Globalization and the Nigerian Manufacturing Sector

Erumebor Rume Wilson

Student at the Department of Economics, Delta State University, Abraka, Delta State, Nigeria
Email: erumebor@yahoo.com, wilson@valuefronteira.com

There have been gains and benefits from increased privatization, globalization in one aspect
border transaction and massive flow of undermine growth in the manufacturing sector in
investment, technology and information among Nigeria as it exposes local firms and industries to
countries. Many other countries have however competition from global corporation who often
been faced with enormous challenges of partaking have better financing, technology, advertising and
in the benefits of globalization. Such challenges market reach. With increasing breakdown of
include structural deficiencies, inefficient and barriers in developing countries including Nigeria
inappropriate economic policies and high existence as a result of globalization, industrialized nations
of corruption in the country amongst others. All have therefore taken advantages of trade
these internal problems reduce their strength and liberalization thereby seeking market to dump their
capacity to successfully compete in the global cheap manufactured goods and rendering the local
trend rather they tend to reap the negative effects industries inefficient leading to slow growth rate,
of globalization. According to the World low capacity utilization and low output of the local
Development Indicators (2007), “globalization has industries as the demand for goods produced in
created opportunities and challenges for the country decline due to cheap imported goods
developing countries. While the experience of and high cost of production faced by the
China, India, Indonesia, Thailand and some other industries. With globalization, Nigeria kept
countries have demonstrated that integration into importing everything at the expense of her own
the global economy is necessary for long term domestic industries. These problems have
growth and poverty reduction, concerns have been therefore caused firms to leave their industries
expressed over equality of opportunity and rendering many Nigerians unemployed.
unequal distribution of benefits”. Globalization is a
dual sided phenomenon which has been beneficial Trade liberalization, a major policy thrust in the
to many countries and has not helped matters in Structural Adjustment Programme (SAP) in 1986 in
the same or many other countries especially the Nigeria led to the exposure of infant local
developing countries. This is so because most industries in Nigeria to unfavourable competition
developing countries have very weak capacities to with Multi-National Corporation (MNCs). The local
take advantages of global markets as they are still industries do not have what it takes to compete
grappling with the provision of basic necessities with these multi-national corporations which have
such as roads, railways, food, and water among stronger financial base, produce better and
others. In the absence and inadequacy of these cheaper products and have a strong and efficient
basic necessities, it becomes difficult to fully utilize
managerial capacity. Trade liberalization focused
the opportunities and benefits of globalization in exclusively on import liberalization without
the developing countries even in Nigeria. sufficient attention to improving export markets
access and establishing a competitive exchange
By integrating the world into a global economy
rate to ensure that the resources freed-up in the
through trade liberalization, commercialization and

