Amid much fanfare the federal government launched the Nigeria Industrial revolution plan (NIRP). Based on the need to boost economic growth and local industrial capacity the FG launched what it called the first comprehensive industrial plan in decades. Filled with the usual stuff about creating millions of jobs, reducing unemployment and fighting poverty. All the things we know and love. So how impressive is this new industrial revolution plan? To answer that question it is useful to take a trip down memory lane and visit some of the previous industrial plans we have had.

First of these was the “First National Plan”. The plan was dated to run from 1962-1968.The idea was to focus on promoting industrialization through import substitution and a resource based strategy. This included “enabling the country to import key capital goods like machinery, tools etc to facilitate the assembly of products within the country, and to encourage the manufacture of consumer goods”. These key important items wereto be brought in at little or no duty in industries protected by “high tariffs”. The government also put its money where its mouth was. 13% of the budget was set aside for trade and industry. The plan started off well and produced some positive results initially. Manufacturing share of GDP rose from 5-6% of GDP in the year after the launch. However, as with most other government driven programmes, it proved unsustainable. It alsofailedtoresolvethebalanceofpaymentsproblem. The civil war put the proverbial nail in the coffin for that planandthatwas that.

The “SecondNational Development Plan”was kicked off in 1970 and was scheduled to run until 1974. Reconciliation, reconstruction and rehabilitation was the theme of this plan keeping in mind that it was launched shortly after the civil war. The basic tenets of the plan were topromote even development, and fair distribution of industries. Diversification of the industrial sectorand the promotion and establishment of industries which catered to foreign markets in order to earn foreign exchange were also highlighted. As usual import substitution was touted as a key feature of the plan as well as initiating schemes designed to promote indigenous manpower development and raise the proportion of indigenous ownership of industrial investments. This time around the government took a leading role financing and sometimes completely owning and running much of the new industries. No surprise how it ended. The plan resulted in industries built in weird locations disconnected from markets, over-importation of raw materials and, as with government businesses at the time, mismanagement. Of course this was during the oil boom. Mismanagement didn’t mean shutting down, mismanagement meant pumping in more oil money to fix the problem.The Nigerian Enterprises Promotion Decree was also launched in 1972. Fuelled with oil cash the FG started a tactical indigenization of foreign owned businesses. The decree reserved certain categories of industries and industrial activity, mostly services and manufacturing for Nigerians only. The scheme initially launched with two schedules; categories strictly for Nigeriansand categories of at least 40% Nigerianownership. In 1977 an amendment was made restructuring the categories to 100% Nigerian owned, 60% Nigerianequity and 40%Nigerian equity.A Nigerian enterprises promotion board and a Bank of Commerce were also set up to assist in this Nigerian-driven industrialization. Commercial banks were encouraged to advance more loans to Nigerian customers. Import licenses were a key feature of the policy with licenses issued to “key” Nigerian businesses. Yes this is where duty waivers started. The message was clear. Industrialization wanted but only by Nigerians. The industrialization plan failed. Unsurprisingly. A crash in the oil price meant there was no cash to prop up mismanaged government owned businesses and that was that.

On to the next plan. The famous Structural Adjustment programme of 1986. Although this plan was not focused directly on industrialization, it did have an industrialization component. The plan attempted to encourage the development and use of local raw materials and intermediate inputs rather than imported ones. To encourage the development and use of local technology, to assist in maximizing the growth of value-added of manufacturing activity, to promote export oriented industries, to generate employment through the encouragement of private sector small and medium scale industries, to remove bottlenecks and constraints that hamper industrial development, including infrastructural, manpower and administrative deficiencies, and to liberalize controls to facilitate indigenous and foreign investment. The plan was more robustly defined in 1988 with the “Industrial Policy of Nigeria: Policies, Incentives, Guidelines and Institutional Framework”. The Goal?To “accelerate the pace of industrial development and to make the industrial sector the prime mover of economic development. This was to be made possible through a number of strategies including promoting increased private sector participation in the industrial sector; privatizing and commercializing government holdings in existing industrial enterprises; playing a catalytic role in establishing new core industries; providing and improving infrastructural facilities; improving regulatory environment; improving investment climate prevailing in the country; establishing a clear set of industrial priorities; and harmonizing industrial policies at the federal, state and local government levels”. A very good plan according to most international observers at the time. The plan did yield some results; for instance, capacity utilization, which was 30% at the end of 1986, rose to 36.7% by mid-1987 and again to 40.3% in 1990 and to 42.0% in 1991. However as the world entered a period where there was no hiding place for uncompetitive firms, the Nigerian industry suffered. Nigerian industries could not compete with their foreign counterparts who had access to better infrastructure, more consistent power supply and other key industrial components. As it turned out the plan was not properly implemented. Government owned corporation were not privatized, enough investments in infrastructure and power were not made and the investment climate was suspect. Not to mention manyNigerians hated the plan. Something about the IMF and World Bank trying to dictate to the country.

