INDUSTRIAL POLICIES AND INCENTIVES IN

NIGERIA OVERTIME
1960 TILL DATE

PREPARED BY

FAMADE, OYELEKE OYEDELE

MATRIC NO: 138260
TEACHER EDUCATION.

UNIVERSITY OF IBADAN, NIGERIA.

MAY, 2009

INDUSTRIAL POLICIES AND INCENTIVES IN NIGERIA OVERTIME FROM 1960 TILL DATE. Industrialization is a considered as a child of necessity in every nations economy for it accelerates the process of both Economic growth and Economic of development .The importance of the industrial Sector in the economic development cannot be overemphasized. Thus, the fortune of every economy lies in it industrial sector which make it the HEATBEAT of economic development Since the important and relevance of industrialization (industrial Sector) cannot be over-emphasized, there is need to unmask and explain lucidly the various industrial polices and strategies embarked upon by the Nigeria economy from 1960 till date. 1. IMPORT SUBSTITUTION INDUSTRIALIZATION ( ISI, 1960`S). This was the first Industrial strategy embarked upon by the Nigeria government immediately after attaining independence. It has the following aims and objectives; A. To lessen over dependence on foreign trade. B. To save foreign exchange by producing those items that were formerly imported.

2. THE NIGERIAN INDIGENIZATION POLICY (1972). It attempts to strengthening Nigeria economy through it aims and objective which include; A. The transfer of ownership and control to Nigerians in respect of those enterprises formally wholly or mainly owned and controlled by foreigners. B. Fostering widespread ownership of enterprises among Nigerian citizens. C. The creation of opportunities for Nigeria indigenous businessmen. D. The encouragement of foreign businessmen and investors to move from the unsophisticated area of economy to the area where large investment are more needed.

3. THE NIGERIAN INDIGENIZATION POLICY(1977) The 1972 Act that resulted in the indigenization policy was amended, repealed and replaced by the Nigerian Enterprises promotion Act, in 1977.This Act gave birth to the indigenization policy of 1977. The 1972 contained II schedules, while the 1977 act contained III schedules. Schedule I of 1977 contained 40 Enterprises, schedule II contained 57 and schedule III contained 39. In 1981 To be precise, the number of Enterprises in each schedule was revised .By this, schedule I had 36 Enterprises, schedule II, 576 Enterprises and schedule III, 456 Enterprises respectively.

4. STRUCTURAL ADJUSTMENT PROGRAMME (SAP, 1986) This policy came to being in order to right wrong the weaknesses and ineffectiveness of earlier industrial policies. Its aims and objectives include; A. B. To promote investment , To stimulate non-oil exports and providing a base for private sector led

development. C. D. To promote efficiency of Nigeria`s industrial sector. Privatization and commercialization of the economy toward the promotion of

industrial efficiency. E. To develop and utilize local technology by encouraging accelerated development and use of local raw materials and intermediate inputs rather than depend on imported ones.

5. TRADE AND FINANCFIAL LIBERALIZATION POLICY(1989) This policy was enacted purposely to foster competition and efficiency in the financial sector. Its aims and objectives include; A. To foster competition among the domestic firms and between the domestic import

competing firms and foreign firms with view to promote efficiency. B. C. D. Reduction of levels of both tariff and non tariff barriers. Scarping of commodity marketing boards. Marketing determination of exchanging rate as well as deregulation of interest

rates was meant to foster efficiency and productivity.

6. BANK FOR INDUSTRY(BOI- 2000) The bank was introduced as a development institution to accelerate industrial development through the provision of term loans, equity finances and technical assistance to industrial enterprises. The bank has the combination of the following institutions; A. B. C. D. Nigerian Industrial Development Bank (NIDB) Nigerian bank For Commerce And Industry (NBCI). Industrial And Insurance Brokers (IDIB) Leasing Company Of Nigerian Limited (LECON) e.t.c. Other aims and objectives of this bank includes; i. Making a considerable impact in terms of long term loans. ii. To assist in employment generation. iii. Industrial dispersal and promotion of indigenous entrepreneurship

