Dutch disease is an economic concept that explains the seeming relationship between the exploitation of natural resources and a decline in the manufacturing sector. Nigeria’s economy has suffered from the Dutch disease since the advent of oil syndrome which shifted attention from other sectors of the economy to oil sector [1]. With its large reserves of human and natural resources, Nigeria has potential to build a prosperous economy, reduce poverty and have a vibrant manufacturing sector that can sustain development. The path to economic recovery, growth and sustainable development has always required increasing production inputs (land, labour, capital and technology) and their productivity [2]. This increase in productivity, according to Mike [3] should be the focus of any economy because many countries that found themselves in the same economic predicaments always resolved them through productivity enhancement schemes.

The Nigerian manufacturing sector has failed to undergo the critical structural transformations necessary for it to play the expected role in economic growth and sustainable development of the country. The sector is structurally weak and basic industries such as iron, steel and petrochemicals are not fully functional. The technological base for manufacturing is grossly inadequate, largely due to the absence of or inadequacy of research and development efforts about light manufacturing activities, which depend entirely on importation of machineries, equipments and parts. These factors have led previous development plans to describe the Nigerian manufacturing sector as a “mere assembly plants” [1]. The contribution of the manufacturing sector in any economy cannot be over emphasized when considering its employment potentials and financial impacts on the economy and society of Nigeria. Apart from its role in building grounds for development by laying solid foundation for the economy, it also serves as import substituting industry and provides ready market for intermediate goods which are basis for sustainable development [4].    

The illusion that developing nations can just jump into a post-industrial services economy no longer holds sway as empirical evidences confirmed that manufacturing and industrial sector will remain the basic foundation and basis of any modern economy as it ought to have the capacity to sustain present and future generations [5].

However, Nigerian experience of manufacturing sector has suffered a lot of setbacks especially after oil boom in 1970s. Consequently, the sector did not significantly boast employment generation, reduce poverty, increase gross domestic product GDP etc, as in the case of the country’s contemporaries like Malaysia, Indonesia, Thailand, etc. Therefore, it is against this backdrop that this paper tries to look at the factors inhibiting the performance of manufacturing sector in Nigeria for sustainable development in the country and proffered relevant recommendations that could help in addressing the problem.

Manufacturing Sector

Manufacturing sector, according to Economicwatch [6] comprised of those industries which are involve in the manufacturing and processing of items and indulge in either creation of new commodities or in value addition. Online Business dictionary [7] defined manufacturing sector as agglomeration of industries engaged in chemical, mechanical or physical transformation of materials, substances or components into consumer or industrial goods. From the above definitions we can therefore view manufacturing sector as a section of the economy that deals with transformation of raw materials into finished goods.

Economic Development

According to Yarra Rangers Council [8], Economic Development is essentially improving the economic wellbeing of a community through efforts focused on investment attraction and job creation leading to improvement in quality of life. Online Business Dictionary [7] referred to Economic Development as the adoption of new technologies necessary for transition from agricultural-based to industrial-based economy and several improvements in living standards. Economic development could, therefore be seen as the transformation of economic growth into employment opportunities, poverty reduction and general improvement in the standard of living of the citizens. 

Sustainable Development

Sustainable development, according to the Brundtland Report is “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” [9]. The Caring for the Earth where it views the concept as an approach aims at “improving the quality of human life while living within the carrying capacity of supporting systems” [10]. The concept, therefore, implies using environmental resources in a manner which does not eliminate or degrade them, or otherwise diminish their usefulness for future generations. It involves a process of change in which the exploitation of resources, the direction of investment, the orientation of technological development and institutional change are all in harmony and enhance both current and future potentials to meet human needs and aspirations.

Historical Performance of Manufacturing Sector in Nigeria 

To effectively analyze the performance of the manufacturing sector in Nigeria, we will divide the periods into the following:

Pre-Independence Period (Pre-1960s)

In the pre-independence period, Nigeria was characterized by near absence of industrial activities. The manufacturing industry grew sluggishly in 1950 contributing only 0.4% of GDP. This was because industrialization was not part of the economic agenda of the colonial administrators; their main focus was the production of raw materials (mainly cash crops) for foreign industries and importation of manufactured goods [11]. Thus, the sector suffered serious neglect throughout the colonial administration.