Next we had the national rolling plans. The first national rolling plan was set from 1990-1992. The plan proposed to tackle some key issues which the FG argued was holding back industrialization. These included things like “the shortage of industrial raw materials and inputs, infrastructure challenges, inadequate linkage among industrial subsectors and, administrative and institutional problems. The Industrial Master Plan (IMP), which was part of the First Rolling Plan, sought to promote the development of an efficient industrial system through the determination and definition of all the functional aspects of an industrial system, and the preparation of an action plan to achieve established objectives and targets. Another major program that resulted from the Rolling Plans was the privatization of public enterprises, including those in the industrial sector, for more effective performance. This was undertaken by the Technical Committee on Privatization and Commercialization (TCPC).The government, as well, commenced a deliberate policy aimed at assisting small scale industries given their contribution to the economy in terms of employment generation, promotion of indigenous technology, and forward and backward linkages. In the same vein, government sought to make all areas of the country attractive to new investors through a package of incentives, which included a program of industrial layouts and craft villages' development. It also pledged to assist state governments with matching grants in the establishment of industrial estates for small scale industries. Government equally promoted the Entrepreneurial Development Program (EDP), Working-for-Yourself Programs (WFYP), and Train the Trainers Scheme. The aim was to develop a corps of entrepreneurs needed for successful implementation of the small scale industrialization strategy”. Sounds awfully familiar right? We will get to that.

In 2003 another industrial policy was launched by the Federal Ministry of Industry. The objective was to “accelerate the pace of industrial development by radically increasing value-added at every stage of the value-chain”. According to the policy, Nigeria's resources would no longer be traded in their primary state. The government proposed a focus on improving Total Factor Productivity (TFP) by pursuing knowledge and skill intensive production on the basis of available best practice. “In the short term, the goals were to raise capacity utilization in manufacturing from 30% to 60%; create new opportunities for the development of the small scale sector; establish more direct and indirect employment opportunities; and, develop conditions to attract new investments into medium and large industries. In the medium term, the aims were to strengthen the competitiveness of manufacturers by facilitating access to technology and best practices; stimulate development of small and medium size enterprises by developing the nation's resources as a base for cheap inputs; maximize linkages achieved between small-scale units and medium and large enterprises; and adapt and respond to the changing global environment. The long term aspirations were to encourage 100% export-oriented units and encourage industrial development in the informal sector”. The Bank of Industry andNigerian Agricultural, Cooperative and Rural Development Bank (NACRDB) were set up and mandated to facilitate the availability of primary industrial inputs through the provision of medium to long term funds for agriculture and agro-allied industries and other industries. The government, acting through the Central Bank of Nigeria (CBN),also mandated commercial banks to set aside 10% of their annual profit as equity funds for the promotion of SMEs under the Small and Medium Enterprises Equity Investment Scheme (SMEEIS).

Finally in 2007 the Federal Ministry of Commerce and Industry adopted the Cluster Concept, Nigeria's new Industrial Development Strategy. The Cluster Concept according to the then Minister was “not entirely a change in policy, since Nigeria had in the past promoted the setting up of industrial estates. Instead it represented a refocusing of the country's implementation strategy to achieve rapid take off and survival of Nigerian industrial/productive enterprises. This was based on government's conviction that so long as Nigeria remained deficient in infrastructure and continued to be perceived as a hostile and unfavourable business environment, major foreign direct investments would continue to elude it”. As with all the previous industrialization plans it proposed to address the myriad of problems which Nigeria needed to overcome to grow its economy. According to the policy, “the Cluster Concept would operate on five planks: Free Trade Zones; Industrial Parks; Industrial Clusters; Enterprise Zones; and Incubators”.

There have been other smaller efforts to boost industrialization since independence. Some of these include “strengthening the National Office for Technology Acquisition and Promotion (NOTAP), which started in 1979 as the National Office of Industrial Property (NOIP); promoting the Export Processing Zones (EPZ) and Export Processing Factories (EPF); and strengthening the Nigerian Investment Promotion Commission (NIPC) essentially to control and administer incentives to attract investments. Furthermore, although export promotion had been in focus since the 1980s, when the Export (Incentives and Miscellaneous Provisions) Decree No. 18 of 1986 was promulgated, it received greater attention in this period, especially with the strengthening of the Export Expansion Grant (EEG), which was to provide cash inducements to exporters who exported a minimum of N500, 000.00 worth of processed products, including solid minerals”.

As you can see we have had many industrial plans since independence but perhaps this new plan is different. I should point out that the plan actually hasn’t been made public. To the best of my knowledge no plan documents have been released although it has been launched. I emailed the Federal Ministry of Trade and Investment asking for detailed documents on the plan but they haven’t responded yet. [Honestly I emailed them. I can forward you the proof if you like J]. As a result all the information about the 2014 plan is based on statements made by the minister during the launch of the plan.

To kick things off the minister claims this is the first comprehensive industrial revolution plan in decades? That may be true but only in the sense that the other plans didn’t have “revolution” in their titles. As we have read above, there have been industrial plans every five years or so. But maybe this one is different. The minister highlighted a number of challenges which the industrial plan hoped to address and the main strategy is thoughpublic -private partnerships.

