Changing dynamics of location of industries in Nigeria

BY OLUFEMI ADEDAMOLA OYEDELE

Olufemi Adedamola Oyedele, MPhil. Construction Management, managing director/CEO, Fame Oyster & Co. Nigeria, is an expert in real estate investment, a registered estate surveyor and valuer, and an experienced construction project manager. He can be reached on +2348137564200 (text only) or femoyede@gmail.com

All nations depend on industries for manufacture of capital and consumer goods according to Michael E. Porter in his book, “The Competitive Advantage of Nations”, published by Free Press, New York, in 1990. Industries also add to the value-chain of raw materials, especially agriculture produce and mineral resources of an area. In the sixties and up till early eighties, Lagos, Ibadan, Enugu, Port Harcourt, Kaduna and Kano were the hubs of manufacturing industries in Nigeria. Industrial setup then, followed government policies. Industries producing textiles, shoes, beverages, cocoa products, tyres, batteries, beer, matches, packaged foods, food seasoning, soaps, paper products and body lotions were scattered in Nigeria industrial parks/estates. Manufacturing industries are industries that make products from raw materials by the use of manual labour and or machineries and that are usually carried out systematically with division of labour.

According to R. L. Sanghvi in “Role of industrial estates in a developing economy” published in Bombay, India, in 1979 by Multi-tech Publishing Company, industries in industrial hubs benefits immensely from collective provision of security, infrastructure like roads, water and electricity and are easy to locate because they are in ‘specialised’ land use. Manufacturing industries have direct correlation with employment provision of any area. A lot of raw materials suppliers, traders, transporters and warehouse managers depend on manufacturing industries for their businesses. Industrialists also see establishing manufacturing industries as a form of satisfying people’s needs, and investments to generate profit. While some industries are located in residential areas because of security and easy access to consumers, others are located along the major roads and some are in industrial zones/parks. Irrespective of their locations, industries are an important sector of the economy of any nation as they are high income generators in the form of personal income and corporate taxes, and value added tax (VAT).

In 1966, manufacturing accounted for 35 percent of the Gross Domestic Product (GDP) of the United Kingdom and employed 8.7 million people according to the book, “The Competitiveness and Productivity of UK Manufacturing Industry” published in London by The Stationery Office, by the Select Committee on Trade and Industry in 2002. Manufacturing industries were also at the centre of post-war economic development of the United Kingdom. Industrial development is one of the best training grounds for skill development, and it can increase the flexibility of the economy and reduce dependence on external forces. Industrial development provides employment, efficiency among citizens, foreign exchange earnings if exported, consumer and capital products and domestic earnings. The Indigenization of Enterprises Operating in Nigeria Act of 1972 resulted in an indigenization policy, which was later reviewed, repealed, and replaced by the Nigerian Enterprises Promotion Act of 1977.

The objectives of the policy were to: transfer ownership and control of industries in Nigeria in respect of those enterprises formerly owned (wholly or partly) and controlled by foreigners to Nigerians; foster widespread ownership of enterprises among Nigerian citizens; create opportunities for Nigerian indigenous businessmen; and encourage foreign businessmen and investors to move from the unsophisticated spheres of the economy to domains where large investments are required. The Nigerian Enterprises Promotion Act 1989 stated that, “an enterprise shall be deemed to be an alien enterprise if the entire capital or proprietary interest, whether financial or otherwise in so far as it concerns any of the enterprises in the Schedule to this Act, is owned by an alien.” An alien can, otherwise, be referred to as a foreigner or non-Nigerian. While the main motive of foreigners in businesses in Nigeria is to generate profit; that of local investors may not necessarily be profit-making. Patriotism and generation of employment for people may be factored in.

Since the enactment of this act in 1989, Nigerians have tried to set up industries all over the country, especially in the area of consumer goods and light manufacturing with corruption in the regulatory bodies, lack of electricity, lack of local raw materials, lack of human capacity and lack of protection of local industries being their major banes. The indigenous industrialists were into beer brewing, food processing, beverages, textiles, pharmaceuticals, plastics, papers and publishing. Most industries in the sixties and seventies in Nigeria were set up by governments because of the huge amount of money needed to finance industrial set-ups. These public industries’ location factors were political. The private industrialists looked into market factors, raw materials, labour availability and electricity before they locate their industries. Lack of constant power to run plants and machinery of industries, corruption, market-flooding with cheaper imported products and lack of access to raw materials like rubber and barley, made some industries to shift base to and locate in neighbouring West African countries in the nineties.

Traditional factors that influence where an industry is located in Nigeria include: power supply – industries depend highly on electricity consumption to power their machines and equipment; land and buildings; communication – accessibility to raw materials, including transport (train, water and road), telecommunications and postal services. Some industries are located near wharf so as to export their products with ease; labour supply – industries depend on labour, including workers with the right skills. Cities where there are concentrations of labour will have more industries than rural areas; access to market – manufacturers of goods and products depend on markets to dispose their goods; finance, grants and financial incentives – industries usually depend on savings of the promoters, loans from banks and grants from governments or international agencies to start; raw materials – raw materials which are inputs of manufacturing are essential consideration in the location of industries; and security of properties and personnel has a higher rank in the decision-making tree. But for leadership quest, Nigeria is supposed to be an industrial nation for having moderate to high supply of these factors!

In modern industrial development in Nigeria, more industries are being set up based on the “home development” factor. More industries are being located in the home-city and villages of origin of their founders. Though this factor may not follow economic factors, more and more Nigerians see ‘business sense’ in locating their industries in their sources or places of origin instead of a place that they are not connected to but meet economic factors. In these locations, industrialists have access to cheaper land for factory compounds. Towns like Ifo, Abeokuta, Ibadan, Ilesha, Ogere, Sagamu, Ososa, Osogbo and Ijebu Ode, apart from their nearness to Lagos, have paint industries, ceramic manufacturing, beverage companies, food packaging, integrated farms, breweries, galvanised sheets industries, textile industries, electric cable manufacturing industries etc, due to the singular fact that their founders were/are from the towns in which they are located, and aim to contribute to the development of their towns. The disadvantage of this new factor is that it may be very difficult to sell these factories to non-indigenous buyers, because of their ‘social ties’ to their owners.