APPRAISAL OF THE ROLE OF THE WORLD BANK IN THE INDUSTRIAL DEVELOPMENT OF NIGERIA
INDUSTRIAL DEVELOPMENT OF NIGERIA – THE ROLE OF THE WORLD BANK
INTRODUCTION To place an order for the Complete Project Material, pay N5,000 to GTBank (Guaranty Trust Bank) Account Name – Chudi-Oji Chukwuka Then text the name of the Project topic, email address and your names to 08060565721.
Nigeria, forty-six years after the attainment of political independence is not yet economically independent. But economic independence as we know is a necessary pre-requisite to political freedom. As our finance Minister aptly puts it, “Now that the political independence of Nigeria has been assured, the vital concern is to secure the rapid development of the machinery to enable us to assume our responsibilities to safeguard our economic freedom”.
Since the era of the oil boom in the 1970’s, Nigeria has been a victim of monolithic economy and since then has been enjoying what is termed as “petro-Naira” without adequately evolving a sound policy that will put the nation’s economy on a firm foundation for steady growth.
Though, the country recognised the importance of establishing industries to ensure a diversified economy, the mineral oil assumed greater and greater prominence over the year as a crucial production and dynamizing sector. This was to the detriment of the other sectors of the economy, and given the fact that the revenue got from it was not properly appropriated but on white elephant projects.
This phenomenon has been described by the World Bank as the “Outch disease”. The oil glut in 1978 fired the first warning shot, while the weakening of the international oil market clearly spelt out the consequence of total dependence on one commodity – oil. The declining extent of earnings from crude oil arising from the fall of prices plunged the Nigerian economy into a crises of recession. Nigerian’s production was pegged by OPEC just as prices tumbled from a height of about 840 per barrel in 1981/82 to less than $15 in 1957, export earning collapsed from $23 billion to around $6 billion.
There was need therefore to augment foreign exchange earnings from oil through an aggressive expansion of non-oil export. This will lead us to best and effective way of solving the problem; this solution is “industrialization” which stands as the main emphasis in this research work which is not justified just because it ensures diversification of the economy, but because it also accelerates the economic development of a country.
In fact, the basic premise is that, if a country wishes to accelerate the overall rate of economic development, it must have manufacturing production arising faster than the overall rate of growth of the Gross National Product (GNP) and this has to be reflected in an increasing dominating role of manufacturing industry in the total economy. So important are industries that they have become the major indices for classification of nations in terms of levels of development. No wonder then why industrialization forms the centre prices of the development programmes of most third world nations (including Nigeria).
Generally, therefore, the transformation of an economy from pre-modern to modern depends on the development of the manufacturing sector.
On the other hand, Finance is the life blood of every business organization. Every business enterprise whether big or small, newly formed or an already existing one requires funds without which it cannot operate. In other words, there can be no investment without funds and it is a vital ingredient for the establishment and running of industries. Capital formation is basically a two phased process which includes savings and investment in which banks (including the World Bank) stands in between. The traditional macro-economic role of banks is “financial Intermediation”, which entails the mobilization of funds from savers and then transfers them as credit to investors.
It is basically based on this that we shall examine the extent of the bank’s (World Bank’s ) contributions as well as the roles they are supposed to play in the industrial development of Nigeria. We shall also analyse the necessity of industrialization and the factors that have impeded the nation’s rapid industrial development in exception of inadequate finance.
In conclusion, the researcher suggests remedies and recommendations to problems encountered in the process of industrialization as well as suggesting solutions for enhancing active participation of the bank to rapid industrialization of the country.
1.2 STATEMENT OF THE PROBLEM
That industrialization of a truth is the catalyst of economic prosperity for many nations in the twentieth century can no longer be disputed. It has been a much emphasised development strategy in Nigeria as in many other countries even see industrialization as providing the basic means of overcoming their economic backwardness.
While the exact relationship between industrialization and economic development has been a controversial issue in the economic literature, not many economists doubt the capacity of industry for rapid growth and in turning sharply the table of economic progress.
To the less developed countries like ours, the high level of industrialization and rapid economic growth of the advanced countries taken account of and are making frantic efforts towards attaining it too, through several industrial policies aimed at encouraging both individuals and the public/government to establish industries. However, the greatest obstacle to rapid industrial development in Nigeria has been identified to be; inadequate finance. Abdulkadir, (1984) pointedly puts it that “if the country’s industrial aspirations are to be achieved, the provision of adequate finance should be accorded high priority. But regrettably, Nigerian industrialists have been badly starved of this very important ingredient for both the establishment and maintenance of industry(ies).
This exists in the following forms:
i) Inadequate initial capital for take off.
ii) Inadequate funds for maintaining existing industries.
iii) Insufficient funds for expansion.
