National Economic Empowerment and Development Strategy (NEEDS) (VII)
Contd. from last week

Federal government ministries, their state counterparts, and private sector stakeholoers are developing strategies for each sector. These strategies will be nationally coordinated, with clearly delineated roles and responsibilities for each level of government, the private sector, and other stakeholders.
The overall strategy is to diversify the productive base of the economy away from oil and to foster market-oriented, private sector—driven economic development with strong local participation. The goal is to develop an indigenous entrepreneurial class capable of competing in a global market in which technology and skills play dominant roles.
As the government continues to redefine its role, resources will be freed up, allowing the government to focus on its primary role of providing basic infrastructure, security, defence, and the social services that are necessary to create a competitive environment that enables the development of sustainable private sector—driven wealth and employment.
For its part, the private sector will be encouraged to commit to genuine and responsible investment, good corporate governance and citizenship, and internationally acceptable standards of quality, business ethics, and practices. It must also commit to transparent partnership with the public sector, especially in promoting and developing small and medium-size enterprises.
It is in this context that the various sector strategies are couched. Given the interdependent nature of the different sectors of the economy, several cross-cutting issues will need to be addressed. These include:
• Inadequate infrastructure
• The finance and funding gap
• Inappropriate and inadequate technology
• Unfair competition
• Inadequate institutional and legal framework, including bureaucratic procedures and practices
• Policy inconsistency and lack of commitment and political will to implement accepted policies
• Inadequate human capital development
• Lack of security, law and order, and respect for contracts
The government will encourage organizations (public and private) to modernize by adopting information and communications technology. The Raw Materials Information System (RMIS) of the Raw Materials Research and Development Council will be updated to increase its usefulness to stakeholders. RMIS will routinely provide the following information to investors, industrialists, researchers, policymakers, and other stakeholders:
• Raw materials available by sector
• Location and estimates of reserves
• National demand for raw materials
• Industrial uses
• Processing equipment fabricators in Nigeria
• Science and technology experts in Nigeria
• Quantities and prices of important commodities.
To promote harmonized and integrated science and technology—driven socioeconomic development, the government will establish a national Research and Development Coordinating Council, chaired by the President, with all core science and technology—based ministries as members. Other members could include the Minister of Finance and representatives of the office of the economic adviser to the president; umbrella science, engineering, and economics associations, research institutes, and associations of Nigerian academies, universities, and polytechnic schools; the Nigerian Investment Promotion Council; and small and medium-size enterprises, among others.
Agriculture and food security
Despite the dominant role of the petroleum sector as the major foreign exchange earner, agriculture remains the mainstay of Nigeria’s economy In addition to contributing the largest share of GDP, it is the largest nonoil export earner, the largest employer of labour, and a key contributor to wealth creation and poverty alleviation, as a large percentage of the population derives its income from agriculture and related activities.
Over the years the rate of growth in agricultural production has stagnated and failed to keep pace with the needs of a rapidly growing population, resulting in a progressive increase in import bills for food and industrial raw materials. The potential of the agri-business sector as a major employer of the growing labour force and an earner of foreign exchange has also been undermined. As a result, the large majority of Nigeria’s population, many of whom live in rural areas, remain poor. Under the NEEDS programme, agricultural development will be vigorously pursued, with the aim of achieving food security and reducing poverty.
Major constraints inhibiting private sector participation in the transformation of agricultural production include the following:
• The rapid shift of the population from rural to urban areas and the shift in consumption patterns from local to imported food items
• Lack of funds, inadequate processing and storage facilities, and inefficiencies in input supply and distribution
• The oil boom, policy inconsistency and the decline in political commitment to agricultural and rural development
• An inadequate incentive framework and pervasive distortions in the macroeconomy
• Absence of a price support mechanism and pervasive distortions in macroeconomic and sectoral policies, including misaligned exchange rates and heavy taxation of agricultural exports
• Continued dependence on rain-fed agriculture and the absence of economies of scale
• A land tenure system that inhibits the acquisition of land for mechanized farming
• Inadequate agricultural extension services and the lack of indigenous capacity or technologies responsive to local conditions
• A degraded environment that has reduced agricultural yields
Policy thrust
Given the dominant role of agriculture in the economy, prospects for food security, the supply of industrial raw materials, and overall economic growth are critically dependent on what happens in this sector. Accordingly, the government is committed to increasing investment in food and agricultural production. Its main policy thrusts include the following:
• Provide the right policy environment and target incentives for private investment in the sector. Implement a new agricultural and rural development policy aimed at addressing the constraints in the sector
• Foster effective linkages with industry to achieve maximum value-added and processing for export.
