The Corvus | August 2018
Beyond the Rhetoric of
Import Substitution
Suliat Aliyu
The reason for
patronising locally
produced goods is less
about patriotism and
more about protecting
the nation's FX reserves
and developing the
domestic economy.
In the face of the many predicaments
Nigeria has had to deal with in recent
times, from falling oil prices and
production levels to the uninspiring
depreciation of the Naira, the need for
the country to look inward has become
paramount once again. The economy
has seen its relevant indices drop from
their highest of 2014 to very low levels
it has ever been in years; Inflation
(8.0% in Dec.2014 vs 15.4% in
Dec.2017), unemployment rate (7.8%
in Q1 2014 vs 18.8% in Q3 2017),
GDP ($568.5bn in 2014 vs $408.2Bn 1
in 2017), official CBN exchange rate
(N168/US$1 in 2014 vs N306/US$1 in
2017), to mention a few.
The main reason for this is related with
the country’s heavy reliance on imports,
from industrial to basic day to day needs
of its citizens. Nigeria is still a nation
filled with vast resources that can still
1
Source: World Bank Data, IMF, OECD National Accounts data, CBN
be harnessed to get the country back
on an upward trajectory despite all the
challenges facing the country.
Import Substitution,
Development Paradox
Import substitution (IS) has been, for
many years, the go-to strategy for
countries to reduce their dependence
on foreign markets as it stimulates local
production and consumption. This
would usually require some amount
of sacrifice and/or dedication on the
part of citizens, corporates and the
government.
based on analyst forecast
9
The
Beyond the Rhetoric of Import Substitution
Citizens will need to cut back on their
level of imports and rely more on
local purchases; corporates will need
to adopt backward integration as
part of their strategic business policy,
while the government will need to
build an enabling environment for
capital investments. Only then can
an IS strategy be truly deemed as
successful as the benefits in the long
run will outweigh all the short-term
inconveniences. It would not only
reduce reliance on importation but
would also have the domino effect of
strengthening the nation’s currency,
increasing domestic employment,
enhancing economic resilience in the