ECONOMIC CRISIS, STRUCTURAL ADJUSTMENT AND THE COPING STRATEGIES OF MANUFACTURERS IN KANO, NIGERIA by Adebayo Olukoshi
UNRISD Discussion Papers are preliminary documents circulated in a limited number of copies to stimulate discussion and critical comment.
Nigeria’s manufacturing sector has experienced major changes in production techniques, labour relations, marketing arrangements and management practices, which raise questions about the future of industrialization and the livelihoods of industrial employees. Despite the high industrial growth rates that accompanied the petroleum boom of the 1970s, value added remained low for a number of key industries, which were often protected by an overvalued currency, tariff barriers and state subsidies. The long recession and the economic stabilization programmes of the 1980s exposed the structural weaknesses of import-substitution industrialization, and forced manufacturers to devise a variety of coping and accumulation strategies to overcome the crisis. What these strategies are and their implications for industrial growth and sustainability constitute the subject of this discussion paper. The study relies on government data, records of manufacturing companies and associations, as well as wide-ranging interviews of three groups of manufacturers — indigenous entrepreneurs, Levantine manufacturers and Western transnational corporations — to analyse entrepreneurial responses. By focusing on the dynamics of individual and collective corporate strategies, the study attempts to go beyond standard works that deal with the effects of adjustment on industry, which have often been concerned with technical issues: output growth, rates of investment or disinvestment, labour absorption and productivity, value added and industrial competitiveness. Instead, the author uses data derived from the coping strategies of the three groups of entrepreneurs to place the macro-economic and industrial sector indicators in perspective, as well as to comment on the changes and challenges confronting Nigerian industry today. The first parts of the paper deal with conceptual issues and the history of entrepreneurship in Kano, the study site, which is the country’s second industrial city and the northern region’s leading commercial centre. The study goes on to show that in the 1980s, foreign corporate manufacturers were present in all sub-sectors of manufacturing except wooden and metal furniture, and glass products. Levantine manufacturers were dominant in the plastic products sub-sector, as well as in the textiles, weaving, knitting and spinning sub-sectors, and they enjoyed varying levels of involvement in the production of a wide range of other products. Foreign and Levantine capital were clearly dominant in Kano’s industrial sector. However, the indigenization decrees of the 1970s helped to promote indigenous entrepreneurship, which in the 1980s became well-entrenched in the sub-sectors of food, beverages, vegetable oil, metal and wooden furniture products, and soap, perfumes, toiletries and cosmetics. The light consumer goods sub-sectors, where much of the indigenous and Levantine capital is concentrated, registered very high rates of return in the 1970s and 1980s — no doubt aided by the existence of an oil boom-induced mass market for such goods. The study suggests that all three groups of manufacturers shared broadly similar performance levels — in terms of profitability and turnover — before the mid-1980s.
The government’s ability to finance the import needs of industry came under considerable strain following the collapse of oil prices in the early 1980s. The paper discusses the nature of the emerging industrial crisis in the national and Kano contexts, as well as the sets of policies that were introduced under various stabilization and adjustment programmes. It highlights certain...