The Corvus | August 2018
agricultural output and capacity
utilization of agricultural processors.
Furthermore, the government also
implemented bans and tariff increases
on some imported items such as rice,
cement, fruit juice and cars. Some 41
imported goods and services were also
deemed not valid for FX purchase from
the official forex window all in a bid to
encourage local production of these
items. While a few of these strategies
recorded varying degrees of success,
Nigeria’s balance of trade data has
still not shown any sign of sustainable
growth.
From the above chart, the country’s
Net Trade, defined as the excess of
its exports over imports, swung to a
negative position in 2015. During that
year, it was reported that Nigeria spent
N6.7 trillion on the importation of
goods and services, some of which are
locally produced. Roughly N1.6 trillion
on boiler, machinery and appliances;
N1.3 trillion on mineral products; N1.5
trillion on spare parts; over N1.09 trillion
on imported foods and drinks; N123.01
billion on shoes and cloths; and a total
of N399 billion on household items.
Statistics like these would lead anyone
to believing that Nigeria is its own
biggest problem. It can be seen clearly
that the impediment to achieving a
successful IS strategy is mostly centered
around the acquired taste of the citizens
for foreign products, and the insistence
of most manufacturing companies on
importing spares and raw materials
that can be acquired locally with a little
investment.
Despite all these difficulties surrounding
import substitution strategy and
implementation, there are still reasons
to believe that it is a satisfactory
approach to development as can be
seen in many other countries around
the globe.
What can Nigeria learn from
BRICS?
The BRICS are major emerging
economies, which have adopted
import substitution strategies at
different stages on their path towards
industrialization. These five countries -
Brazil, Russia, India, China and South
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Africa represent about 41% of the
world's population, with a combined
nominal GDP of US$16.8 trillion as of
2016. This article will take a quick look
at the complexities of the IS initiatives
that have been implemented by
each of these countries, with a view
to identifying what key takeaways
can be adapted into the Nigerian IS
strategy.
country’s technological know-how.
The share of industrial sector in Brazil’s
GDP nearly doubled from 24.1% in the
1950s to 40.9% in the 1980s.
The country witnessed development of
major industrial sectors particularly the
automotive and oil & gas industry as the
Brazilian government saw the growth
of these sectors as the quickest way to
promote the country’s industrialization.
Brazil’s auto transformation which
Source: World Bank Data
Brazil
The most notable IS strategy in
Brazil was adopted after World
War 2, when the country embarked
on a rapid expansion of industries
through various economic policies
such as import prohibitions, multiple
exchange rates, import licencing,
tariffs, cheaper funding, social
security and government investment
in key economic sectors in order to
aid backward integration. However,
despite the various mix of policies
deployed, Brazil came to realize that
these IS strategies alone were not
effective in increasing GDP. In the
1980s, the government decided to
combine export promotion policies
with the implemented import
substitution strategies, which had
a significant positive effect on the
Brazilian economy. Furthermore,
the government invested heavily
in research and development with
the establishment of agricultural
research
corporations
and
aeronautics institute to increase the
Beyond the Rhetoric of Import Substitution
covers light vehicles, trucks, buses and
agricultural machines began with the
introduction of the five-year plan. The
government restricted importation of
automotive and forced companies that
only had assembling plants in Brazil to
choose between producing vehicles
with 90-95% Brazilian made content
or exit the Brazilian market, with a
deadline period of five years.
The government also offered attractive
subsidies to reduce the cost of capital
investment and guaranteed a return
even if profits did not materialize, all
within the five year period. By so doing,
assembling companies were pressured
to rapidly invest and commence local
production in Brazil as the incentives
were only available for five years. This
also encouraged inflow of foreign
capital and technologies from large
global companies such as Nissan,
Honda, Hyundai, Mitsubishi, Chrysler
and Audi, as they decided to settle
and open factories in Brazil so as not
to lose market share due to the import
ban. Automotive production volume
grew from 133,000 in the 60s to 1.2