7. SMALL

AND

MEDIUM

INDUSTRIES

EQUITY

INVESTMENT

SCHEME(SMIEIS,2000) This was set up so as to help in the co-ordination of the scheme with a guideline that 60 percent of the SMIEIS fund should go to core real sector, 30 percent to services , and 10 percent to micro enterprises through NGO`S . The objective of SMIEIS are as follows; A. Increasing per capita income / output and initiating /constituting changes in the structure of business and the society through growth, increased output and employment opportunities. B. Enhancement of Regional economic balance through industrial dispersal. C. Moderating rural/ urban migration. D. Easily adaptable to local technology. E. Promotion of effective resourse utilization. However , it must be appreciated that the primary objectives of these industrial policies highlighted above were meant to; ensure rapid expansion and diversification of the industrial sector ; increase income realized from industrial activities; create more employment opportunities; promote even development and fair distribution of industries in all part of the country e.t.c. In pursuance of these objectives, the Government has experimented with a number incentives aimed at positively influencing the performance and productivity of the industrial sector. Some of these incentives are; 8

1. TAX HOLIDAY: - This simply means the exemption of infant or new industries from the payment of profit tax for some years of operation such as five year . The aim is to protect them from international competition and enable them build up enough funds for expansion purposes. 2. TARIFF PROTECTION: - This is the imposition of heavy import duties on foreign goods so as to protect local industries from international competition. 3. IMPORT DUTY RELIEF: - This is the granting of import duty relief to industries , particularly new ones for the importation of capital equipment by the Government. This helps newly establishment firms to be able to precure capital equipment cheaply, thereby increasing their productivity. 4. REDUCTION OF EXCISE DUTY:- This simply means reduction in the amount paid as taxes for the goods and services produced in the country. This helps to reduce business cost of production, especially newly established ones 5. DUTY DRAWBACK SCHEME:- The scheme was aimed at boosting exported goods thereby increasing the countrys foreign exchange base. 6. TOTAL BAN ON CERTAIN FOREIGN GOODS:- This is the banning of some foreign goods with the intention of protecting local industries engaged in production of similar products as well as to encourage increased local production. 7. PROVISION OF SUPPORTIVE ACTIVITIES:- This involves Government provision of aids, such as building of industrial estates e.g. The Export Incentive 9

promotion Decree of 1986 which gave production and marketing incentives to export production and the completion of the Export processing zone (EPZ) in calabar in 1995. 8. PROVISION OF LOANS:- In Nigeria, there are guidelines on credit allocation to financial institutions in the country such as commercial banks merchant banks and industrial development banks to the industrial sector. 9. PROVISION OF ACCELERATED DEPRECIATION ALLOWANCE:- This is a form of tax relief granted by Government thereby allowing industries to set aside huge sum of covering wear and tear of their equipment and machines in the early years of operation. 10. DIRECT GOVERNMENT PARTICIPATION:- This direct participation of Government in certain strategic industries either alone or through joint participation with foreigners or local entrepreneurs 11. APPROVED USER SCHEME:- This has to do with the giving of concessionary rates of duty to certain selected items of industrial imports of manufacture. 12. EXPORT INCENTIVES:- Export promotion incentives in Nigeria include; the refund of import duty on raw material for production of export goods, refund of excise duty paid on export manufacture , exemption from import levy of 30 percent of raw materials imported for production in 1986.

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13. ESTABLISHMENT

OF

SPECIAL

INDUSTRIAL

DEVELOPMENT

FINANCIAL INSTITUTIONS:- This include the Nigeria Industrial Development Bank (NIDB) and Nigeria Bank for commerce and Industries (NBCI). 14. RAW MATERIAL RESEARCH AND DEVELOPMENT COUNCIL(RMRDC):- This outfit was set up by government after SAP to aid in research into the use of domestic raw and intermediate materials and to enhance domestic fabrication and usage of machinery and equipment. It was meant to complement the effect of Federal Institute of Industrial Research (FIIRO), Oshodi, and the Product Development

Agency(PRODA).

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