The lack of funds by industrialists has greatly denied the nation of many opportunities of achieving development industrially or industrialization which it (Nigeria) has always longed, hoped and craved for. Considering the enormous importance attached to industrialization in our economic development, any problem militating against its achievement should be of interest to us. the question therefore is: To what extent has the World Bank helped?
1.3 PURPOSE OF STUDY
Industrialization has come to be seen as the necessary route to the economic and social development of any nation without which it remains stagnant in the fast-passed, technology oriented world of today. A country’s wealth, development and advancement is normally judged by its level of industrialization.
It has generally been acknowledged that finance is an indispensable tool for industrial development of any nation. Considering the pivotal position of banks in the financial system, this research work is set out to examine the contribution of the World Bank to the industrial development of Nigeria. Thus, this project is aimed at finding out:
i. The extent of World Bank contributions to the establishment and of industries.
ii. What problems do the World Bank encounter in industrial financing.
iii. How far has the Nigerian State’s industrial sector advanced?
iv. What factors are necessary for industrial development?
v. Why has Nigeria not industrialized more than it has done?
This research will then explore possible solutions to the above problems which when implemented, will set the country on the fast lane of industrialization.
1.4 NEED FOR THE STUDY
The realization of the consequences of total dependence n one commodity – oil, has turned the country’s attention to the only one possible way out (i.e industrialization). During the early 1970’s which is the oil boom era, the economy experienced a high inflow of foreign exchange which brought much money into the pockets of people owing to the various salary awards/adjustments at the time. This increased revenue rather than be used in the importation of almost everything used in the country. This ensures capital flight and before we knew it, we were back to square one with the gains of the oil boom era, lost to indiscriminate white elephant projects, when the price of oil latter fell, the country found it difficult to adjust its expenditure pattern but rather, went borrowing to maintain or sustain its current level of finance, outlets. This greatly hampered the nation’s industrial development as it has to grapple with many other sectors for a share of government’s lean purse.
Interest in the amelioration of this problem of inadequate finance to industries stems from the realization of the fact that as industrialization is the engine of any economy so is finance the lifeblood of industrial development.
In choosing this topic therefore, I believe if effectively and successfully carried out, will lead to greater and adequate contribution by the World Bank towards industrial development of Nigeria.
The government being the over all guardian of the economy will a sound and adequate policy both for the World Bank and the industrialists which will set the nation’s wheel on the path of industrial development. This study is obvious if we should realize that it will enable us hasten our industrial development.
1.5 RESEARCH HYPOTHESES
In order to achieve the objectives of this research, the researcher makes the following hypotheses:
Hoi The World Bank has not adequately contributed to the industrial development of Nigeria.
Hi The World Bank has adequately contributed to the industrial development of Nigeria.
1.6 SCOPE AND DELIMITATIONS OF STUDY
It is important to point out that this work is not exhaustive and no attempt is made to assert so. World Bank contributions and industrial development are two topics that cannot be effectively treated within the limited time frame. For this reason therefore, and also owing to the scanty data available, given that the sector does not receive loans from the World Bank on a yearly basis, the researcher concentrates mainly on the bank’s financial contributions to the sectors (industrial sector) development within the period of 1965 1995.
However, the data for the analysis were derived from the World Bank and CBN publications.
1.7 LIMITATIONS OF THE STUDY
Many obstacles arose in the course of this research. They include:
i. Time: This served as a major constrain as the work ad to be completed in good time so as to facilitate its assessment and grading. It should be noted that the topic for this work was approved at a time the first semester exams were by the corner. This constrained the researcher’s ability to make a thorough material hunt.
ii. Another constrain was distance to source of materials (i.e. C.B.N and World Bank Head Offices at Abuja), which would require a full day’s journey to reach.
This is coupled with the skyrocketed cost of transportation owing to scarcity of petrol could not allow the researcher make enough visits to the above – named establishments.
iii. Bureaucratic bottleneck in the public service is yet another constrain. A couple of visits to the Ministry of Finance, Abuja, proved abortive. Even after entering roughly ten (10) offices nothing was got as they would either tell you: “the Director is not on seat”, “he has gone for a meeting, check back in about half an hour from now” only to come back to be told to come back tomorrow. Some even treat you as though you were not a human being.
To overcome these, I had to carve out time out of no time to make a trip to Abuja (that was after my first semester exams) where is shuttled between the CBN library, Federal Ministry of Finance and the work World Bank Offices.
Financially, the researcher had to sacrifice a part of the money for his stay in school for the second semester in order to accomplish/attain the Abuja trip.
1.8 THEORETICAL FRAMEWORK
According to Gerschenkron, all nations were once backward.
To move from the traditional level of economic backwardness to modern industrial economy required a shard break with the pest or a “great spurt” of industrialization –many Western countries like the United States, Germany,
Great Britain and France experienced Changes at roughly the same time an achieved partly industrialization during the first half of the 19th Century”. This he noted that he advanced nations started their first stage of development with the factory/private firm. While it (the great spurt) will be provided by banks in what he described as moderately backward states and government in extreme backward states.
