Commercial policy and industrialisation in Nigeria, 1963-1978
As a contribution to the continuing debate among trade and development economists as to the role of industrial strategies in the pattern of economic development, this study analyses the experience of one developing country, Nigeria, with an import substitution strategy. The performance of the industrial sector is critically assessed and related to the trade policy adopted. Using published data, the study covers 24 industries and a period of 16 years, beginning 1963 and extending to 1978. An analysis of the structure of protection reveals a considerably high and wide ranging levels of effective protection, in favour of consumer-goods oriented sectors. The relationship between these rates of effective protection on the one hand and import substitution and sectoral growth on the other was examined using various parametric and non-parametric tests of association. The evidence, which is only suggestive in nature, indicates that the structure of protection does play a role, albeit a minimal one, in stimulating industrial growth. Using Input-Output techniques, the employment, foreign exchange and output implications of the present strategy of Import- Substitution and of a hypothetical strategy of export promotion are analysed. There is a general absence of 'key' employment sectors and, paradoxically, an export promotion strategy is found to be less employment generating and more capital using but less foreign exchangeusing than the existing strategy. Although there is a considerable scope for capital-labour substitution in many industries, it was found that the often recommended policy of getting prices 'right' will not be sufficient to bring about an appreciable improvement in the employment situation. The development of factor productivity between 1963 and 1978 for each of the 24 industries was analysed; and three possible determinants of productivity are investigated: capital intensity and technical progress, output growth (the Verdoorn's Law) and trade policy. With regards to the latter, it was found that periods of especially slack productivity growth roughly correspond to those in which there was especially restrictive trade policy as quantified by high erps. The economic efficiency of the manufacturing sector was appraised using the criteria of net social profitability, social rate of return and Domestic Resources Costs (DRCs). Evidence was found in support of the hypothesis that the resource pull of protection to the protected industries is accompanied by higher rates of private, but lower rates of social profitability for the more heavily protected sectors. The overall conclusion of the thesis is that the policies of protection should have been more rationally applied and the IS strategy more rationally executed in line with the country's enunciated objectives.