The Corvus Magazine 4th Edition | Page 16

The Corvus | August 2018

more about protecting the nation ’ s FX market and contributing to the growth of domestic market for our own benefit . When local companies are unable to grow to the point where they can take advantage of economies of scale , they will see no need in investing in capacity building that will churn out the desired product quality . This eventually leads to the winding down of the company and ultimately the death of that industry . A good example of this is the Nigerian textile industry which the government has been making several efforts to revive . Nigerians also need to understand that the more they spend on imported items , the more expensive those items become as every kobo spent on import contributes to the devaluation of the naira . Alternatively , the more Nigerians spend on locally made products , the cheaper the product becomes in the long run when local companies achieve economies of scale .

Secondly , when there is a lack of backward integration by corporations , there is a risk of economic policies not achieving the desired effect . Industry experts have argued that over 80 % of Nigeria ’ s manufacturing needs are imported which contributed to depletion of the country ’ s foreign reserves . A number of companies had to wind down when the Nigerian economy slid into recession in 2016 , while the few companies that had invested in backward integration reaped the benefit . Players in the Nigerian brewery industry have embraced vertical integration by sourcing raw materials locally and pumping investment to support local farming of sorghum and cassava , saving the country about US $ 7million in foreign exchange on processed cassava starch alone , as argued by some industry player . It was also revealed during the 23rd Nigeria Economic Summit that backward integration in the cement industry saves the country about N240 billion yearly . You can imagine how much foreign exchange savings the country would achieve if a diverse number of corporations adopt vertical integration . This would go a long way in ultimately bringing the country out of its dependence on import for industrial existence .

Changing from imported items to locally produced items will certainly prove difficult for individuals and corporations alike . However , understanding the impact that import consumption has on the economy and the role we each have to play is crucial in overcoming current challenges as successful import substitution goes beyond policy promulgation by the government . Having said that , the Nigerian government still has the task of implementing the right mix of different IS initiatives and sectoral based policies as can be seen from the BRICS example , while ensuring consistency of the policies and an enabling environment for the implemented policies to bear fruit . Only then can Nigeria be set on the right path to achieving import independence

References

Alexander M . Z ., E . A . ( 2017 ). Comparative Analysis of the Best Practices in the Economic Policy of Import Substitution . Retrieved from Alexander M . Z ., Ekaterina A . D ., Veronica Y . C ., Vasily S . S . ( 2017 ) - Comparative Analysis of the Best Practices in the Economic Policy of Import Substitution

Aregbeshola R . A . ( 2017 ). Import Substitution Industrialisation and Economic Growth .

ILO . ( 2017 , November ). https :// data . worldbank . org / indicator / SL . UEM . TOTL . NE . ZS ? locations = NG . Retrieved from data . worldbank . org .

IMF . ( 2017 ). https :// data . worldbank . org / indicator / BN . GSR . GNFS . CD ? locations = NG . Retrieved from data . worldbank . org .

IMF . ( 2017 ). https :// data . worldbank . org / indicator / BX . GSR . GNFS . CD ? locations = BR-CN-IN-RU-ZA . Retrieved from data . worldbank . org .

IMF . ( 2018 ). http :// www . imf . org / external / datamapper / LUR @ WEO / OEMDC / ADVEC / WEOWORLD / NGA . Retrieved from www . imf . org . Irina E ., Aleksei E . ( 2016 ). Development of a Strategy of Import Substitution .

Lolu A . ( 2017 ). 23rd Nigeria Economic Summit ‘ Opportunities , Productivity and Employment ’.

Mona L . ( 2015 ). Rethinking the Political Economy of Import Substitution Industrialization in Brazil : A Clientelist Model of Development Policymaking .

Research , KfW . ( 2017 ). Russia – Import Substitution during Recession .

World Bank . ( 2017 ). https :// data . worldbank . org / indicator / NY . GDP . MKTP . CD ? locations = CN-BR-IN-RU-ZA . Retrieved from data . worldbank . org .

15 Beyond the Rhetoric of Import Substitution