THE IMPORT SUBSTITUTION STRATEGY FOR NIGERIA'S INDUSTRIAL DEVELOPMENT: RETROSPECTS AND PROSPECTS

Import substitution is a development strategy which has been adopted by many developing countries. This paper examines the strategy which was adopted by the Federal Government from the early 1950s to 1986 after which it was abandoned for export promotion. Import substitution, a term used to refer to domestic production of goods that would otherwise be imported, was adopted for several reasons. To begin with, it was adopted to correct the structural distortions in the economy which manifested itself in the form of a large difference between what was being consumed domestically and what was being produced domestically. This gap led to persistent trade imbalance. Another reason for the adoption of the strategy was that the history of almost all the developed countries showed that industrialization was very important for economic growth. There were considerable empirical evidences to support the hypothesis that any country which has a strong industrial base lays a solid foundation for fast economic growth. Consequently, encouragements were given to various initiatives aimed at realizing the country’s import substitution objectives. However, there was a disappointing result of the import substitution strategy. Trade imbalance persisted, commodity diversification of locally manufactured goods did not progress satisfactorily. Products expansion was also not satisfactory. Import substitution tended to succeed only when generous incentives were offered. But the degree of success dropped from 1986 under Structural Adjustment Programme (SAP). The thesis of this paper is that the strategy failed because government did not adopt the right type of import substitution strategy. What we consider to be the right type of import substitution is based primarily on the Mahalanobis’ four-sector model for India.