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Globalization and the Nigerian Manufacturing Sector

Globalization and the Nigerian Manufacturing Sector

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Published by Wilson Rume
This article reveals the impact of globalization on the performance of the Nigerian manufacturing sector and reasons why the sector has not fully maximized the benefits of globalization.
This article reveals the impact of globalization on the performance of the Nigerian manufacturing sector and reasons why the sector has not fully maximized the benefits of globalization.

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Published by: Wilson Rume on Dec 31, 2010
Copyright:Attribution Non-commercial


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June 2010 Page 1
Globalization and the Nigerian Manufacturing Sector 
Erumebor Rume Wilson
Student at the Department of Economics, Delta State University, Abraka, Delta State, Nigeria
Email:erumebor@yahoo.com, wilson@valuefronteira.com
There have been gains and benefits from increasedborder transaction and massive flow ofinvestment, technology and information amongcountries. Many other countries have however been faced with enormous challenges of partakingin the benefits of globalization. Such challengesinclude structural deficiencies, inefficient andinappropriate economic policies and high existenceof corruption in the country amongst others. Allthese internal problems reduce their strength andcapacity to successfully compete in the globaltrend rather they tend to reap the negative effectsof globalization.
According to the WorldDevelopment Indicators (2007), “globalization hascreated opportunities and challenges for developing countries. While the experience ofChina, India, Indonesia, Thailand and some other countries have demonstrated that integration intothe global economy is necessary for long termgrowth and poverty reduction, concerns have beenexpressed over equality of opportunity andunequal distribution of benefits”. Globalization is adual sided phenomenon which has been beneficialto many countries and has not helped matters inthe same or many other countries especially thedeveloping countries. This is so because mostdeveloping countries have very weak capacities totake advantages of global markets as they are stillgrappling with the provision of basic necessitiessuch as roads, railways, food, and water amongothers. In the absence and inadequacy of thesebasic necessities, it becomes difficult to fully utilizethe opportunities and benefits of globalization inthe developing countries even in Nigeria.By integrating the world into a global economythrough trade liberalization, commercialization andprivatization, globalization in one aspectundermine growth in the manufacturing sector inNigeria as it exposes local firms and industries tocompetition from global corporation who oftenhave better financing, technology, advertising andmarket reach. With increasing breakdown ofbarriers in developing countries including Nigeriaas a result of globalization, industrialized nationshave therefore taken advantages of tradeliberalization thereby seeking market to dump their cheap manufactured goods and rendering the localindustries inefficient leading to slow growth rate,low capacity utilization and low output of the localindustries as the demand for goods produced inthe country decline due to cheap imported goodsand high cost of production faced by theindustries. With globalization, Nigeria keptimporting everything at the expense of her owndomestic industries. These problems havetherefore caused firms to leave their industriesrendering many Nigerians unemployed.Trade liberalization, a major policy thrust in theStructural Adjustment Programme (SAP) in 1986 inNigeria led to the exposure of infant localindustries in Nigeria to unfavourable competitionwith Multi-National Corporation (MNCs). The localindustries do not have what it takes to competewith these multi-national corporations which havestronger financial base, produce better andcheaper products and have a strong and efficientmanagerial capacity. Trade liberalization focusedexclusively on import liberalization withoutsufficient attention to improving export marketsaccess and establishing a competitive exchangerate to ensure that the resources freed-up in the
June 2010 Page 2
import–competing sector are deployed into theexport sector. This however led to increaseimportation of consumer goods without asignificant increase in manufactured export,making the local industries especially themanufacturing sub-sector suffer. The free inflow ofcheaper goods have hindered the growth of localindustries, leaving the protection of theseindustries shattered as most consumers prefer cheap and better products to an expensive locallyproduced goods due to high cost of productionand high technological deficiencies in their production processes.Another problem faced by the Nigerianmanufacturing sector in the liberalization processis that Nigeria may be able to control how fast shecan open her borders but cannot determine howother countries open theirs. Thus, increased tradebarriers by developed countries have however served as an obstacle in promoting manufacturedgoods export in the country.The rapid economic growth and prosperity in theAsian developing countries is derived from their ability to enhance manufactured exports andindustrialization and produce goods in which theyhave comparative advantages which turns out tobe cheaply produced and affordable by their tradepartners. But in the case of Nigerian industries, theability to produce these goods is constrained bymany domestic factors which includeinfrastructural inadequacies and macro economicinstability leading to low level of output, high costof production, low capacity utilization andunfavourable business environments. The adversebusiness conditions coupled with insecurity of lifeand property, political instability makes it difficultfor Nigerian industries to take advantages of theopportunities offered by globalization. For Nigeriato become a manufactured export-driven nation, itbecomes pertinent that these problems beaddressed so as to encourage growth anddevelopment of the manufacturing sector and theeconomy as a whole.It is however realistic to stress that no meaningfuleconomic growth, wealth creation, employmentgeneration and poverty reduction can be achievedin any country without a robust manufacturingsector. This therefore depicts the importance ofthe manufacturing sector in the growth of the realsectors of the Nigerian economy as it facilitates theuse of human resources in the procurement of rawmaterials and in the production and distribution ofgoods. Besides, most manufactured goods areeasily transferable across national andinternational boundaries and as a result couldenhance foreign exchange earnings and balance ofpayment condition of the country. Themanufacturing sector in industrialized and fastdeveloping countries is the driver, mover and coreaspect of industrialization. While manufacturingsector’s share to GDP in other developing countriessuch as Malaysia stood at 30.9% in 2003, 25% on theaverage from 2000 to 2006 in Singapore, theNigerian manufacturing sector’s share of GDP isdeclining and is also a single digit percentage ofGDP. As reported in Vanguard Newspaper on July10, 2008, “Textile industry has further lostadditional 15,000 direct jobs in the last one year with the danger of more closures and more joblosses following the closure of UNT PLC, AtlanticTextile mill and United Textile ltd amongst others.The manufacturing firms in Nigeria are faced withhigh cost of production as a result of adversebusiness conditions; multiple taxation by differentlevels of government and excessive dependenceon imported raw materials, uneasy access tomarkets and low profit level which reduces their competitive strength and defunct the value-addedfeature of a manufacturing sector.The domestic industries face unfavourablecompetition with the influx of cheap finishedproducts and the dumping of sub-standard goods

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