Key features include moving SME’s from informal to formal sectors. Changing the delivery structure for example by setting upstate SME councilsto work with the national SME council. Restructuringthe delivery agencies such asthe BOI, SMEDAN and ITF to deliver growth through a “bottom of pyramid” model. This model will lend to grass root businesses without demanding for collateral by registering them as cooperatives and cross guaranteeing each other and ensuring they have bankable business plans. Lots of talk about market access, supply chains and value chains. Something about one Local government (LG), one product which sounds eerily close to the “equal development plan” that resulted in a refinery in Kaduna, hundreds of kilometres from the closest oil well. These LG’s will supposedly focus on a product in which they have a competitive advantage. Of course the government has pre-mandated that each LG will have an advantage in something and of course the government knows what fits where. But of course as economists we know that the government’s idea of what goes where is often very different from the markets idea of what goes where. Bad industrial policy tries to implement a government’s idea of what goes where. Good industrial policy allows the market to dictate what goes where and promotes a system flexible enough to adapt.
Continuing with the industrial plan; the ministry allegedly created 10000 cooperatives across the country and plans to create 50000 cooperatives every year. This it argues will resultin 1 million jobs being created every year.I am not exactly sure how this works though. Hopefully the plan policy document clarifies this but I don’t understand how getting people together and tagging them a cooperative creates jobs. Perhaps it has to do with reducing the risk of lending but as we have learned from Microfinance in Nigeria, cooperatives do not always lead to less risk in lending.
The minister also mentions that the industrial plan will be based on three principles; Nigeria must diversify its economy, diversify its sources of revenue and,as the minister put it“we must produce what we consume” aka import substitution circa all the previous industrial plans.Import substitution is a tricky topic but usually doesn’t work in promoting long term industrialization. To put it in “lay man’s terms”; there is a reason why most people today don’t live off food grown in their backyard. This is because we know, beyond the shadow of a doubt, that ultimately our wealth or ability to create wealth doesn’t depend on what we don’t buy but on what we do for a living. In essence our wealth doesn’t really depend on our ability to cut down on purchases of beans from the market and replacing it with home-grown beans, but by improving on whatever it is that we do. The focus is on being more productive. This does not mean that there is no room for cutting back and reorganizing your beans purchases. There is a place for that but cutting back isn’t the same thing as becoming more productive. There is room for import substitution but only to the sense that they are temporary, boost productivity and don’t stifle competition. No surprise that the import substitution based industrial policies proposed since independence haven’t yielded any tangible results.
There were other things mentioned during the launch of the new plan. “Nigeria must become a rich nation”. “No more exporting raw materials”. “Must create value in our commodities”. “Industrial clusters, competitiveness, access to affordable finance, skills, infrastructure, standards, linking innovation to industries. We must consume what we must produce. Working with private sector”. Most of these are not plans but goalsandsoundveryclosetothestatementsfrompreviousplans, or goals. If I wake up in the morning with a broken arm and decide that I want to fix my broken arm, that is a goal not a plan. The achievement of that goal depends on how I plan to fix my broken arm. Do I plan to go to a hospital, visit a babalawo, or maybe pray really really hard?The goal is important but the plan is what really counts.

In conclusion, the Nigerian Industrialization Plan does not appear new or revolutionary. It is basically a re-hash of previous industrialization plans although with some lessons learned but still unlikely to succeed in promoting long term industrialization. The plan is based on the assumption that the government knows what to do to promote industrialization. The government knows which sectors can survive in the long term. The government knows which products each local government area has a comparative advantage in. The government knows that cement manufacturing is more beneficial that construction. The government knows that assembling cars locally is key to creating jobs although car assembling in most countries is now highly automated. The industrialization plan is based on the idea that the government has the answers.

But I would argue that the government does not have the answers. I do not think the government knows what industries can survive long term in Nigeria. I do not think the government can predict what products the market will accept. The government cannot predict what industries will be globally dominant in the next ten or fifteen years. If we agree that the government does not know, then the industrialization plan cannot work. A government that is still talking about mining iron ore for steel when then world seems to be moving towards recycling for steel cannot promote industrialization.

My suggestion: no need for grand industrialization plans. Focus on infrastructure, security, a stable trade policy and most importantly, promoting a competitive environment. Let the businesses compete and figure out what works.

Nonso Obikili is an economist at Economic Research Southern Africa with research interests in African economic history, economic development and macroeconomics. Current research includes the long term effects of the trans-Atlantic slave trades on political economic development in Africa. He was formerly a Lecturer at the State University of New York at Binghamton and is a regular contributor to various policy oriented think tanks in Nigeria. He tweets @Nonso2

NB: For a more detailed examination of history of industrial policy Nigeria read “Nigeria and the Challenge of Industrial Development: The New Cluster Strategy” by Obi Iwuagwu. 2009. African Economic History. 37: 151 -180