Post-Independence and Oil Boom Era of 1970

After attainment of independence, the successive governments embraced the policy of transforming the country into modern industrialized economy, with emphasis and high priority on industrialization [11]. This is why the first National Plan included Import Substitution Strategy (ISS) as one of the objectives of the plan. During this period, the manufacturing sector was dominated by a few European commercial firms and the share of the sector in GDP increased steadily to 7% in 1967 [12]. While agriculture began to decline, manufacturing, oil, health and education grew in comparison to other sectors. The sector experienced a mean annual growth rate of 7.4% between 1960 and 1970. The subsequent oil boom of 1970s marked a complete change in the basic structure and the growth pattern of the economy. This era was called the oil boom with heavy government intervention through import substitution that depends on imported inputs [13]. As a result of the boom, there was increased revenue and this enabled the expansion of infrastructure and public investment in large scale and manufacturing sector expansions. The expansion aimed at achieving import substitution of foreign consumer goods and consumer durables. Import substitution policies introduced made the sector heavily depends on imported raw materials and capital goods, protection from foreign competition and preferential treatment in foreign exchange allocation. This resulted in lack of competitiveness and the creation of manufacturing base that had significant backward and forward linkages effect with the rest of the economy. Oil prices fell in the late 1970s and early 1980s and this caused the economy to go into a period of rapid economic decline.

Era of Economic Crisis, Structural Adjustment Programme and Beyond 1980s

During 1980s, there was a decline in the fortune of Nigeria’s manufacturing sector with the commencement of economic recession in 1981. By 1981, oil revenue had sharply declined resulting in high deficit financing that drained the external reserve and the piling up of foreign debts. Argued that in 1982, the loss of reserves and accelerating inflation prompted emergency stabilization policy measures such as advance deposits for imports, increase in imports, increase in import duties and review of import licenses. These policy measures brought a lot of stress on the productive sector of the economy and there was decline in the performance of manufacturing sector, with dramatic loss of production capacity resulting in gross losses in output and employment. It was reported that the aggregate index of manufacturing fell by 26% in 1993 and the average capacity utilization in the industry declined from 73.3% in 1981 to 38.2% in 1986. This, according to Dantama, [13] led to the introduction of Structural Adjustment Programme (SAP) in 1986 to restructure and diversify the productive base of the economy. Measures adopted under SAP include: widen the nation’s industrial base; export promotion; provision of incentives for manufacturing sector to enhance its value addition and contribution to GDP and to generate greater employment opportunities [11]. This shows that the manufacturing sector in Nigeria from 1960-1990 has shown the unstable nature of the manufacturing sector in Nigeria and how it declined to its present state. 

Situation of Manufacturing Sector in Nigeria from 2000 to 2020

The decade of the 1990s was mostly a period of economic and political crisis in Nigeria largely due to authoritarian military rule. The return to democratic government in 1999 introduced a new opportunity for political and economic freedom. The outcome was an emerging economy with relatively stable exchange rate, fairly predictable macroeconomic environment and good prospect for growth. Value added in manufacturing grew at an average of 8.8% between 2000 and 2004. Capacity utilization rose from about 34% in 1999 to over 53% in 2007. According to Corporate Nigeria [14], the sector’s contribution rose from 3.6% in 2008 to 4.2% in 2009. Since then, the contribution of manufacturing sector to the economy has changed over the course of the decade. Even as industries like cement and beverages have attracted investment from home and abroad, yet in recent years, overall investment in the manufacturing sector has been very low. Indigenous manufacturing firms; multinationals and investors aiming to avoid the nation's challenging social and infrastructural landscape have shut down or relocated outside the country. Corporate Nigeria [14] pointed out that between 2000 and 2010, more than 850 manufacturing firms in Nigeria either shut down or halted production. An example of the aforementioned scenario is the case of the United Nigeria Textile Plc (UNTL) which was established in 1964 by the regional government of Sir Ahmadu Bello. In 1990, the factory had over 20,000 employees but unfortunately, when it closed down, the work force shrunk to only 4,000 all of whom have now been thrown into labour market [1].