Several tensions between economics backwardness and the urgency of development in many directions. According to Geschenkron, for industrialization, as put forth by Rostow. He based this view on two empirical observations first, the preconditions for industrialization that existed in England were either absent in the backward countries of Europe or existed n a very small scale – second, a big spurt of industrialization occurred even in those countries where such preconditions were not present. Gershenkron supported his view by citing the example of England that capital was supplied to the early factories in England from previously accumulated wealth or from gradually ploughing back of profits – but extremely backwards states/countries which – could not have these preconditions of industrialization were compensated by the actions of bank and government. This great spurt could be provided by the World Bank which accumulated resources from the surplus units of the world for the world’s deficit units.
1.9 DEFINITION OF TERMS
Industrial development: This refers to the rate of growths in industry and its contribution – to gross National Product (GNP) in the economy as measured by the production of goods and services.
World Bank: This is a common name used in describing the international Bank for reconstruction and development (IBRD) which was charged with the responsibility of using global backing to reconstruct post war Europe and Japan and to assist lesser developed economies everywhere
Loan: This is a fixed amount lent to a customer or borrower, for an agreed time period and on specific terms.
Monolihic Economy: This is an economy built around a particular sector while showing indifference to the other sectors.
Petro-Naira: This refers to the high revenue gotten from the sale of petroleum products as in the period of oil boom.
Oil Glut: This refers to a situation of over supply of petroleum or crude oil in the international oil market.
Diversified Economy: This is an economy but invests almost equitably in all its sectors to facilities equitable and all round growth in all ramifications of the economy.
Dutch Disease: This is a situation wherein a dramatic increase in oil revenue is not managed carefully.
To place an order for the Complete Project Material, pay N5,000 to
GTBank (Guaranty Trust Bank)
Account Name – Chudi-Oji ChukwukaAccount No – 0044157183
Then text the name of the Project topic, email address and your names to 08060565721.
2.0 REVIEW OF RELATED LITERATURE
Literature on World Bank Involvement in the Industrial development in Nigeria in particular appear source and do not come handy as most information available deals with the economy at Large
This does not imply that there were no specific allocations to the industrial sector but that presumable less allocations were made to it when compared to other sectors of the economy like agriculture on which innumerable literature exist.
Let us now look at the world bank history.
“The World bank began in July 1944, in the small town of Bretton woods, new Hampshire, in the U.S. where delegates from 44 nation met. The outcome of the world war II was then still uncertain, Europe and Japan were in ruins; Asia was struggling with colonialism and African remained under. Its sway; democracy barely existed in the developing.
The world bank in the developing world of five international organizations responsible for providing finance to countries for purpose of development and poverty reduction, and for encouraging and safe guarding international investment. The group and its affiliates are headquartered in Washington DC. Together with the separate international monetary fund. The world bank organizations are sometimes called the Bretton Woods institution, after Bretton woods, new Hampshire, where the United nations monetary and financial conference that led to their establishment took place (July 1, July 22, 1944). The bank came into formal existence on 27 December 1945 following international ratification of the Breton wood’s agreements and commenced operations on 25 June 1946. it appr its first loan on 9 May 1947 (USD 250 million) to France for post war reconstruction, in real terms the largest loan issued by the Bank to date.
Technically, the world bank is aprt of the united nations systems, but the government structure is different. Each institution in the world bank is owned by his its members, government, which subscribes to its basic share capital, with votes proportional to shareholding. Membership gives certain voting rights that are the same for all countries but there are also additional votes, which depend on financial contributions to the organizations.
As a result the world bank is controlled primarily by developed countries, while clients have almost exclusively been developing countries.
As of November 1 2004, the united state hold 16-4% of total votes Japan (7.9%) Germany 4-3% and the U.K. and France each hold 4-3%. As major decision requires 83% super majority, the US can block or veto any change, if it does not appear of it. On the issue about world bank, Another thing the world bank favours is an instrument policy for the nation. This is as a result of what the bank perceived as an absence of such a policy in Nigeria. However, the NIPC seems to be thinking in line with the world bank. Mustaphu Bello, NIPC’s executive secretary, assures that the council is already working on fashioning an actionable and enduring investment policy for Nigeria.
The world bank mission is to fight poverty and improve the living standard of people in the developing world. It provides in the developing world. It provides loan, grants and technical assistance, to help developing countries implement their poverty reduction programmes. World Bank financing is used in many different areas, such as reform of health and education sector and reconstruction of environmental and infrastructure projects including clams, Roads, and national Park. In addition to financing, the world bank Group provides advice and assistance to developing countries on almost every aspect of economic development.
