Nigeria once dreamed of becoming Africa’s industrial powerhouse and for a short while, between the 1970s and the 1980s, the vision seemed within reach.
Within that period, booming sectors like steel, textiles, and manufacturing were laying the groundwork for a self-sufficient economy, propelled by an oil boom of early 1970s.
In the 1970s, the federal government set up over 600 industries, accompanied by industries set up by sub-national governments. The dream was realisable.
However, in less than 20 years, the towering ambitions of industrialisation began to crumble and decay under the weights of corruption, policy missteps, infrastructure deficits and an over-reliance on oil exports – in the face of a global recession which crumbled oil prices.
Between 1986 and 1989, at the behest of the Structural Adjustment Programme (SAP), the federal government privatised 89 of these industries, with 22 of them commercialised, including NEPA and NITEL.
In 1987, New York Times summed up the situation in the 1980s quite perfectly in one of its issues: “Through a car window, a Lagos ‘go slow,’ or traffic jam, offers a snapshot of the diminished fortunes of Nigeria, the giant of black Africa.
“Five years ago, freeways here were clogged with cars bought during an oil boom. Today, traffic clogs behind cars that break down because owners cannot afford spare parts.”
After relying heavily on oil and generating over $100 billion in revenue within a single decade, Nigeria’s industrial ambitions unraveled due to unsustainable business practices, inefficiencies, mismanagement, and a glaring lack of capacity.
Out of the 89 companies marked for privatisation, 38 were rooted in the manufacturing and processing sector, spanning three textile firms, five cement plants, three sugar companies, six motor assembly plants, and six food and beverage businesses.
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The federal government also privatised four construction firms, four development banks, and 12 commercial banks. This lineup highlights the remarkable extent of public-sector involvement in shaping Nigeria’s consumer economy in the 1980s.
Some of the companies sold off by the federal government during the SAP period included: Ashaka Cement, Benue Cement, Cement Company of Northern Nigeria, NAL Merchant Bank, Afribank, WAPIC, First Bank of Nigeria, and Flour Mills of Nigeria.
Charles Chukwuma Soludo, Anambra State governor and former governor of the CBN, in a 1998 study, highlighted that the framework for industrialisation adopted by African economies was ‘import-substituting industrialization.’
“No explicit emphasis on exports of manufactures, and the firms were not subjected to performance-based criteria for receiving further incentives and protection. The lack of gradual exposure of the firms to international competition contributed partly to the low industrial growth and innovation…”
According to a study sanctioned by the CBN in 1999, these state-owned enterprises were contributing to the fiscal deficit and were not self-sustaining as they could only finance 20 percent of their investments through internally generated revenues (IGRs).
Outside of the financial mismanagement and inefficiencies that plagued these companies, another defining factor was lack of competitiveness. Unlike the Asian Tigers, African industries were not making products with the aim to export.
In Nigeria, the situation was quite evident as Nigeria had an anti-export bias, which caused some of the products by these companies to lack an ability to compete in the global market. Combined with an anti-export bias, Nigeria had a strong bias for imported products and inputs for manufacturing, a conundrum which cannot be explained.
Lack of globally competitive products combined with grossly mismanaged entities was a perfect recipe for dying industries.
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Recall that the federal government owned over 600 enterprises, with 111 of them earmarked for commercialisation and privatisation. Going into the 1990s, the federal government owned over 400 enterprises cut across various sectors of the economy. Some of the companies included: Ajaokuta Steel Complex, Delta Steel Company, Oku Iboku Pulp and Paper Mill, Nigeria Paper Mill, Jebba, and Iwopin Paper Mill, Warri Refinery and Petrochemicals Complex, Port Harcourt Refinery, Kaduna Refinery, Peugeot Automobile Nigeria, among others.
Essentially, the federal government did not let go of the heavy industries, a move which may have proven harmful. These industries were eventually let go in the 2000s, albeit to a lot of uninspiring buyers or managers. In 2005, the government eventually sold off an extensive list of the ‘dead’ assets in a privatisation exercise that has been a source of great controversy till date.
Speaking in 1999, ex-President Obasanjo noted a strong preference for privatising these industries, “It is estimated that successive Nigerian governments have invested up to N800 billion ($8.5 billion) in publicly-owned enterprises. Annual returns on this huge investment have been well below 10 percent.”
The government at the time sold off all the paper mills, Ajaokuta Steel Company, Delta Steel Company, Peugeot, and the three FG-owned refineries. However, one by one, these moves failed to revive these companies, as they were sold to parties that lacked the technical capacity to turn them around. In the case of the refineries, there was vested political interest as the next administration overturned the sale.
A review of the 1999-2005 privatisation exercise shows that of the 14 manufacturing plants sold off, only six are functional, including the recently revamped Warri and Port Harcourt refineries.
With the continual decay of some of these heavy industries, the Nigerian industrialisation dream of the 1970s continues to vapourise.
However, dreams may delay but they never die. In some corners, it is posited that Nigeria’s industrialisation drive can be awoken, however, this time with a different approach.
According to Joseph Aniekan, a public policy enthusiast, the government has to come at it with a different approach.
He noted, “Government needs to redefine its priorities about Nigeria’s industrialisation drive. There needs to be strategic investment that makes it easy for private players to reinvest in these companies.”
Using an analogy of Ajaokuta Steel Complex, Aniekan said, “If a foreign investor acquires Ajaokuta for $5 billion and revamps it with a further $3 billion, how competitive will they be in the global market with other companies that didn’t incur that $8 billion cost?”
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