Alli in U.M. Mustapha [15] reviewed the performance of the Nigerian manufacturing sector by surveying the results of a study conducted in 2007 by the Manufacturers Association of Nigeria (MAN). The report disclosed that during the last few years many of the manufacturing companies in the country have, as the past studies predicted, faced bad times. It was discovered that only a meagre percentage of manufacturing companies (10%) are operating at a sustainable level, whereas as much as 60% are going to shut down or have already shut down after facing series of financial and other kinds of crises. 

The Manufacturers Association of Nigeria has identified some of the root problems behind the low growth and performance of the Nigerian manufacturing sector during the last few years as: high production costs caused by energy, high interest and exchange rates, influx of inferior and substandard products from other nations, multiplicity of taxes and levies, poor sales, partly as a result of low purchasing power of the consumers, bogged down with delay in clearing consignments due to existence of multiple inspection agencies at the ports and many other issues.

Manufacturing Sector for Sustainable Growth and Development in Nigeria 

Manufacturing sector in Nigeria has not contributed significantly to the Gross National Product (GNP) of the country in comparison with oil and gas sector. At this point, it is worthy to note that the real sector of Nigeria has high untapped and unexploited potentials that can guarantee sustainable development. Agricultural growth is low compared to the large fertile land and varieties of crops that Nigeria is endowed with. Manufacturing and industrial sector grow at a lower rate that may not guarantee sustainable development for Nigeria as most of the commodities that are consumed in Nigeria are imported. Manufacturing sector has high capacity to absorb all the agricultural products as raw materials that could be transformed into finished goods; this is where manufacturing sector is considered to be critical to economic development.

Many objectives of sustainable development may be conflicting with each other in the short-run. For instance, industrial growth might conflict with preserving natural resources. Yet in the long-run, responsible use of natural resources now will help ensure that there are resources available for sustained industrial and manufacturing growth far into the future. The sector is capable of generating employment opportunities to the teaming unemployed youths; reduce poverty level significantly; increase GDP and per capita income; improve on standard of living of the poor masses; enhance manpower development; provides essential commodities for local and foreign consumption; increase in transfer of technology as well as improvement on bi-lateral trade and relation. It is therefore pertinent to ask this question, what will happen to the future generations if the present generation cannot afford to meet its basic household needs today as a result of poor performance of manufacturing sector? It is against this backdrop that the paper tries to look at the factors inhibiting the performance of manufacturing sector in Nigeria as it affects sustainable development.

Problems Inhibiting the Performance of Manufacturing Sector in Nigeria 

The performance of manufacturing sector in Nigeria is filled with so many constraints as over reliance on the petroleum sector made the manufacturing sector suffer neglect and isolation thinking that the sector cannot contribute meaningfully to economic development as oil sector. This marked the beginning of the failure of the sector as it was not given required attention anymore.

Following have been considered as constraints facing the sector

Infrastructural Deficit

Electricity supply is the major problem inhibiting the performance of manufacturing sector in Nigeria. Adeolu [16], argued that epileptic and erratic nature of electricity supply in Nigeria constituted huge hindrance to the performance of manufacturing sector. It is difficult for the sector to perform optimally in this predicament as electricity is critical to the development of any nation. Government is not making much effort to improve the infrastructural facilities in the country. Other infrastructural facilities include; good transport systems and energy sector inadequacy of which served as a constraint to performance of the manufacturing sector in the country [17]. 

Poor Government Policies

Government policies to promote the performance of manufacturing sector have not been very effective. Multiple taxation, poor patronage by the government, boarder porosity, non-implementation of existing policies, inadequate regulatory agencies have been issues of concern to both domestic and foreign investors. Most governments in Nigeria concern themselves with how to retain power in the next coming election rather than thinking of how to make sound policies for sustainable development of the country. Thus, necessary policies needed to improve the manufacturing sector in the economy are lacking and those already in place are not adequate or efficient.