The world bank asks that political measures be taken by members, for example, limit corruption or foster democracy. The institutions of the world bank group are all run by a board of 24 Executive Directors, with each director representing either one country (for the largest countries) or a group countries.
Directors are appointed by their respective government or the constituencies. By convening the banks, president has always been a European.
World bank group agencies consists of (1) The International bank for reconstruction and development (IBRD) (2) The International, finance corporation (IFC)
(3) The International Development Agency (IDA)
(4) The Multilateral investment guarantee Agency (MIGA)
(50 The International Center for Settlement of investment Disputes (ICISD).
History. The world bank through its development efforts has made a contribution to this progress with social indicators such as health and literacy being on the increase since the 11960’s, expectancy rose as high as 52 year in 1992 from a maximum of 40 years in 1960. also, infant mortality dropped to 84 per thousand as compared to 189 in 1960. see the table below:-
Nigerian social indicators.
|Population growth (%)||2.5||2-5||2-5||2.4||2.8||3.2|
|Primary school, enrolment (%)||3.6||32||37||51||104||82|
A – Per thousand like births
B – Average number of children a woman would give birth to between age of 15-49.
C – Data for period closet to specified years.
SOURCE: Social indicators of development, World Development Reports and staff estimate.
The World Bank raises must of its money on the world’s financial markets. It sells bonds and other debt securities to other banks, corporations, pension funds, insurance companies, and individuals around the world. Other sources of bank funds are capital contributions from the member countries and retained earnings. The world bank’s bonds have the highest possible investment rating, backed as they are by the callable capital of 178 member governments. Maintenance of a high credit rating also requires prudent financial policies, together with a strong portfolio of performing projects backed by timely repayments on funds loaned out.
As a matter o policy, the bank does not reschedule interest or principal payment on its loans, or participate in debt rescheduling agreements with respect to its loans. The Bank needs to maintain a solid credit rating so that it can borrow at the best intertest rates, and thus pass the savings on to its borrowers countries come to the bank for economic research, policy and technical advice, and for capital loans with the understanding that these will be repaid. The Bank is a co-operative, not a profit maximizing institution. A portion of
Against this background, the Bretton-Woods conference set up the international bank for reconstruction and development (IBRD) – Commonly called the world bank to use global backing to reconstruct post war Europe and Japan and to assist lesser developed economics everywhere. The Bretron woods conference also set up the international monetary fund at the same time. Since then, the bank has conduced studies, given expert advice and technical assistance, and less than US $300 billion in support of over 6000 project in about 140 countries. Outstanding commitments to Nigeria – where the bank is now funding 32 ongoing project are the largest in sub-saharan Africa.
Since it began over fifty years ago, the international Banking for reconstruction and development. (IBRD) has added four affiliated institutions: The International development Association (IDA). Thte International finance corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the centre for settlement of Investment disputes (ICSID).
The Bank founded in 1944 has been described as the single largest provider of development loans to middle income developing countries and a major catalyst of similar financing from other sources. The IBRD funds itself primarily by borrowing on international capital markets”1
On ownership, the world bank has been described as a “global co-operative owned by the member countries. The size of country’s economy relative to hat of the world. To date 178 nation are members of the world bank., each member country is represented by a governor and an alternative governor – the Board of governors which meets once a year- Jointly with board of Executive directors.
The bank’s 24 Executive Director – are accountable for the conduct of the general operation of the bank, with the president of the Bank serving as Chairman of the Board. According to the bank’s charter, know as the Article of Agreement the five Largest Share holders (The united states, Japan, Germany, France and the United Kingdom), each appoint one executive Directors. The other countries are grouped into 19 constituencies, representing over 61 percent voting power. It taked 85 percent of the shares to change the article of Agreement, but virtually all other maters are decided by majority vote”. The Bank has to some extent ameliorated the lot to many in the country by reducing poverty and raising living standard than during any other comparable period in
IBRD’S net income is allocated to its reserve to ensure a high degree of financial protection in the world capital market. although IBRD does not pay dividends to its members, a portion of net income has been used to support commitment fee and interest rate reduction.
Since the middle 1980’s records have it that the bank has focused its development assistance on reducing poverty and raising the living standard of the poor. To this end, it has increasingly supported programmes designed to provide basic social services to help build the human capital o the poor, and to empower the poor to reap the gains of economics growth. This was the case of the structural adjustment program/SAP) which came to be with the blessing of the IMF but without any of its money, the government announced it own structural adjustment programme (SAP) to the nation on August 27, 1986. an instead of borrowing from the IMf, the government took an adjustment loan from the world bank for $452 million, most of which was used to increase the supply of foreign exchange to the private sector, thereby helping stabilities the exchange rate throughout 1987. the bank’s assistance has been sought not Just only at the federal level but also for individual states. The bank’s assistance ahs been widely spread but with little emphasis on the industrial sector of the loans the world bank give to the country dating from 1958 till date, records has it that only six in all went to the industrials sector while greater emphasis (ie. In the area of loan) went to the agricultural sector. Based on this, the world bank can be seen as believing agriculture to be the main vehicle to development.
