Industrialization in an Open Economy: Nigeria, 1945-1966

Industrialization in an Open Economy: Nigeria, 1945-1966

Industrialization in an Open Economy: Nigeria, 1945-1966

Industrialization in an Open Economy: Nigeria, 1945-1966

Synopsis

This book provides a detailed study of how manufacturing and processing industries have developed in the largest country of West Africa. Three chapters devoted to import substitution examine the interaction of growing consumer demand and the market strategy objectives of foreign merchant firms which produced the sudden spurt of industrialization in the late 1950s. It is shown that conventional government promotion policies played an insignificant role in triggering industrial development. Subsequent chapters present analyses of Nigeria's processing industries, applied industrial research, labour supply and productivity, technical education, industrial relations and indigenous entrepreneurial performance. The study goes beyond questions of efficiency in allocating resources, to underlying organizational and institutional factors. Professor Kilby concludes by isolating key problems in the industrialization process and by suggesting an optimum development strategy.

Excerpt

The preceding chapter considered the critical features of the Nigerian economic environment as it relates to entrepreneurial behaviour. Section I of the present chapter sets forth an hypothesis concerning the primary motive which has channelled entrepreneurial activity into industrial pursuits during the past decade. Section ii is a history of the changing market structure of the import merchandise trade over the period 1930-60. Section iii reviews the major industrial investment decisions during 1958-65 and the context in which they were made.

In a predominantly free enterprise developing economy what are the factors which bring about the transition from importation to local manufacture? By and large, economists have explained this process in a simple and straightforward manner: when the market, as mapped out by imports, has reached or is approaching that size which will support a plant of optimum or near optimum efficiency, an investor who is in search of profitable opportunities will come forward, given appropriate publicity and the provision of reasonable tariff protection and other fiscal incentives. Where, as often happens, markets have reached this critical size and failed to evoke the required investment, the economist takes refuge in ceteris imparibus: insufficient publicity or incentive, fear of political instability, foreign exchange restrictions and the like. and indeed in most cases one or more of such impediments are present; yet in other cases (e.g. Brazil, India), where there is no apparent difference in the strength of such obstacles, private foreign investment does occur. the traditional interpretation based on the 'technological threshold' would thus seem to contain a necessary but not a sufficient condition for explaining the investment decision.

An analysis of the history of industrial investment in Nigeria would seem to indicate that the size of the market is indeed an important consideration, but that some 'competitive threshold' as opposed to a 'technological threshold' has been the critical factor. As we saw in chapter 2, prior to the late 1950s few industries serving local demand were developed despite the existence of many markets which would have supported a number of minimum-sized efficient factories. Then, from about 1958 in the face of a gradually deteriorating balance-of-payments . . .

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