Prior to independence in 1960, Nigeria had a vibrant economy in which the different sectors of the economy contributed meaningfully to the sustenance of polity. During the first decade of independence agriculture, manufacturing, solid mineral, crude oil, services, etc. played significant roles in the nation’s economy.
However, in the early 1970s, during the “oil boom” era, Nigeria gradually but steadily abandoned virtually all other sectors and focused on oil for her main source of revenue. Since then, oil has become the mainstay of the Nigerian economy, with oil export as a percentage of total national exports from 1981 to 2010 reaching an average of 95 percent.
The implication of the above circumstances is that Nigeria had become a mono-product economy since the 1970s, and the situation has remained the same in the past four decades. Also, it follows that the other sectors have been experiencing a huge problem of low productivity and have failed to contribute substantially to the well-being of the nation’s economy. There was therefore the need for the diversification of the economy so as to increase productivity in the other sectors of the economy, especially manufacturing.
Modern Special Economic Zones, SEZs, which originated in China, are usually larger in scale than the traditional zone types such as Free Trade Zones, Export Processing Zones Industrial Parks which have been around for decades. According to the World Bank, there are more than 3,000 projects taking place in the SEZs in 135 countries worldwide creating more than 68 million direct jobs. Nigeria is not among the list of success stories led by China in attracting investment and promoting exports through the SEZs. As a matter of fact, China’s SEZ programme has been widely lauded for its remarkable success as a tool for attracting Foreign Direct Investment (FDI) and promoting export-oriented and industrialization. The World Bank notes that outside of Mauritius (with partial success in Kenya, Lesotho and Madagascar); most zones initiatives in Africa have been sub-optimal.
A World Bank study in 2012 on selected economic zones operational in Nigeria namely Lekki Free Trade Zone, Lagos State; Ogun-Guangdong Free Trade Zone, Ogun State; Abuja Technology Village in the FCT; Koko Free Zone, Delta State; Warri Industrial Business Park, Delta State; and the ICT Park, Asaba, Delta State, observes that “all the zones face some common challenges, at varying degrees, in the areas of legal and institutional framework, resettlement and compensation issues, infrastructure deficit especially power and transport, environment issues, zone management and operational know-how as well as host government ownership and continuity especially when a new government does not fully acknowledge the commitments made by the previous government.”
The Nigerian government adopted the EPZ strategy via Decree No 63 of 1992, titled the Nigerian Export Processing Zone Authority Decree. As part of efforts to achieve the much needed diversification of the country’s economy, the Federal Government, according to recent reports, plans to facilitate the establishment of Special Economic Zones in the six geopolitical zones.
The Minister of Trade and Investment, Dr Okechukwu Enelamah, is quoted to have said that “apart from the funding secured in the 2017 budget for the SEZs, other financial partners such as Afrexim Bank and EXIM Bank of China have committed $1bn to the project” and that the whole idea behind the SEZs “is to help overcome the infrastructure disadvantages faced by local manufacturers and promote the cluster effects gained by locating similar manufacturing businesses together”.
Much as this is cheering news, economic zones will not be birthing in Nigeria for the first time as a number of Free Trade Zones are already operating in the country with similar objectives but little impact on the economy. Data obtained from the website of Nigeria Export Processing Zones Authority show that there are 32 registered free zones in the country out of which 14 are operational while 18 are still under construction. Another eight are awaiting approval. The Calabar Free Trade Zone, the first of these, started operation in November 2001 on the back of an enabling Act which came into effect in 1992 as earlier stated.
Nigeria’s Vice President, Professor Yemi Osinbajo in his speech at the Nation’s Forum On The Economy held on Thursday in Lagos State, south-west Nigeria, the Vice President said that the government will focus on implementing about 33 Priority Actions under the six themes in the 2016 fiscal year, among of which was on the second thematic strategy, the Vice President said that the government had a plan to further diversify the economy by fast-tracking industrialisation, Agriculture and Agro-Allied Processing as well as attracting investment into the Solid Minerals, Tourism and Entertainment Sectors.
The government is also looking at implementing measures to achieve self-sufficiency and become net exporters of certain agricultural items – rice in 2018, tomato paste in 2016 and wheat in 2019.
“We want to increase local production of maize, soya, poultry and livestock, so as to achieve self-sufficiency. The deadlines are to be announced in due course.
“We will revitalise and expand agro-allied processing to intensify local production and processing of cassava, cocoa, cashew, fruits and sesame seed, utilize 5,000 hectares of irrigable land in the 12 River Basin Development Authorities and utilise 22 dams for commercial farming activities by prospective investors,” the Vice President told the gathering.
Also, President Muhammadu Buhari, at joint session of the national assembly on the 2017 budget of recovery and growth 14th December 2016, under item 11 of the speech, stated that part of the 2017 Budget goals is : “to achieve self-sufficiency in food and other products, a lot of work needs to be done across the various value chains. For agriculture, inputs must be available and affordable. In the past, basic inputs, like the NPK fertilizer, were imported although key ingredients like urea and limestone are readily available locally. Our local blending plants have been abandoned. Jobs lost and families destroyed. I am pleased to announce today that on 2nd December 2016, Morocco and Nigeria signed an ambitious collaboration agreement to revive the abandoned Nigerian fertilizer blending plants. The agreement focuses on optimizing local materials while only importing items that are not available locally. This program has already commenced and we expect that in the first quarter of 2017, it will create thousands of jobs and save Nigeria US$200 million of foreign exchange and over N60 billion in subsidy.”
The economic challenges confronting the present administration in the face of plummeting oil price in the international market are indeed formidable and require concerted effort to diversify our economy.
This will entail policies to promote expanded production in both agricultural and industrial sector. If we achieve higher level of production output, we will not only satisfy local demand for our goods with a reasonable balance for export. We must work hard to expand our exports beyond African and Asian markets. The present government should place greater impetus in our penetration of African markets to fully harness our comparative advantage.
An immediate upgrade of basic infrastructure to functional level such as adequate power and water supplies is required for our industrialisation drive to yield meaningful results. Only then, will our concerted effort and promotion of Foreign Direct Investment become more impactful to our national economy.