But according to ‘Andrew Reed; “many experts believe that industrialization can solve the economic problems of the developing nation. They pointed out that Japan and the Soviet Union were back ward until large – scale industrialization to place is it out possible to repent the Japanese, miracle in the poor countries today? A number of countries, notably Taiwan, South-Korea, Singapore and Malaysia, are rapidly expending their manufacturing industries with the help of foreign investment”. According to Echeeom Chinedum, B. it has been generally acknowledged by many renowned economist and a lot of other authorities that eh fastest way for the country to riggle out of this monolithic economy and achieve the long dreamed diversification of her economic base is through industrialization. Apart from ensuring a diversified economy, industrialization also accelerates economic development”.
Professor Daku (then Dr. Diaku) in his Book “Industrial Finance in Nigeria” Like many less developed countries has accepted industrialization as an inevitable premise for rapid economic development”.
In his own contribution, Jose expressed the view that “the attainment of political independence brought the reign of power into the hands of Nigerians who were eager to change the industrial landscape of the nation, since the development of manufacturing industry was seen as being synonymous with national power and prestige”. Alhaja lawal identified industrialization as the true indox of a nation’s development. According to him industrialization generates employment, contributes significantly to GDP, improve the standard of living and social basis for growth. While the development of industries is important from the economic point of view of development, setting up and operating industries involves enormous finance that can hardly be provided by the industries coupled with this is the fact that industrialization limited access to funds. In supporting this view, Diaku has this to say: in any Industrialization process, the main handicap is the inadequacy of financial institutions and techniques for channeling domestic savings and foreign financial assistance into productive investment” He added that medium and large scale industries have more access to external source of finance, especially from backs and development finance institutions, for laons and equity finance.
But on the other hand, the small scale industries which are of enormous importance are abdly hit. According to him, evidence indicate that apart from acute shortage of financial and managerial skills and poor financial management, capital remains the source of great concern to the entrepreneur in this sector. To this end.
Therefore, finance is the life-blood of every organization. Against this back ground as stated earlier on, the world Bank mobilizes financial resources from the surplus units of the world economy and channels them to the deficit units through the extension of loans, though given the level of our development industrially, the world bank may not be scored well in the work done so far.
2.1 DEFINITION OF INDUSTRIALIZATION:
For adequate understanding of the issues involved in this study, it is imperative to review what essentially. Constitutes industrialization. Though a generally accepted definition is not available but it (industrialization) has been described as the engine of economic growth. To began with a tautology, industrialization is the process by which a non-industrialization economy be comes an industrialized one. Further more, industrialization may be defined as the process by which industries are established, replicated, and sustained with a view to increasing the share of industrial output while also enhancing the national productive capacity to process raw materials and to manufacture both consumption and capital goods.
Schatz defined industrialization as the organization of production in a manner characterized by specialization which arises from the application of technology and mechanical power to aid human efforts. Industrialization, therefore, is more than the secular growth or the establishment of industries and the modernization of existing ones.
Therefore, for the purpose of this study, lie shall define industrialization in the contact of a developing country as a massive re-orientation of all available resources, both human and material, towards developing the industrials technology that is suitable for the local environment in an endeavour to make the country economically self reliant in the manufacturing sector.
However, one major yardstick has been set for the assessment of industrial development. For an economy to qualify, as industrial as industrial, industrial output must account for at least, 25% of the gross domestic product (GNP), a minimum of 60% of her total industrial output musty be contributed by manufacturing and no less than 10% of her total population must be employed in industry.
Thte growth of industrialization in any country may also be investigated through he study of such vital indces as growth of value added, capital formation in the sector, coverage of products manufactured, and change in the trade structure etc.
2.2 importance of industrialization
There has been a lively debate on the role of industrialization in the process of economic development. Attempt have been made to make a case for rapid Industrialization as increasing the rate of economic development for developing nations. Some of the reasons put forward have been rigorously criticized. However, we do not need to debate here, but suffice it to say that the argument is not that industrialization does not increase the rate of economic development but that it is not the only method of achieving economic development. Therefore, nothing prevents efforts being devoted to it as many developing nations are doing.
In the Nigerian economy, the goal of industrialization ahs been pursued vigorously for many years by the various governments or regimes, using various policy tools which includes. Tax incentives, provision of capital funds to businesses, the establishment of industrial estates, and direct government investment. Either alone or in partnership with foreign firms.
