in foreign exchange rate at a time the bulk of inputs of local industries were imported.
  • Approaches adopted do not totally support industrialization and are without consideration for small and medium enterprises. Also, export led strategies of the 90s have not produced the desired results with unstable macro-economic environment, poor infrastructure and other operating challenges for local industries.

  • The
    labour unions Contd.
  • Specific successes that have been recorded with respect to economic/industrial policies over time include (i) the development of Nigeria Industrial Revolution Plan; (ii) the development of the Cotton, Textile and Garment (CTG) revised plan as well as other policies like the auto policy, but whose implementation has been a huge setback; (iii) establishment of Bank of Industry (BOI) and provision of single digit interest rate (though the funding capacity has to be expanded); (iv) patronage of made in Nigeria goods, and (v) suspension of Economic Partnership Agreement (EPA) as a step in the right direction.
  • The specific failures are the abandonment of planning as a vehicle for development and the wholesale adoption of neo-liberal economic framework which has created serious setback for industrial development. Shortfalls in economic policy generally and industrial policies being pursued presently with regards to contents, formulation and implementation comprise weak involvement of critical stakeholders, lack of synergy between agencies of government, policy inconsistency and poor/weak policy implementation framework.
  • The spoilers of economic development and industrialization agenda
  • The spoilers of economic development and industrialization agenda are :

v the elite/interest class,

v political leaders and

v the bureaucrats

through

(i)state capture and policy process corruption,

(ii)lack of political will,

(iii)systemic corruption,

(iv)inconsistent policy- the absence of a consistent and coherent strategy,

(v)policy coordination problem among government agencies and

(vi)improper and ill motivated implementation of policies.

  • Conclusion and Recommendations

Conclusion

  • Based on the foregoing, the conclusion from this study is that to make success of the attempt towards economic development and industrialization agenda of the country requires a renewed, pragmatic and disciplined approach.

Recommendations

On the basis of the analysis and the conclusion reached, a number of  recommendations were proffered.

Government:

  • create a stable macro-economic framework/environment;
  • Direct the economy along the line stipulated in section 2(a) of the 1999 constitution as amended by returning the country to the path of conscious planning. Necessary legal initiatives for the amendment of the Fiscal Responsibility Act (2007) to make MTDP replace the MTEF (which is not per se a legislative act but a mere endorsement) is required. This legal initiative will henceforth insulate present and future development plans and policies from changes in political leadership at all levels as well as eliminate the prevalence of abandoned projects;
  • Recommendations for Government Contd.
  • Facilitate the establishment of the contemplated Nigerian Trade and Competition Commission (NTCC) and the Intellectual Property Right Enforcement Commission (IPREC);
  • Institute and promote public-private interface to prevent the manipulation and undermining of the economic development/industrialization agenda. Public-private interface will help ensure that henceforth government/state interventions of whatever modes are the products of the consensus reached through an inclusive process of intensive formal and informal consultations, discussions and interactions among the socioeconomic groups/interests and/or stakeholders’ in an atmosphere of mutual trust, respect and sincerity of purpose. By this, interests and institutions will be aligned and industry will get promoted;
  • strategic and pragmatic state investment in people, science and technology- to promote and support the development of world-class indigenous private and public sector operators, organizations and institutions able and ready to partner with their foreign counterparts to their mutual benefits and complementary to national development agenda;
  • demonstrate necessary political will and commitment to good governance (responsible, responsive, transparent, participatory and accountable, etc.) towards maximizing the welfare of the citizenry as a matter of high priority;
  • Recommendations Contd.
  • Creation and maintenance of a competent highly motivated and professional bureaucracy- to develop the ability and have necessary authority to carry out all development policy activities including formulating sound policies and programmes and vigorously and pragmatically implementing them;
  • Encourage the character of the arrangement and framework for Cement and Fruit Juice productions in other areas/sub-sectors;
  • Provide a structured regime of incentives for manufacturing industries on a sector-specific basis and allow to run its course under an institutionalised arrangement;
  • Address the infrastructure gaps particularly electricity supply to industries;
  • Ensure effective combating of smuggling, counterfeiting, faking of made in Nigeria goods and other trade malpractices;
  • Promote tripartite collaboration among the government, industry and academics;
  • Enact laws to commit government to policy continuity;
  • Repeal extant industrial policies and laws that violate provisions of the constitution, and similarly all laws inhibiting industrial policy implementation should be subjected to regular review;
  • Ensure adequate security for lives and investment;
  • Use the institution of cooperative societies to facilitate industrial development through access to low interest funds;
  • Ensure the alignment of industrial policy formulation and implementation across national and sub-national levels of government;
  • Recommendations Contd.
  • Promote the establishment of industrial clusters across the economy for shared infrastructure, idea incubation, innovation, start-ups and overall industrial development;
  • Promote the patronage of made in Nigeria goods by giving locally produced goods preference and entrenching it in the National Procurement procedure and process;
  • Institute proper monitoring and evaluation mechanisms incorporating all interest groups for the implementation of policies on regular basis;
  • Aggressive development of key selected mineral resources through backward integration especially those with high inter-industry linkages such as iron ore, zinc- led, bitumen, lime stone and coal; including selected agricultural produces for more industrial input supply from other sectors;
  • Develop framework to capture businesses operating in the informal sector and transit them into the formal sector;
  • Recommendations Contd.

Organized Private sector

  • Develop the capacity and raise the quality of their members and leaders to more effectively engage in issues of policy concerns;
  • Facilitate the accumulation of technological capability to improve their competitiveness for export production;
  • Participate actively in public-private partnership and investments in infrastructure;
  • Active involvement in policy formulation and review, as well as implementation.
  • Recommendations Contd.

Labour Unions

  • Sustain and deepen collaborations with the public sector, private sector, labour organisations, CSOs and other interest groups in policy campaigns and advocacy
  • Involve more strongly in policy formulation and review, as well as in the monitoring of the implementation.

I THANK YOU MOST SINCERELY FOR YOUR TIME AND ATTENTION

One comment

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