The Industrial Policies and Incentives in Nigeria from 1999 to 2014

1. Small and Medium Industries Equity Investment Scheme (SMIEIS, 2000/2001)

The scheme was instituted in response to the Federal Government's concern and policy measures for promotion of small and medium enterprises, as vehicles for rapid industrialization, sustainable economic growth and development, poverty alleviation and employment generation. It was a voluntary initiative, which requires all banks to set aside 10 percent of their after-tax profit, for equity investment in small and medium enterprises in Nigeria, as part of their contribution towards stimulating economic growth, developing local technology and generating employment. This was set up so as to help in the co-ordination of the scheme with a guideline that 60 percent of the SMIEIS fund should go to core real sector, 30 percent to services, and 10 percent to micro enterprises through NGOs.

The objectives of SMIEIS are as follows;

• Increasing per capita income / output and initiating /constituting changes in the structure of business and the society through growth, increased output and employment opportunities.
• Enhancement of Regional economic balance through industrial dispersal.
• Moderating rural/ urban migration.
• Easily adaptable to local technology.
• Promotion of effective resource utilization.
• To facilitate the flow of funds for the establishment of new small and medium investment (SMI) projects.
• To develop and package viable industries with Nigerian entrepreneurs.
• To provide venture capital and management that would spearhead the restructuring and.
• Financing of the small and medium scale industries (SMI).
• To stimulate economic growth, develop local technology and generate employment.

Although, the scheme has recorded significant improvement in terms of sectoral and geographical distribution of investments, it has also been bedeviled with slow pace of aggregate investment. Other setbacks include high cost of pre-investment activities, such as feasibility studies, assets valuation, etc. which entrepreneurs feared might become wasted fund, if they are not considered; reluctance of banks to make a paradigm shift from short-term financing to long term financing; continued poor state of physical infrastructures, among others.

2. Bank of Industry (BOI- 2000)

The bank was introduced as a development institution to accelerate industrial development through the provision of term loans, equity finances and technical assistance to industrial enterprises. The bank has the combination of the following institutions:

• Nigerian Industrial Development Bank (NIDB).
• Nigerian Bank for Commerce and Industry (NBCI).
• Industrial and Insurance Brokers (IDIB).
• Leasing Company of Nigerian Limited (LECON).

Other aims and objectives of the bank include;

• Making a considerable impact in terms of long term loans to assist in employment generation.
• Industrial dispersal and promotion of indigenous entrepreneurship.

3. National Economic Empowerment and Development Strategy (NEEDS, 2004)

In an effort to further consolidate the possible achievement by the preceding policy, the Federal Government in 2004 launched an entirely home-groomed package known as National Economic Empowerment and Development Strategy (NEEDS). Under this development policy, the private sector was identified as the engine of growth. The private sector is the executor, investor and manager of businesses, while the government is the facilitator and regulator that helps the private sector to grow, create jobs, and generate wealth, (NEEDS, 2004).

As contained in NEEDS document, the overriding objectives of this development policy included:

• To accelerate the pace of industrial development by increasing value added at every stage of the value chain.
• To encourage forward and backward linkages in a few niches.
• To provide enabling environment for private sector leadership.
• To promote the establishment of efficient small and medium size enterprise sector to enhance sustainable economic development.
• To facilitate the development of an industrial sector that is internationally competitive.

The success and/or failure of NEEDS will to a very large extent depend on the successes and/or failure of subsequent industrial policies that evolved thereafter, since NEEDs package is believed to be a "mother package" through which other industrial policies within this period anchored their existence.

4. National Integrated Industrial Development (NIID, 2007)

The continued search for appropriate industrial policy in Nigeria took another turn when the government in 2007 instituted another policy, the National Integrated Industrial Development (NIID) blueprint, as a service framework developed by the United Nations Industrial Development Organization (UNIDO) in collaboration with the Federal Ministry of Industry and other stakeholders. The framework, according to CBN (2007), comprised four integrated programmes, namely:

1. Industrial governance and public private sector partnership;
2. Strengthening industry's institutional support base; a cluster development initiative to grow the small and medium enterprises (SME's), using common facilities;
3. Environmental and energy; addressing the challenges of low power generation and utilization through rural renewable energy; and
4. Rural private sector agro-industrial development.