In identifying the importance of industrialization, Alhaji Mukhter Ahmed observed that the industrial development in Nigeria was not motivated by specific sets of institutional forces, but by the speculative notion of the promise, which industrialization holds for rapid economic growth. The major reasons for a need for industrialization the Nigeria economy as well as other less developing countries (IDC) may therefore, be summarized as follows:-
Industrialization is a means for diversifying the economic base, promoting economic self-reliance and strengthening the balance of payment. Manufacturing is seen as having the greatest capacity and potentials to generate economics of scales and positive external ties that induces real growth as was in the case if the industrial revolution of England.
Industry enhances high linkages and sprinkle effects on other sectors of the economy and provides room for greater non-traditional employment out side agriculture.
Industrialization also enhances the search for local raw materials as it leads to the greater need of local raw material sourcing. To added to this, the value of locally produced goods and the income level of the generality of the population is increased.
All these invariably lead to economic independence and it has been stressed that a nation which is economically less dependent in other nations will most certainly avoid being politically undermined; because when severe strains occur in the relationship between nations, economic sanction come in handy as a tool of political subvention. It is therefore, in the light of the above, that various Nigerian governments as well as governments of other less developed or developing countries have made serious efforts towards achieving an industrialized economy.
2.3 industrialization strategies
Development models and strategies have been expanded to emphasize the role of industrialization as an important engine for growth- Economic development of any nation can thus be accelerated through rapid industrialization strategies are briefly discussed below:-
2.3.1 PROCESSING APPROACH STRATEGY
This is usually the first step. It entails for export. This strategy Marley improves the quality of the expectable product in their raw form through grading and enhancing their potency and chemical or mineral content. In return, the producing units earn higher returns for their output.
The handling and processing activities provide additional employment opportunities as well. at this stage of industrialization, the economy only established market contracts with the rest o the world. In the process, the producing units get exposed to new chemicals to reduce wastage and mobility. The experience thus gained from the processing of raw materials should enhance the country’s ability to start actual manufacturing in the future.
2.3.2 IMPORT SUBSTITUTION:
The second strategy is the import substitution approach. This approach is sometime referred to as the inward looking strategy of industrialization.
Most developing countries tart their manufacturing activities through import substitution of the most simplest firm of imported consumer item.-building up over time with increasing sophistication and consumer preferences.
The populatily of this approach lies in the fact that it involves a process fo industrialization which is tailord to the potential as well as know requirements of ready made market, and in its early stages, is usually limited to the replacement of imports of non outrable consumer goods which can be produced with unskilled and semi-skilled labour and little or not application of advanced technological methods.
2.3.3 EXPORT PROMOTION:
This is an export oriented or “outward looking” approach which presupposes the existence of comparative advantage to the country in he production of certain manufacture goods and the existence of querseas markets for the product.
This approach may also require the provision of generous export subsidies and the existence of concessionary commercial policies in the advanced industrial countries which often cannot be taken for granted.
2.3.4: semblance approach:
Apart form the previously mentioned strategies, a forth approach of industrialization strategy is also beginning to emerge amongst newly industrialization- nations.
This new approach may be termed the semblance approach’ or better put” the limitation syndrome” this approach is now perfected by countries such as: Taiwan, Kore a, Hong Kang, India, Israel, etc. this approach is reached when a country starts high technology manufacturing, mainly in intermediate inputs and capital goods and can perhaps be considered to be reached when a country must have built up a strong base of highly skilled, but relatively cheap labour force.
However, the above strategies for industrialization are not intended to be mutually exclusive. Infact, it is possible and perhaps even advisable for a country to start its process of industrialization via the processing approach and then progress graduate to the higher stages of manufacturing before it changes over to adopt export oriented outward looking” strategy. Whichever approach through increased import and substitution graduate, or sequence or country adopts, other factors should be considered too. These relates to the kind of industries which should be established in the light of a country’s resources endowment. It is at this Junction that the idea of absolute and comparative advantage comes in.
A country might industrialized by starting with industries which are based on a country’s own natual resource endowment as in the extraction of gold in south Africa’s gold mines so that through its linkage effect, the economy might be profited. They could also establish industries which are absed on the use of processed or finished materials. Some of which may be imported.
2.4 SIZES OF INDUSTRIES IN NIGERIA:
Industries world over can be classified into three. The predominant size of industry in any economy depends mostly on the stage of development in which the economy exists. The less developed countries are characterised by small and medium scale enterprises with little large scale industries. But where they have large scale industries which are big in number, they are owned by foreign countries. Examples are: Venezuela and Zambia where a large foreign owned mining sector are extremely small.
In Nigeria, about 60% of the industries are under the small scale industries and are being runned on subsistence basis only.
Small scale industries exists where one starts and runs an enterprise on a modest level and produce little output because he employ little amounts of factors of production particularly capital. Conversely, large scale industries involves the expansion of existing small scale industries to increase output, employing large amount of factors of production ore especially, capital. Establishment of numerous large scale industries indicate industrialization.
