Indigenisation policy in Nigeria can be defined as government effort to encourage indigenous entrepreneurs to participate fully in all industrial, commercial and financial activities of the country, by removing foreign domination of the country.
Brief History of Indigenisation Policy in Nigeria
In Nigeria, before the indigenisation policy was implemented, foreigners were the sole owners, the managers and the controllers of the country’s productive enterprises. The investment preference and dividend policies of those foreign firms were costly to the Nigerian economy and did very little to her development.
To this effect, the Federal Government on 23rd February, 1972 promulgated the Nigerian Enterprises Promotion Decree (now Act) which was amended, repealed and replaced by the Nigerian Enterprises Promotion Act of 1977. The 1977 Act contained provisions for the implementation of the second phase of the scheme as well as the provision of three schedules of Enterprises.
The decree listed major industrial and commercial enterprises that must have complete Nigerian ownership and control. By this policy, local entrepreneurs have been brought in to the management and participation in most business enterprises of the economy. The provisions made in this policy of indigenisation are contained in three schedules.
This schedule provides for only twenty two (22) industrial and commercial businesses mainly reserved for Nigerian citizens and associations.
This decree states that no foreigner other than Nigerian citizens shall be allowed to establish or continue to run such enterprises in the country after 31st March 1974 as contained in 1972 decree. The enterprises in this schedule include rice milling, newspaper printing, dry cleaning, hair dressing, radio and television broadcasting, casinos and cinema and retail trade.
In this schedule, 57 enterprises with at least 60% of the equity shares are to be owned by Nigerians. The decree states that no foreigners shall be owners of such enterprises after 30th April, 1974. The enterprises include meat slaughtering and processing, beer brewing, bottling of soft drinks, furniture making, manufacturing of cement, metal, cement, washers, soap and detergents, suitcases and bags, insecticides, pesticides and fungicides, wholesale distribution, cosmetics and estate agencies.
This schedule provides for 39 enterprises with at least 40% equity shares reserved exclusively for Nigerian citizens.
To implement this policy, the decree No. 4 of 23rd February 1972 which established the Nigerian Enterprises Promotion Board was used. The enterprises in this schedule include textile manufacturing industries, hotels, distilling, camps and lodging places, tobacco and drug manufacturers, etc.
Objectives of Indigenisation Policy
(i) The main objective of the decree was to enable Nigerians to have greater control of ownership of their economy in respect of those enterprises formerly owned and controlled by foreigners.
(ii) It aims at fostering greater opportunities among Nigerian citizens who were interested in carrying out business but because of foreign domination they could not stand the test of competition. This policy was therefore to bring such business ventures into the hands of indigenous businessmen who show greater interest and capabilities.
(iii) The policy aims at guaranteeing the protection of the key and basic industries which were managed and controlled by foreigners.
(iv) To create opportunity for the training of indigenous personnel in management, thereby increasing the skill of Nigerians, in commerce and industries that were owned by foreigners.
(v) It was aimed at fostering the development of the Nigerian capital market.
(vi) The policy aims at keeping and spending of the profit realised in Nigeria.
Implementation of the Decree
Agencies or institutions were set up by Nigerian Government to ensure effective implementation of the policy. The following measures were taken:
(i) The Nigerian Enterprises Promotion Board was established with full power to ensure overall implementation of the Indigenisation Decree of 1972 and 1977. The implementation will include, advancing, development and promotion of business in which citizens of Nigeria shall participate fully and play a dominant role.
(ii) The Council for Management Education and Training was established. The purpose was to train local businessmen to be involved actively by replacing people who lack managerial skill. Also, it organised conferences for businessmen on how to buy and sell under a clearly defined policy guidelines for the promotion of Nigerian enterprises.
(iii) The Nigerian Bank for Commerce and Industry was established. The bank was set up to give financial aids for acquiring foreign businesses affected by the decree.
(iv) The Nigerian Industrial Development Bank was established. The purpose was to assist or finance industrial projects and also to encourage indigenous investors to carry out any investment relating to business enterprises in Nigeria in respect of commerce industry, in accordance with the lndigenisation Decree of 1972.
Problems which Hindered Effective Implementation of the Indigenisation Decree
Some major problems which were responsible for effective implementation of the decree were envisaged as follows:
(i) Shortage of Capital:
Difficulties in finding funds to assist businesses due to low income per capita competing with high standard of living and becoming the major problem in capital accumulation. Capital shortage could hinder the citizen from buying the required minimum percentage of equity shares of the business.
(ii) Inadequate Skilled Manpower:
There was the problem of inadequate indigenous trained manpower to replace the foreigners in that, most of the Nigerian people did not have the managerial skill and technical knowhow which the policy required, to handle effectively the complex foreign owned businesses which would be taken over by Nigerians.
(iii) Creating a few Wealthy Nigerians at the Expense of the Masses:
With the policy,few individuals were made richer at the expense of the masses through shares purchases, while the poor could not buy shares and remains entirely poor.
(iv) Frustrating the Decree through Collaboration:
Some citizens collaborated with foreigners to frustrate the decree in that, most of the citizens pretended to purchase the business with the money given to them by foreigners and eventually employed the services of foreign owners at unreasonable salaries as a form of compensation.
(v) Problems of Capital Outflow:
In the short-run, the problem of capital outflow was expected, foreigners who sold their businesses could leave the country with their wealth instead of reinvesting them in the business.
Steps Taken by the Government to Solve the Problems of Indigenisation Policy
To overcome these problems, the following steps were taken:
(i) Solution to Capital Shortage:
To overcome this problem of capital shortage, Federal Government set up different agencies to combat the problem of capital shortage. The Nigerian Bank for commerce and Industry was set up to provide capital for acquiring the businesses of the foreigners. Commercial banks were encouraged to give loans to indigenous businessmen and citizens were encouraged to form cooperative societies in order to raise adequate amounts of capital.
(ii) Solution to Frustrating Decree through Collaboration:
To solve the issue of frustrating the decree through collaboration, the decree provided for strong penalties and any Nigerian found guilty was to pay a fine or get sentenced to jail.
(iii) Solution to the problem of Capital outflow:
To overcome the problem of capital out flow in the short-run, a number of rules were stipulated that no alien is allowed to sell real estate from capital generated locally, except the vendor was to leave Nigeria finally. That no money should be carried out of Nigeria by an alien when the assets are sold to non-Nigerians, but should be re-invested.
(iv) Solution to Inadequate Skilled Manpower:
To solve this problem, the Federal government has established a Centre for Management Training Institute to help in the training of indigenous personnel.