Local Production And It’s Impact In Nigeria Economy

Project and Seminar Material for Economics

Abstract

The purpose of this study is to examine local production and its impact on Nigeria economy. This study adopted the survey, ex post facto and descriptive research design for both quantitative and qualitative analysis. It is ex-post facto research design in that the data generated were already put in place and are not subject to the manipulation of the researcher, this were data within the period of 1989 to 2014. This data were extracted from CBN statistical bulletin in CBN website and from the website of Food and Agriculture Organization of the United Nations (FAO).

This study presumed that the economic development in Nigeria (represented by real GDP) is dependent on Total Local Production TLP (independent variable), Cashew production in Nigeria CPN (independent variable) and money supply MSP (independent variable). Multiple regression analysis was applied for the data analyses following the specified model. The result obtained shows that total local production and money supply exert a positive but insignificant influence on the development of Nigeria economy. Also, cashew production in Nigeria has not contributed so much to the Nigeria economy.

Chapter One

Introduction

1.1 Background of the Study

The structure of the Nigerian economy is typical of an underdeveloped country. Over half of the gross domestic product (GDP) is accounted for by the primary sector with agriculture continuing to play an important role. The oil and gas sector, in particular, continues to be a major driver of the economy, accounting for over 95 per cent of export earnings and about 85 per cent of government revenue between 2011 and 2012. The sector contributed 14.8 and 13.8 per cent to GDP in 2011 and 2012, respectively. It also recorded an increase in reserves from 37.119 billion barrels (bbs) in 2012 from 36.042 bbs in 2011.

In contrast, the industrial sector in Nigeria (comprising manufacturing, mining, and utilities) accounts for a tiny proportion of economic activity (6 per cent) while the manufacturing sector contributed only 4 per cent to GDP in 2011. This is despite policy efforts, over the last 50 years, and, in particular, more recently, that have attempted to facilitate the industrialization process. In this paper we explore the evolution of the industrial sector in Nigeria over the last 50 years. To set the context we begin by providing an overview of the policy framework for industrial development from the 1960s to the present day. At independence in 1960 and for much of that decade, agriculture was the mainstay of the Nigerian economy providing food and employment for the populace, raw materials for the nascent industrial sector, and generating the bulk of government revenue and foreign exchange earnings. Following the discovery of oil and its exploration and exportation in commercial quantities, the fortunes of agriculture gradually diminished while crude petroleum replaced it as the dominant source of revenue and export earnings.

This is despite a drive for industrial development in Nigeria dating back to the early 1960s with the first National Development Plan for the period 1962-68.2 Under the First Plan the country embraced import-substituting industrialization (ISI)3 with the objective of mobilizing national economic resources and deploying them on a cost/benefit basis among contending projects as a systematic attempt at industrial development. The period of this plan witnessed the commissioning of energy projects such as the Kanji dam and the Ughelli thermal plants, which provided a vital infrastructural backbone for the nascent industrial sector.

Other important industrial infrastructure developed during this period, which was considered crucial for catalyzing industrial take-off in Nigeria; included an oil refinery, a development bank, and a mint and security company. Even though, the main objective of the ISI strategy was to stimulate the start-up and growth of industries as well as enhance indigenous participation by altering the ownership structure and management of industries, it was characterized by a high degree of technological dependence on foreign knowhow to the extent that the domestic factor endowments of the country were grossly neglected.

The focus on an ISI strategy as the cornerstone of industrial development efforts during the period of the First Plan therefore seemed to have neglected many of the factors required for managing the emergent industrial sector and in particular, the management of technologies transferred or acquired. The Second National Development Plan (1970-74), attempted to address the limitations of the ISI strategy, and placed emphasis on ‘the upgrading of local production of intermediate and capital goods for sale to other industries’. This was the first systematic effort to create an industrial structure linked to agriculture, transport, mining, and quarrying. The Second Plan coincided with Nigeria’s newly acquired status as a major petroleum producing country.

As the economy benefited heavily from enormous foreign exchange inflows, the government embraced ambitious and costly industrial projects in sectors such as iron and steel, cement, salt, sugar, fertilizer, pulp and paper, among others.4 According to the plan, the establishment of industrial projects during this period was inspired by the need to increase the earning power of the populace; to minimize social tension by generating more employment; to make essential goods easily available; and to lay the foundation for a self-sustaining economy. The shallow nature of Nigeria’s technological capacity, however, prevented the economy from moving beyond the elementary phases of these projects, and indeed, virtually all of these projects have today either been shut down or operate at very low capacity.

1.2 Statement of the Problem

It is the deficit of visionary leadership and long-term planning that has prevented locally made goods and other local industrial clusters from becoming global manufacturing hubs. Nevertheless, the current economic realities in the country have pushed the government at both national and sub-national levels to start looking inwards. Aba-made products are now receiving some attention.

On October 1, 2016, the Abia State government launched an e-commerce site, MadeInAba.com.ng, to make it possible for Aba-made merchandise to be retailed across the country. MadeInAba.com.ng is a much larger market that includes an online retail store and physical stores to offer wholesale and retail services. A strategic engagement of the Nigerian government in the production of this resource as well as supporting entrepreneurs in the country, are viable approaches for achieving the competitiveness of the Nigerian economy sought by the current administration’s economic plan.

Moreover, supporting the manufacturing sector in the south-eastern part of the country would go a long way in boosting the political capital of President Muhammadu Buhari in that region. In all, both the government and the private sector have major roles to play in achieving economic security for all Nigerians, it is against this backdrop that the researcher intends to investigate the impact of local production on Nigeria economy.