• Modernize production and create an agricultural sector that is responsive to the demands and realities of the Nigerian economy in order to create more agricultural and rural employment opportunities, which will increase the income of farmers and rural dwellers.
• Reverse the trend in the import of food (which stood at 14.5 percent of total imports at the end of 2001), through a progressive programme for agricultural expansion. The government is committed to reducing the growing food import bill to stem the rising trade imbalance as well as diversify the foreign exchange earning base.
• Strive towards food security and a food surplus that could be exported.
• Invest in improving the quality of the environment in order to increase crop yields.
Targets
To restore agriculture to its former status as a leading sector in the economy, NEEDS sets the following targets:
• Achieve minimum annual growth rate of 6 percent in agriculture.
• Raise agricultural exports to $3 billion by 2007. A major component of these exports will be cassava.
• Drastically reduce food imports, from 14.5 percent of total imports to 5 percent by
2007.
• Develop and implement a scheme of land preparation services to increase cultivable arable land by 10 percent a year and foster private sector participation through incentive schemes.
• Promote the adoption of environmentfriendly farming practices.
• Protect all prime agricultural lands for continued agricultural production.
Strategies
To achieve these targets, the following strategies will be employed:
• Vigorously implement presidential initiatives on cassava, rice, vegetable oil, sugar, livestock, tree crops, and cereals. Under this initiative, Nigeria hopes to generate as much as N3 billion a year from agricultural exports.
• Take advantage of the various concessional arrangements provided by the World Trade Organization (WTO), the European Union’s African, Caribbean, and Pacific states agreement, the U.S. African Growth and Opportunity Act, and the National Partnership for African Development, as well as the huge West African market.
• Strengthen agricultural research, revitalize agricultural training, and streamline the extension delivery system. Involve NGOs and opinion leaders in extension delivery by building capacity and promoting improved technologies that meet farmers needs.
• Review the agricultural input supply and distribution system with a view to developing an effective and sustainable private sector—led input supply and distribution system.
• Promote integrated rural development involving agricultural and nonagricultural activities, including through the provision of physical infrastructure such as feeder roads, rural water supply, and rural communications.
• Encourage states to develop model rural communities and farm settlements, providing them with feeder roads, boreholes, vocational training, simple farm tools and equipment, alternative energy sources, and communications centers to provide a wholesome rural life and reduce the incentives to migrate to urban areas.
• Adequately capitalize the Nigerian Agricultural, Cooperative and Rural Development Bank (NACRDB) to provide soft agricultural credit and rural finance. (NACRDB has been restructured and its mandate expanded to include full financial intermediation.)
• Refurbish the eight functional silo complexes and phase completion of the remaining ones to improve and increase the capacity of the food reserve programme as a step towards achieving food security. These facilities would be leased to farmers on an individual or group basis.
• Promote joint venture, private sector— managed, multicommodity development and marketing companies to guarantee remunerative prices for farmers, stabilize consumer prices, and provide alternative markets for farm produce through a buyerof-last-resort mechanism.
• Support all-season farming by promoting rain-fed and irrigated farming, with an emphasis on fadama agriculture.
• Implement the programme for the massive production of tree crop seedlings.
• Increase crop productivity through sound environmental rehabilitation and management.