Under this new initiative, the Lagos, Kano, Aba and Port Harcourt (LOKAP) industrial action plan was developed to address the problem of infrastructural decay and to focus efforts in addressing the needs of these four industrial cities. The framework also made a provision for the construction of one park in each of the six geo-political zones of the country to boost the development of SMEs.

On-the-spot assessment of this policy has shown that it has not achieved much success. One of such failures is bureaucratic bottleneck in terms of policy implementation. For instance, the slow pace of work at various National Integrated power project sites is a clear testimony to the policy failure. Also, some proposed sites have become fallowed, prompting trespasses by local residents. Another problem is slow pace in the disbursement of loans meant for small and medium scale enterprises by banks. Lastly, the "cluster concept" conceived by this policy is only operational on paper. The designated industrial parks’ lack operational facilities such as adequate power supply; lack of good transport network; inadequate water supply for both human and industrial uses; lack of sewage system and so on.

5. Industrial Park Development Strategy (IPDS, 2009).

The current industrial policy (referring to 2009) pursued relentlessly by the present government is the industrial park development strategy (IPDs). This is a 'cluster concept" strategy aimed at driving non-oil growth through the creation of industrial parks and special economic zones. As a medium-term strategy, industrial parks are designed in areas with basic infrastructural facilities needed for establishing an industry, thus making such areas more investment friendly. Where the park is near the sea port, it can be made an export processing zone, thus allowing tenants to bring in machinery and raw materials free of duty, provided a certain percentage of the output goes back into export.

As fascinating as the 'cluster concept' seems to portray on paper, it is also beset by a number of possible challenges. One of such problems is the bureaucratic bottlenecks in the provision of basic physical infrastructures in the areas where industrial parks are located. Such delays are capable of obstructing both the taking-off process, as well as, the operational activities of such parks, which in turn could overturn the intended objective of industrial development.

Poor electricity generation and distribution is another problem that has strongly hindered industrial development in the country in recent times. The erratic power supply situation in Nigeria is far from being over, despite several efforts by the governments to solve it.

Some of Nigeria's Industrial Policy Incentives 

As part of government's drive to encourage investments and promote industrial development in Nigeria, various incentive packages have been designed and implemented for the industrial sector of the economy. These incentives are usually in form of fiscal measures like tax deductions and allowances.

1. Tax Holiday: - This simply means the exemption of infant or new industries from the payment of profit tax for some years of operation such as five year. The aim is to protect them from international competition and enable them build up enough funds for expansion purposes.
2. Tariff Protection: - This is the imposition of heavy import duties on foreign goods so as to protect local industries from international competition.
3. Investment Guarantees and Effective Protection: Under this, a foreign investor in an enterprise shall be guaranteed unconditional transferability of funds through an authorized dealer in freely convertible currency. Also, no enterprise shall be nationalized or expropriated by any government, unless the acquisition is for national interest or for public purpose.
4. Export Incentives for Industries: Under this, companies are free to retain the export proceeds in foreign currency in a domiciliary account with any authorized bank of their choice in Nigeria.

Special export development fund has been established to offer financial assistance to private exporting companies, to cover their initial expenses in some export promotion activities.

5. Export Processing Zone (EPZ): Export processing zones (EPZs) have been established which allowed interested persons to set up industries with the aim of exporting the goods and services manufactured. Incentives in the zone include tax holiday; restricted remittance of profits and dividends; no import and export licenses required; up to 100 percent foreign ownership of enterprises, etc.
6. Access to Land:

This incentive policy also guarantees that any company incorporated in Nigeria be allowed access to land in any state of the federation, for industrial purposes. Industrial concerns are required to abide by the regulations on the use of land for industrial purposes and with environmental regulations.

References:

1.  Udo N. Ekpo,

            Nigeria Industrial Policies and Industrial Sector Performance: Analytical          

Exploration, Department of Economics, Faculty of Social and Management Sciences,     Akwa Ibom State University, Obio Akpa Campus, Akwa Ibom State, Nigeria.  

2. Daibi W Dagogo,

Nigerian Industrial Development between 1943 and 2013: Challenges and Opportunities,     Department of Banking and Finance, Rivers State University of Science and Technology, Nigeria.

Photo Credit: Author Stream