June 2010 Page 1

import–competing sector are deployed into the development of the manufacturing sector and the
export sector. This however led to increase economy as a whole.
importation of consumer goods without a
It is however realistic to stress that no meaningful
significant increase in manufactured export,
economic growth, wealth creation, employment
making the local industries especially the
manufacturing sub-sector suffer. The free inflow of generation and poverty reduction can be achieved
in any country without a robust manufacturing
cheaper goods have hindered the growth of local
sector. This therefore depicts the importance of
industries, leaving the protection of these
industries shattered as most consumers prefer the manufacturing sector in the growth of the real
sectors of the Nigerian economy as it facilitates the
cheap and better products to an expensive locally
use of human resources in the procurement of raw
produced goods due to high cost of production
and high technological deficiencies in their materials and in the production and distribution of
goods. Besides, most manufactured goods are
production processes.
easily transferable across national and
Another problem faced by the Nigerian international boundaries and as a result could
manufacturing sector in the liberalization process enhance foreign exchange earnings and balance of
is that Nigeria may be able to control how fast she payment condition of the country. The
can open her borders but cannot determine how manufacturing sector in industrialized and fast
other countries open theirs. Thus, increased trade developing countries is the driver, mover and core
barriers by developed countries have however aspect of industrialization. While manufacturing
served as an obstacle in promoting manufactured sector’s share to GDP in other developing countries
goods export in the country. such as Malaysia stood at 30.9% in 2003, 25% on the
average from 2000 to 2006 in Singapore, the
The rapid economic growth and prosperity in the
Nigerian manufacturing sector’s share of GDP is
Asian developing countries is derived from their
declining and is also a single digit percentage of
ability to enhance manufactured exports and GDP. As reported in Vanguard Newspaper on July
industrialization and produce goods in which they
10, 2008, “Textile industry has further lost
have comparative advantages which turns out to
additional 15,000 direct jobs in the last one year
be cheaply produced and affordable by their trade with the danger of more closures and more job
partners. But in the case of Nigerian industries, the
losses following the closure of UNT PLC, Atlantic
ability to produce these goods is constrained by
Textile mill and United Textile ltd amongst others.
many domestic factors which include The manufacturing firms in Nigeria are faced with
infrastructural inadequacies and macro economic
high cost of production as a result of adverse
instability leading to low level of output, high cost
business conditions; multiple taxation by different
of production, low capacity utilization and levels of government and excessive dependence
unfavourable business environments. The adverse
on imported raw materials, uneasy access to
business conditions coupled with insecurity of life
markets and low profit level which reduces their
and property, political instability makes it difficultcompetitive strength and defunct the value-added
for Nigerian industries to take advantages of the
feature of a manufacturing sector.
opportunities offered by globalization. For Nigeria
to become a manufactured export-driven nation, it The domestic industries face unfavourable
becomes pertinent that these problems be competition with the influx of cheap finished
addressed so as to encourage growth and products and the dumping of sub-standard goods

June 2010 Page 2

from industrialized and other developing nations.
These problems are still prominent in the sector as
the manufacturing sector contribute an annual
average of 9.58% in the period 1981-1985, 7.08%
from 1986-1990, 5.8% from 1991-1995 and 4.95%,
3.9% and 2.6% during the periods 1996- 1999, 2000-
2003 and 2004- 2007 respectively to the Gross
Domestic Product (GDP). Capacity utilization rate
followed the same downward trend from an
annual average of 53.6% in the period 1981-1985 to
41.1%, 35.4% and 31.8% during the periods 1986-1990.
1991-1995 and 1996-1998. The manufacturing sector
in spite of its huge potentials to create wealth,
reduce poverty and generate employment has
remained stagnant contributing 3.31% annually on
the average to GDP in the period 1998-2008. The
stagnation and unimpressive performance of this
sub-sector is injurious to the industrial sector
growth and also a major obstacle facing the
growth and development of the Nigerian economy.
Also, the overdependence on oil and monoculture
nature of the economy to the neglect of the
manufacturing sector has served as a constraint in
maximising the benefits of globalization rather it
has partly led to slow growth in non–oil export and
poor development of other sectors mainly the
agricultural and manufacturing sector of the
economy.
Erumebor Rume Wilson is a student of the Department of Economics, Delta State University, Abraka, Delta
State. He is also a staff of ValueFronteira Limited, Ikeja, Lagos State.
June 2010
For the Nigerian economy to reap the massive
gains and benefits of globalization, promotion of
manufactured exports in the areas of comparatives
advantages have to be carried out thoroughly. This
however can be achieved if the government and its
agencies initiate grass root production medium
through the promotion of Small and Medium scale
Enterprise (SMEs) to produce what is imported and
to meet the basic domestic needs and tailor
Nigeria’s participation in the globalization process.
This will, if properly instituted and managed,
generate production externalities that could lead
to productivity, industrialization, economic growth
and development and strengthen Nigeria’s status
and prospects in the globalization trend. Also,
basic amenities and infrastructural facilities should
be provided so as to create a favourable business
environment which would reduce cost of
production and encourage productivity and
increased output in the manufacturing sector.
Nigeria’s vision to be among the 20 largest
economies of the world by the year 2020 will
remain hollow and trivial in the absence of a
vibrant manufacturing sector that is able to cope
with the dynamic challenges and improvements of
an increasingly globalized world.
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