After 63 years of independence, Nigeria is still heavily reliant on imports, which is impeding efforts to boost industrialization. The depreciation of the currency against the dollar, with rates now above N1,000/$ on the parallel market, has made it challenging for manufacturing businesses to thrive. Experts argue that the historical strength of the naira relative to the dollar encouraged import dependence, hindering the growth of the manufacturing sector. The lack of implementation and continuity of industrialization policies over the years has further slowed progress in this regard.
Key Points:
- Nigeria’s heavy reliance on imports is a significant obstacle to its industrialization efforts, despite 63 years of independence.
- The depreciation of the naira against the dollar, with rates now exceeding N1,000/$ on the parallel market, has created difficulties for manufacturing businesses.
- Historically, the strength of the naira relative to the dollar encouraged import dependence, which hindered the growth of the manufacturing sector.
- The lack of consistent implementation of industrialization policies over the years has contributed to the slow progress in Nigeria’s industrialization efforts.
- The National Bureau of Statistics (NBS) reports that growth in the manufacturing sector slowed to 2.2 percent in the second quarter of 2023, compared to 7.3 percent in the same period of 2010.
- Nigeria’s imports surged by 678.1 percent to N25.6 trillion in 2022 from N3.29 trillion in 2008, according to the NBS.
- The floating of the naira and subsequent depreciation increased the official exchange rate from N463.38/$ on June 9 to N755.08/$ as of September 26.
- The high cost of dollars and the implementation of a 7.5 percent value-added tax on diesel imports have driven up pump prices, exacerbating inflation.
- The number of registered manufacturing firms with the Manufacturers Association of Nigeria (MAN) dropped from 4,850 in the early 1980s to 2,000 in 2010.
- Over the period from 2017 to 2022, more than 50 manufacturing companies have shut down, including well-known names like Unilever and GlaxoSmithKline.
Analysis: Nigeria’s over-reliance on imports has become a significant barrier to the country’s efforts to industrialize and diversify its economy. The historic trend of import dependence, combined with currency depreciation, has created a challenging environment for the manufacturing sector. The lack of consistent policy implementation and the discontinuity of industrialization efforts have further hindered progress. To overcome this, Nigeria will need to implement a combination of stable economic policies, investment in local industries, and strategies to promote self-sufficiency in key sectors.
