POLICIES OF IMPORT SUBSTITUTION IN NIGERIA

Introduction

In layman’s terms, import substitution meant substituting domestic production for international imports. “Reducing dependency on imported commodities by substituting locally produced ones” was the goal” (Osei-Hwedie, 2005, p1). Imported commodities from industrialized economies were to be skipped in favor of those produced domestically under the import substitution industrialization strategy. The import substitution industrialization(ISI) main goal was to help the local market develop to the point of self-sufficiency in the manufacturing of commodities that were suited for and dictated by the local market. The infant industry concept was at the heart of the majority of ISI policies, in which local industries were forced to function under protectionism in order to develop inwards.

The formation of global markets and the worldwide competitiveness of entrepreneurial structures does not bring benefits in terms of optimizing production and distribution processes, and it is fraught with dangers, one of which is the question of ensuring national economic security. It expands as highly competitive foreign corporations enter domestic markets, displacing domestic manufacturing.

Long-term, the country’s reliance on imports develops, which, in the event that global economic relations are severed, could result in an acute deficit with bad social effects. As a result, import substitution is becoming more relevant as a means of bolstering national economic security in the face of globalization. The goal of this essay is to examine current import substitution policies as a key component of Nigeria’s growth plans. Theoretical and practical arguments in favor of import substitution strategies are explained. What were the flaws in these policies in practice, and why did the results often fall short of expectations? What are the differences between export promotion and import substitution strategies?

Nigeria’s agricultural past

In the context of Nigeria’s history, the country’s current demand for agricultural imports is relatively young. In the early twentieth century, Nigeria’s principal duty as a British Empire colony was to supply raw materials for processing in the United Kingdom, as well as to provide a market for British manufactured goods. Cocoa, palm goods, and groundnuts accounted for 70% of all exports from Nigeria during the colonial era. Even after independence in 1960, Nigeria’s status as an agricultural powerhouse remained. Export crops were the country’s principal foreign exchange earner between 1962 and 1968. In addition, the country dominated the globe in palm oil exports and outstripped both the US and Argentina in groundnut exports. Despite relying on subsistence agricultural techniques at the time, Nigeria provided 95 percent of its own food needs, making it more than just a significant exporter.

Agricultural dominance could have been maintained if investment had not shifted disproportionately to oil in the 1970s. With the Nigerian Civil War causing significant costs and world oil prices skyrocketing, mining and exporting crude oil became Nigeria’s most important economic activity and financial source, allowing the country to rebuild following the civil war.

The oil boom resulted in labor market distortions as more people discovered that working in the oil fields was more financially rewarding than farming. Furthermore, in order to assure cheap food costs in urban areas, the government paid farmers low prices for domestic food crops, which discouraged agricultural production of not only cash crops, as well as necessary ingredients. As farmers moved to urban regions to work in the oil industry in the 1970s, Nigeria’s agricultural land use percentage continued to fall, in 1980, the figure was 51.8 percent., down from 70.1 percent in 1969, before recovering again (today the figure is above 75 percent).

Despite its vast agricultural potential, Nigeria has become increasingly reliant on oil. Petroleum accounted for 91.2 percent of the country’s exports in 2014. Because of this reliance, variations in the price of oil cause considerable economic instability. Furthermore, oil wealth benefits only a small minority of Nigerians. Despite a rapidly rising economy and a reputation as one of Africa’s richest countries, a 2010 government study Nigerians spend 60.9 percent of their income on food than $1.25 per day, up from 54.7 percent in 2004.

Nigeria has been a net food importer since 1974 due to the decline of the agriculture economy and the expanding population. Nigeria, which was formerly able to feed its population, currently ranks as the world’s 90th most food secure country, according to the Economist Intelligence Unit, and spends billions of dollars each year on food imports, particularly basics such as wheat, rice, sugar, and fish. Agriculture, however, employs two-thirds of Nigeria’s workers and could be the key to both economic stability and poverty alleviation.

Nonetheless, Nigerian agriculture need modernization. Nigerian farmers face a slew of issues that stymie output, including an over-reliance on rain-fed irrigation, land holding limits, and poor infrastructure that prevents access to markets. Import substitution policies, in theory, would allow both the private and public sectors to overcome these challenges. However, in the past, such measures have had negative consequences for Nigerian agriculture.

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