The major weakness in the Nigerian economy is the relatively poor performance of non-traditional tradable goods and services that are generally the most low-skill intensive sectors, which have a central role to play in addressing unemployment. The country’s widened exposure to the rest of the world has not in itself induced the necessary structural changes in the economy to significantly alter the export basket beyond the range of products that reflect its static comparative advantage. To facilitate diversification beyond its current reliance on oil requires a strong and coherent industrial policy framework that promotes increased value-added and competitive manufacturing, with a particular emphasis on tradable labour-intensive goods and services and economic linkages that catalyse employment creation.
Industrial policy is not the domain of a single government department, but requires intensive coordination across a range of government departments. It can only be implemented successfully if it is adopted with four associated and supporting sets of pillars. First, a stable and supportive macroeconomic and regulatory environment. Second, appropriate skills development and education systems which are increasingly integrated with the needs of the industrial economy. Third, sufficient, reliable and competitively priced traditional and modern infrastructure. Fourth, adequate support for various forms of technological effort within the economy.
The industrial policy framework has to focus on identifying and addressing the cross-cutting and sector-specific constraints and opportunities prevailing in the industrial economy through:
• Sector strategies: High impact sector strategies that are well designed and properly implemented are crucial to place the economy in a more developmental industrialisation path.
• Industrial financing: This involves investment (including sector-specific programmes), industrial upgrading (including industrial infrastructures), innovation and technology, trade facilitation and small and medium enterprises. Nigeria needs to create an institution that will facilitate industrial financing and provide finance for industrial development projects.
• Trade policy: Improving non-traditional export performance, particularly in more sophisticated value-added products, requires a more integrated trade policy. Trade policy has implications for employment, investment, technology and productivity growth. More targeted FDI as well as a more focused export promotion strategy, based on detailed analysis of trade opportunities, are necessary. Bi-lateral trade agreements and negotiations should be properly managed in order to firstly, achieve substantial market access for manufactured and agricultural goods and secondly, leverage export-oriented investment.
• Skills and education for industrialisation: The link between industrial policy objectives and the skills and education system has to be strengthened.
• Leveraging public expenditure: Investment in new infrastructure and maintenance of existing infrastructure, particularly in the energy and transportation sectors, will create substantial opportunities for domestic firms to gear up to produce quality products at a competitive price.
Trade policy is an instrument of industrial policy. Nigeria needs to strengthen the implementation, administration and enforcement of its trade policy. This includes building a strong capacity to act quickly and efficiently against both unfair trade (subsidised and dumped products) and surges in cheap imports that threaten local industries. It also requires the country to step up measures that enforce trade laws against illegal imports, customs fraud, transhipment, abuse of industrial support programmes, counterfeit goods and under-invoicing, while also clamping down on collusion and price-fixing.
Tariff policy setting should be pursued gradually and selectively to support industrial development. Tariffs on mature upstream-input industries could be reduced or removed to lower the costs for downstream, labour-absorbing manufacturing. At the same time, tariffs on downstream industries with employment or value-addition potential could be retained or raised to ensure sustainability and job creation. The creation of an appropriate institution, such as a Trade and Competition Commission therefore becomes crucial in order to undertake these tasks.
One of the greatest challenges facing global trade is the recent gradual increase in trade restrictions, which will incrementally undermine the benefits of trade, particularly in poorer countries. Developing countries face higher tariffs on processed goods than commodities and this may explain why these countries are heavily dependent on commodities. Analysis conducted by Oxfam concludes that unfair trade barriers imposed by developed economies cost developing countries about US$70 billion a year in lost export earnings – some 5 times the amount that poor countries receive in aid.
Recognising that trade could be either a success or failure depending on how it’s managed, the Trade and Competition Commission will play an important role in ensuring that efficiencies realised from free trade are not undermined, while promoting trade-led growth and development. The Commission will enable Nigerian firms and workers to compete and thrive in the global marketplace.
It is however important to stress that the industrial policy framework is not a blueprint for the industrial economy. Its core objective is to set out government’s approach to Nigeria’s industrialisation trajectory and help align both private and public sector efforts towards this end. The framework should be accompanied by a successive and more detailed industrial policy plan, informed by the country’s developmental strategy (as set out in NEEDS).
In the end, an industrial policy is not set in stone but must be reviewed on an on-going basis and reflect changes in circumstances, taking into account changes in both the domestic and global economy. The industrial policy framework, together with the more detailed industrial policy plan, will be reviewed and adopted on a rolling basis in order to link it to the Medium Term Expenditure Framework (MTEF).
Moses Obinyeluaku