1.3 Objective of the Study

The main objective of the study is to investigate the impact of local production on Nigeria’s economy. To aid the completion of the study, the researcher intends to achieve the following specific objectives:

To ascertain the impact of made in Nigeria goods on the economic growth of Nigeria
To investigate the role of local production in job creation
To ascertain the relationship between local production and job creation in Nigeria
To investigate the role of government in promoting local production

1.4 Research Hypotheses

To aid the completion of the study, the following research hypotheses were formulated by the researcher

H0: made in Nigeria goods has no significant impact on the economic growth of Nigeria
H1: made in Nigeria goods has a significant impact on the economic growth of Nigeria
H02: there is no relationship between local production and job creation in Nigeria
H2: there is a relationship between local production and job creation in Nigeria

1.5 Significance of the Study

It is believed that at the completion of the study, the findings will be of great importance to the federal government, as the result of the findings will serve as a guide in formulating policies that will booster locally made product in the country, the study will also be useful to the state and local government, as the study intends to explore the benefit of local production in terms of revenue generation and job creation at the local and state level. The study will also be of great importance to researchers who intends to embark on study in a similar topic as the study will serve as a guide to further studies. Finally the study will be of great importance to student teachers lecturers and academia as the findings will add to the pool of knowledge already available.

1.6 Scope and Limitation of the Study

The scope of the study covers local production and its impact on Nigeria economy. in the cause of the study, there were some factors which limited the scope of the study:

Time factor: time was not on the researchers to consult various sectors of the economy to review employees or given out questionnaire to various institutions on the effect of government revenue policies.
As we all know, time is never our friend. The time scheduled for the completion of this research thesis was too short. As a result, generating information/data was strenuous as it coincides with final year examination period, which needed attention.

Finance; this is another barrier that limited the researcher’s work.
Available resources; was unavailable for the research work

1.7 Definition of Terms

Production

Production is a process of combining various material inputs and immaterial inputs in order to make something for consumption. It is the act of creating output, a good or service which has value and contributes to the utility of individuals

Economy

An economy is an area of the production, distribution, or trade, and consumption of goods and services by different agents

Economic growth

Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.

1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study.
Chapter two highlight the theoretical framework on which the study its based, thus the review of related literature.
Chapter three deals on the research design and methodology adopted in the study.
Chapter four concentrate on the data collection and analysis and presentation of finding.
Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain the impact of local production on Nigeria’s economy

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges encountered by locally produced good and its implication on the economy

5.2 Summary

It was discovered the one of the factors that affect local production in Nigeria is the cost of production. Indigenous product are under price and one of higher quality in some products while in some lower quality price difference between items whether local or foreign affect the preference of consumers or buyers. When they notice that locally made goods are more expensive then foreign ones they go for the foreign ones. Another factor that was discovered is the fashion and trend. Such the level of technology is still very low in the country, many consumers one carried away by the trend of technology which come from the western world, which make them give preference to foreign made goods. It was discovered that there are some consumers who would choose local made good anytime4 even if they fall within the same price range with foreign one and there are people that prefer foreign product even if the price are 3 times more expensive than the local one because of quality. There are some consumers who concluded within themselves that irrespective of the origin of the product, that if it is well package of high quality good taste and can give value for the purchasing power. It would be a prepared choice. Though some locally made products are of high qualities than foreign one, the overall statistic revealed that the qualities of foreign made goods are higher than made in Nigeria goods. Another factor is self ego and pride. Most people go for international brand to feel proud because of them it depicts class. Demand for foreign made goods is higher than locally made goods irrespective of the standard and quality. Most price of the locally made good which has negative effect on demand and local manufactures. This could be attributed to running cost and source of raw materials

5.3 Conclusion

The industrial sector in Nigeria (comprising manufacturing, mining, and utilities) accounts for a tiny proportion of economic activity (6 per cent) while the manufacturing sector contributed only 4 per cent to GDP in 2011. Electricity outages, transport bottlenecks, crime and corruption are the key factors constituting impediments to firm growth. Nigerian manufacturing firms suffer acute shortages of infrastructure such as good roads, portable water, and, in particular, power supply. Electricity outages and voltage fluctuations are commonplace, causing damage to 31 machinery and equipment. Consequently, most firms rely on self-supply of electricity by using generators, which escalates their costs of production and erodes their competitiveness relative to foreign firms. The economic transformation agenda, otherwise known as Nigeria Vision 20: 2020, sets the direction for the current industrial policy in Nigeria. The industrialization strategy aims to achieve global competitiveness for specific processed and manufactured goods by linking industrial activity with primary sector activity, domestic and foreign trade, and service activity. Nigeria is also pursuing a cluster development strategy for manufacturing and processing industries and selected export materials. In this regard, the economic transformation document highlights a number of issues to be addressed, including the development of industrial parks, industrial clusters and enterprise zones and incubator facilities.

5.4 Recommendations

Haven completed the study, the researcher recommends that:

The central bank of Nigeria should banned commercial banks from issuing tellers for the importation of selected products that are produced in the country
There should be a national re-branding campaign to educate the masses on the important of patronizing made in Nigeria goods.
The federal government should formulate polices that banned importation of some essential goods that are produce in the country to encourage local manufactures.
The local manufactures should improve on the standard of their product in terms of quality and taste.
The government should come with programs to enhance the growth of local manufactures in terms of financing.