Financial Problems

Access to credit or capital has impacted negatively on the performance of manufacturing sector in Nigeria. Even when manufacturing industries are willing to borrow money from banks despite the high interest rates, they still find it very difficult. This is because of collateral security requirements by the financial institutions [1]. This problem led to the use of obsolete technology for those firms that manage to operate, high cost of importation of raw materials which lead to high cost of production and eventually production of substandard goods which could not withstand foreign competition [4].

Security Challenges

No manufacturing industry can thrive effectively in a climate of civil unrest, armed robbery and many other social vices. Even foreign investors will be scared of coming to invest in an unfavorable environment. In the recent times Niger Delta militancy and kidnapping in the southern part of the country, Boko Haram insurgency and banditry in the North were the major civil unrests that have led to capital flight in Nigeria as such served as a constraint to the performance of the manufacturing sector in the country.

Corruption and Poor Corporate Governance

This has contributed to poor investment in Nigeria because corruption acts as an additional tax on entrepreneurial activities and compounds the cost of doing business. The Investment Climate Surveys conducted by the World Bank have shown that most firms in developing countries expect to pay bribes to public officials. Corruption is mainly prevalent in accessing public services such as getting connected to public utilities, clearing goods through customs, submitting tax returns, or getting licenses and permits [18]. Added to this, is leadership problem as our leaders are committed to selfishness, favoritism and nepotism, bribery and corruption at the expense of public interest.

Poor Legal Environment Which Could Not Guarantee Property Right and Safety: The Nigerian legal environment is very shaky. It seems as if corruption has also eaten deep into our legal sector. Thus, there is no guarantee of property right and safety in the country [1]. Without these, the manufacturing sector cannot make a head way because security of rights and safety is what gives the sector the confidence it needs to carry out its operations without fear of intimidation from any external party.

Inadequate Research and Development

Most manufacturing industries in Nigeria do not invest money into research and development. They forget that we are in a changing world and everything is improving. Thus, without adequate research, any worthwhile Endeavour or activity will be left behind while others make progress. Fundamental questions of what to produce? How to produce? For whom to produce? And at what quantity? may not be properly addressed without research. This is one of the major setbacks inhibiting the performance of the manufacturing sector in our dear country.

Poor Patronage by Institutions and Individuals

n Nigeria, the common trend is that anything labeled “Made in Nigeria” is avoided, but whatever is labeled “Made in Japan, of Hong Kong, China, Britain, US or Chin Cheng” is embraced with much passion even though they have never heard the name of the country, as long as it is made in elsewhere. This is a big constraint to the performance of the manufacturing sector because without patronage, there is no way they can have the funds to improve their performance [19].

The paper discussed some constraints that have inhibited the performance of the manufacturing sector in Nigeria. After which it provided solutions to these problems and finally gave some recommendations which if adopted will solve the problems inhibiting the performance of manufacturing sector in Nigeria. It is hope that when these problems are solved sustainable development will be guaranteed.

Recommendations

In view of the aforementioned issues, the paper recommends that government should by matter of urgency find a way of tackling corruption as it has eaten deep into every sector of the economy, both private and public. Anti-corruption agencies such as Economic and Financial Crimes Commission (EFCC) and Independent Corrupt Practices and related offenses Commission (ICPC) should be empowered by relevant policies for effective performance. In addition, energy has been identified as critical to economic development hence, the need for government to try its possible best in finding solution to the problem. Restructuring energy sector may be frustrated as a result of corrupt minds in the system as such privatization of the sector could be beneficial as it worked in former Nigerian Telecommunication (NITEL). Furthermore, government should also address the problem of unfriendly policies to tackle the problems of influx of inferior and substandard goods, multiplicity of taxes and levies, delay in clearing consignment as a result of multiple inspections.

Manufacturing firms should invest in research on basic and fundamental questions as this will help serve the customers efficiently, by way of been informed on the desires of customers at the level of quantity and quality of finished goods. This also helps the manufacturers adopt the latest technologies that will increase the economies of scale. Nigerians should also be sincere, loyal and patriotic to the country. Whatever is produced in Nigeria should be appreciated and patronized by individuals, corporate entities and government.

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