2.5 STAGE OF INDUSTRIAL DEVELOPMENT IN
As stated earlier on, industrialization has been seen as responsible for the economic development of the industrial nations in the world today. Nigeria has also taken steps in this direction believing it to be the prime mover of the economy.
Foreign industrialists were initially affected on favourable terms to transform the nation’s economy. But, their interest were mainly in the area of mining. The nation’s industrialization in the beginning therefore commented with the industries and moved on to semi-processing of primary raw materials for exports to metropolitan industries of Europe. This was under the colonialism of Britain and other Europe countries as an agricultural raw materials based for their own industrial set up.
During the post independence period Nigeria’s industrialization efforts entailed the articulation of medium term plan (5 years) which identifies policy objectives and specifies targets to be achieved by the end of each plan period. The time frame of these plans did not actually give enough room for the actualization of the plans before they be phase out and replaced by others or by new ones. This fact might therefore be said to be responsible for the adoption of ten years time frame but including two, two years appraisal. As these plan succeeds each other, the country pursued a hybrid or combination of all the industrialization approaches earlier on discussed in this chapter laying more emphasis on employing more of import substitution. This arose from the fact that as Nigeria approaches independence, nationalist politicians saw as one and the same power, prestige, and the development of manufacturing industries. This explains why the industrial sector was given a high priority in the nation’s first development plan of 1962-68.
After the civil war 91967 – 1970), the government came up with the second national development plan (NDP) geared towards the rehabilitation and reconstruction of the war ravaged areas realizing that the manufacturing sector which wsa highly dependent on impost could not match the designed projects. This was from 1970 – 75.
The third development plan evolved with the emergence boom in the oil sector which catapulated the taste of Nigerians to a very high level such that even the poorest in the country demands, the best of all he wants. (remember demand is the desire for a commodity bucked by purchasing power). This lead to fundamental structure changes in the pattern of production and consumption in the economy. This plain therefore, was directed at addressing a purposeful drive of import substitution of these wanted items. It also targeted a long list of heavy industrial complexes like the Iron and petrochemical, sugar estates, expansion of cement plants and refineries, commercial vchicle assembly plants etc.
However, due to constraints of executive capacity and the relative weakness of inter –industrial linkages within the economy and also due to the game of international politics, none of the complexs could take off, with the result that the economy’s dependence on imported in out has come even more pronounced.
The fourth national development plan of (1980 -85) followed the import substitution way, but lays greater emphasis on industries that will rely on local resources. Thereby reducing the sector’s dependence, on imported inputs from the lastly mentioned development plan till date. The manufacturing sector has been projected as one with highest growth potentials (at 5.8% per year). In any case, it is the sector that can contribute most effectively towards the desired goals of industrialization.
2.6 THE PROBLEMS OF INDUSTRIALISTS AND INDUSTRIALIZATION IN NIGERIA
Nigeria as an un-industrialized nation has engaged itself in industrialization effort dating from the post independence era. Adopting strategies that would launch the country unto the platform of industrialization, which so far has remained for Nigeria a admired object by a cripple that he cannot grab. In the light of this, this part will try to identify the factors that has so far constituted obstacle to the industrialization, as well s to industrialization in general.
The problems of industrialization in this country can be summarized as:
Financial, managerial, technical and commercial. These problems limit the industrialists’ potential contribution to the economy. The financial contribution evolves primarily from the entrepreneurs. Own limited capital and inability to tap maximum benefit from the resources of the organized financial sector. On the other hand the management problems of entrepreneurs limited education and training as well as mobility ot purchase expert advice. On the other hand, technical problems arise from limited access to modern equipment and knowledge of project appraisal. The commercial problem consists of their inability to organize market surveys and distribution channels of their products.
Of all these problems, finance has been identified as the major obstacle to the industrializes. Money ensures the viability, continuity and development of the industrial sector. But its non-availability or insufficiently of it has over the years made investors turn to the bank who are the custodians of financial assistance. This is not limited to the lcoa, banks only, but to the world bank as well who grants credit both to the government and individual of the country through their various agencies like the “Nigerian industrial development bank” (NIDB) The NIDB was established in 1964, largely to promote medium and long term finance to Nigeria industries. The federal government is the principal financier of the bank and also serve as a channel through which the world bank transfer credit to beneficiaries).
Unfortunately, he bank due to one reason or the other, have not been able to meet these financial needs of the industrial sector. This has really hampered the nation’s industrial development. However the inadequacy of capital is not the only problem of the sector but need also exists for a proper provision of better technical and managerial skills.
2.7 PROSPECTS FOR THE NIGERIA INDUSTRIAL DEVELOPMENT:
Haven analysed the industrialization experience of Nigeria so far, and the attending problems, we shall now look at the future and what it holds for the country’s industrialization needs.
