restricted access Nigeria and the Challenge of Industrial Development: The New Cluster Strategy
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Nigeria and the Challenge of Industrial Development:
The New Cluster Strategy


Since Nigeria became independent in 1960, achieving economic development through rapid industrialization has remained a major challenge. It is also not surprising that this has been the principal focus of the various administrations in the country. Thus, different economic development policies (with each having a bearing on the industrial sector) were adopted ranging from Import Substitution Strategy (ISS) through indigenization to the Structural Adjustment Program (SAP). It also seemed as if none of these policies provided sufficient answers to the challenges of the country’s industries to the point that many have concluded that the more new policies were introduced, the farther the country moved away from being industrialized. Furthermore, the discovery of crude oil, which immediately became the primary export commodity and foreign exchange earner, was to worsen the situation leading to the almost total neglect of industries. Unfortunately, the volatility associated with international oil prices frequently led the country’s resource expectations into avoidable difficulties resulting in the resurgence of calls for the diversification of Nigeria’s economy in general and revenue base in particular. As in the past, the government early in 2007 responded by introducing a new industrial development policy, which was based on the Cluster Concept. But, given past experiences, many are not yet convinced that this is the long term solution to Nigeria’s industrial development challenges.

This paper therefore seeks to discuss Nigeria’s new industrial development strategy, the Cluster concept, against the backdrop of previous policies. It starts by showing the relevance of industry to economic development before undertaking a comprehensive review of the country’s past industrial policies. This is followed by a discussion of [End Page 151] the Cluster Concept as implemented by Nigeria and a brief examination of the counterpoint presented by the example of India. The central argument is that the new policy may still suffer the fate of its predecessors unless immediate steps are taken by governments at various levels to facilitate its implementation.

A considerable literature exists on Nigeria’s industrial policies, especially since 1960.1 The majority of these works reveal the obvious bias for some of the policies, while others in most cases simply criticize without undertaking a proper analysis of the content of the policies. Similarly, none of them discuss the Cluster Concept (introduced in 2007), which forms the subject matter of the present effort. In the same vein, the relevance of the cluster strategy as an acceptable model of industrialization particularly for developing economies has remained a subject of controversy. Whereas the inherent advantages of these clusters in most cases makes it attractive to both small and large enterprises, for Head and Ries the real attraction lies in its pull effect, which cities, especially those with good infrastructure and established industrial bases, usually have on industrial agglomerations.2 The authors argue that firms in the same industry can be drawn to the same locations given that proximity generates positive externalities or ‘agglomeration effects’ even as chance events and government inducements could have lasting influences on the geographical patterns of manufacturing. Using the “flowchart model”, Kuchiki has shown the role of policy interventions (e.g. the setting up of export processing zones and industrial zones), local capacity building, and lead firms as important factors for developing industrial clusters, 3 while Sonobe, Dinghuan, and Otsuka, building on this equally, have demonstrated the contribution of industrial clusters to the industrial development of East Asia.4

Africa’s experience with the cluster strategy have received considerable attention in the works of Zeng,5 Oyelaran-Oyeyinka,6 and others. Relying on these arguments, this contribution further illustrates how the peculiarity of Nigeria’s business environment makes the Cluster Strategy an acceptable model for the country’s industrial development. [End Page 152]

Industrialization and Economic Development

Industrialization may refer to an increase in the share of manufacturing in the Gross Domestic Product (GDP) and in the occupations of the economically active population. It could also be used to describe the development of economic activity in relatively large units of production, making much use of machinery and other capital assets, with the tasks of...