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Strategies of Industrialisation

Nigeria has adopted a number of strategies of industrialisation in her development efforts. This includes:

(1) Import Substitution Strategy
This is the government action or policy aimed at encouraging the growth of industries within the country by replacing imported good with domestic production. It also involves the importation of the component parts and assembling them locally. Examples of import substitution industries in Nigeria include: Peugeot Automobile, and Volkswagen Assembly Plants, etc.

Objectives of Import Substitution

(i) Reducing over-dependence on foreign trade by encouraging export trade.
(ii) Granting tax free status to those entrepreneurs who produce essential commodities that were originally imported.
(iii) Encouraging domestic industries within the country by complete banning or controlled importation.
(iv) Encouraging self reliance on our locally made products so as to improve the balance of payment position of the country.

Problems of Import Substitution

(i) Insufficient Capital:
Government cannot afford the huge capital needed to carry out import substitution.

(ii) Lack of True Entrepreneurship:
The people that are ready to bear industrial risk are businessmen who spend greater part of their money in organising deliberate parties and marrying many wives, hence showing poor quality of entrepreneurship.

(iii) Inadequate Skilled Personnel:
This is the most important problem affecting import substitution. This arises as a result of poor educational planning by our colonial masters whereby most of the labour force was not given opportunity to go beyond primary education. Those that had an opportunity were very scarce.

(iv) Absence of Developed Market:
For industries to start or expand, there have to be sufficient domestic markets to absorb the products of industrialisation. However, because of an absence of a developed market, our system of exchange is still under-developed, resulting in low demand and low per capita income.

(v) Ineffective Transport and Communication:
Efficient transport enables easy movement of finished goods in and out of the factory. But since we have dilapidated
roads and poor sea port together with lack of communication network, these
insufficient facilities, affect import substitution, negatively.

(2) Export Promotion Strategy
This is a deliberate effort undertaken to promote industries that can produce new goods for export, and those originally imported. To encourage and implement this policy, the Nigerian Export Promotion Board was established (NEPB). The major problems confronting this Board had been the lack of incentives and raw materials. But as time went on, these problems were taken care of by the 1986 Budget, through export promotion incentives. During this budget, a number of incentives aimed at increasing exports were announced. They include:

(i) Tariff Protection:
Government sometimes imposed heavy import duties on foreign goods. This is done to encourage and equally protect infant industries from international competition.

(ii) Granting Tax Freedom to Export Oriented Industries:
Local or infant industries were granted tax free assessment for some period of years. This was to enable them compete with others in international trade and also provide for themselves enough capital for expansion.

(iii) Trade Fair and Trade Exhibition:
Trade fair and trade exhibition were organised to expose home made products to other countries.

(iv) Provision of Loans:
Finance institutions such as Commercial Banks, Merchant Banks and Industrial Development Banks were established to give financial assistance to investors and agriculturists to enable them to improve on the method of production and as well as carry out economies of scale production that could stand the test of competition among firms in international trade.

(v) Reducing Export Duty:
Government granted import duty relief to industries, especially the new ones, to enable them import capital equipment. This encourages producers of export items to export more. Since there was reduction in export prices, a greater external demand for the products was anticipated.

(3) Small and Large Scale Industries
Sometimes, it is the policy of government to encourage the development of small and large scale industries under an integrated development programme.

(a) Small Scale Industries                        
These are industries which produce commodities at very little quantity because the required capital and labour services are very low. For example, rice mills, saw mills, cotton, etc.

Purpose of Establishment
(i) To ensure even and greater development of the country.
(ii) Income of rural dwellers will be increased as well as an improvement in their living standard.
(iii) It offers employment opportunities to the less privileged.
(iv) It ensures even distribution of social amenities.

Problems of Small Scale Industries
(i) Lack of skilled technical personnel.
(ii) Difficulties in procurement of machinery meant for production.
(iii) Inadequate financial institutions.
(iv) Inadequate factory accommodation.
(v) Absence of transportation and communication facilities.
(vi) Inadequate water and power supply.
(vii) Poor developed market.

(b) Large Scale Industries
These are industries which produce commodities at relatively high quantities because the capital outlay and labour requirements are very high due to sophisticated machinery used in production. They are found around towns and cities.

Purpose of Establishment
(i) To Increase Export Earning: Large industries are established to process products for export, thereby increasing foreign exchange earnings.
(ii) To Increase Government Revenue: This is because government derives revenue from company profit tax which is used for development projects.
(iii) To Reduce Importation by Encouraging Export.
(iv) To Increase Higher Standard of Living of the People: This is because increased consumption has always led to an increase in the standard of living of the people.
(v) Development of Large Market Places for Agricultural Products.

Problem of Large Scale Industries
(i) Limited Market: The extent of the market for the industry is so limited that it is forced to reduce its size of operation.
(ii) It Increases Risk: Certain industries might become risky to control because of their scope of operation. The larger the size of the industry the greater the risk involved.
(iii) Managerial Control: A large industry is more difficult to control than a small industry. This is due to problems usually associated with size and number of workers in an industry.
(iv) The Cost of Production: If the management is not careful on its operational cost, a common type of problem not easily identified may increase the running and operating cost of the industry.