Notwithstanding the bad experience Nigerian has undergone and the not – too – good present stage of industrialization, Nigeria still ahs a very good future prospect. Given the high stock of agricultural, forest resources and minerals including iron ore and petroleum etc. the country may be said to posses all it takes for a smooth industrial take off. The question may arise why can Nigeria not industrialize when Japan that is today an industrialized nation imports all its petroleum and almost all its wood. The only major resource of Japan is her trained and dedicated manpower, yet Japan is today an industrial super-power. Apart from her resource endowments, Nigerian is also blessed with a large market for the sale of its industrial products.
However despite the resent of the above-named resources, other influence industrialization. They include:
(i) The political stability and national unity are essential factor for a continues process of rapid industrialization.
(ii) The leadership under a generally accepted political philosophy commands the respect and co-operation of the masses and so enhance labour attitude to work (Democracy).
The government and its people must be motivated by common experience of any stated development –objectives in the interest of the country.
SUMMARY, RECOMMENDATION AND CONCLUSION
Following the time of though of this work, we have a large extent, attempted to evaluate the contributions of the World Bank to industrial development in Nigeria.
The objective was to find the extent to which World Bank has contributed to the establishment and expansion of industries with the provision of finance, which are in most cases, short in supply. In this regard, the hypotheses were that the World Bank has not adequately contributed to the industrial development of Nigeria. To establish this relationship, a number of tests were run which at the end proved that the World Bank has not contributed adequately to the nation’s industrial development. Refer to chapter four.
However, at the end of the study, the follow ing observations wee made;
- The World Bank is agriculturally biased in the granting of its lan while giving less attention to the industrial sector.
- Industries are more constrained by inadequate funds. The problem stems from the fact that most of their initial capital are raised personally and therefore, found – inadequate.
- At the establishment of industries, factors like managerial and technical skills are also needed for its continuity.
- Loans when sectioned, most at times gets disbursed in part and not in full. This has been a serious hindrance to he ful actualised plans.
- The inadequacy o f funds prevents industries from producing to full capacity.
dating back to the times of independence, Nigeria has been tirelessly seeking economic development by industrialising. However, this dream have for long, remained a dream an an admired object by a cripple which it cannot grab unless adequate arrangements are first make to put necessary machineries in motion for such development.
In view of this, therefore, the following recommendations are proposed:
- The World Bank should be ready to aid Nigerian industrialisation along Nigeria’s line of development and not a total shift to accepting models which worked elsewhere given their environment and circumstance which differs from place to place.
- There is also the need for proper allocation and management of existing industries so as to ensure proper and positive linkage effects on the economy.
- Awareness also need to be made for people or investors and industrialisation to be aware of opportunities available whereby they can obtain credit form the World Bank.
- The general and common problem faced by a developing economy like ours – inadequate infrastructure should be tackled by the government – efficient prodction and distribution need reliable supply of electricity, water an good transportation network. The presence of these lessens the burden of industrialists and thus enhances their ability to service their debt obligations.
- The Nigeria industrialist could as well assist in many waste to achieving the nation’s long goal of industrialisation – through better organisation of their businesses and by preparing good feasibility studies and keeping proper books of accounts. This applies more specifically to the small scale industries who seem more favoured by the world Bank who see based on experience government’s king size industrial dreams as waste-pipes through which scarce resources are lavished. This is concretised by the millions of naira worth of Ajaokuta steel complex that has for long refused to mature.
An effect so far has been made in this to concretise the fact hat the World Bank operations are an essential ingredient for a proper and sound economic transformation. Thus, industrialisation is the principal solution to the complex problems of Nigeria as well as other under-developed countries and it is the main key to economic development.
The federal government through its monetary authorities should endeavour in collaboration with he nation’s industrialist to make the Nigerian industrial landscape attractive for World Bank patronage which undoubtedly would transform our state of underdevelopment. The local banks should also be encouraged and coursed if need to be patronise the industrial sector by granting much more credit/loans to ti as a supplementary effort to that of the World Bank. To do this, their lending criteria as they relate to collateral security and interest rates should be reviewed with greater emphasis on the evaluation of the viability of the project.
It has been a worthwhile venture trying to find and analyse the extent the World Bank has contributed to Nigeria’s industrial development with regard to their provision of funds as well as the obstacles that hinder their involvement in carrying out such function.
However, the researcher cannot claim to have exhaustively dealt with the subject matte “The World bank” and “Industrial development” Considering the versatility of the two topics.
The researcher is meant therefore to elicit reaction and encourage others to undertake similar research on the numerous hindrances to the nation’s industrial development.
INDUSTRIAL DEVELOPMENT OF NIGERIA – THE ROLE OF THE WORLD BANKTo place an order for the Complete Project Material, pay N5,000 to GTBank (Guaranty Trust Bank) Account Name – Chudi-Oji Chukwuka Account No – 0044157183 Then text the name of the Project topic, email address and your names to 08060565721.