Manufacturing
Although the manufacturing sector (including micro-, small, and medium-size enterprises) has the potential to create wealth and employment, the sector has stagnated in Nigeria, and its contributions to GDP and employment remain small. The activity mix in the sector is also limited, dominated by import-dependent processes and factors. Although reliable data are unavailable, rough indicators show that capacity utilization in the sector has improved perceptibly since 1999 but that the sector still faces a number of constraints, including the following:
• Lack of demand for the products and services of small and medium-size enterprises, and ineffective linkages between industry and research institutes and universities
• Lack of political will to implement local content and technical know-how policies
• Lack of engineering capacity to translate scientific research results into finished goods and maintain existing machinery; low level of entrepreneurial capacity, complete lack of institutional monitoring and technological support and paucity of trained artisanal skills..
• Unfair competition from dumped, secondhand, counterfeit, smuggled, and substandard products
• A weak legal framework; weak business, financial, and information management systems and practices; an underdeveloped payment system
• Systemic and operational constraints that impede the competitive capacities of large manufacturing companies.
The informal economy, which employs the bulk of Nigerians, faces the following additional constraints:
• Low market access
• Poor access to credit
• Poor information flow
• Discriminatory legislation
• Poor access to land
• Weak linkage among different segments of operations in the sector
• Lack of infrastructure for microenterprises
• Weak safeguards against occupational and other health hazards
Policy Thrust
The overriding objective of industrial policy is to accelerate the pace of industrial development by radically increasing value added at every stage of the value chain. Under NEEDS, for the most part Nigeria’s resources will no longer be traded in their primary state. The government will emphasize increases in total factor productivity by pursuing knowledge- and skill-intensive production on the basis of best practices. Nigeria’s industrial development strategy will encourage forward and backward linkages in a few niches. The government will continue to provide the enabling environment for private sector leadership, facilitate renewal for sunset industries, and encourage innovators. Specific policy thrusts include the following:
• Establish a structured and efficient micro-, small, and medium-size enterprise sector to enhance sustainable economic development, generate employment, and create wealth.
• Facilitate the development of an industrial sector that is internationally competitive and can take advantage of existing preferential arrangements as well as give priority to the processing of Nigeria’s abundant resource endowments into intermediate raw materials or finished goods for local consumption and export.
• Develop science and engineering infrastructure—well-trained technical and managerial personnel, physical plants, tools, spare parts, materials, and other inputs needed to operate efficiently and profitably.
Targets and strategies
Targets for the manufacturing sector include the following:
• Increase annual growth of the sector by at least 7 percent a year.
• Increase capacity utilization to about 70 percent by 2007.
• Increase the private sector’s share of investment in the sector to 70 percent by
2007.
To reverse the dwindling fortunes of the manufacturing sector, the government is committed to the following strategies:
• Remove infrastructure constraints on small and medium-size enterprises, and expedite action on establishing clusters and industrial parks. These critical ingredients for increasing the participation of the private sector will be targeted at growth poles.
• Provide appropriate institutional support, by undertaking studies aimed at attracting foreign investors and by scanning overseas markets and monitoring developments that could have implications for the sector. The Small and Medium Enterprise Development Agency of Nigeria will be provided with appropriate infrastructure and executive capacity. In collaboration with the relevant agencies at the state and local government levels, it will play the role of promoter, facilitator, and coordinator of all policies affecting small and medium-size enterprises.
• Strengthen the Bank of Industry and other special-purpose finance institutions (the Nigerian Export Import Bank, the Nigerian Agricultural, Rural, and Cooperative Bank) to perform their statutory roles (especially the provision of concessional loans and credit guarantee schemes) and enlarge their scope to include large manufacturing companies.
• Strengthen the legal and institutional framework for the operation of microfinance institutions by streamlining the operational guidelines and tax incentives for small and medium-size enterprises and adopting other measures. Explicitly recognize the informal sector, remove constraints to implementation of the Small and Medium Enterprise Investment Equity Scheme (SMEIES), and design incentives targeted at investors who would specialize exclusively in exporting.
• Review and implement a codified tax and incentive structure reform (including providing for necessary tradeoffs) that supports an export-oriented manufacturing sector and encourages large businesses to foster the growth of small and medium-size enterprises in their value and supply chain.
• Provide targeted incentives (such as tax deductibility) for science, technology, and research and development spending.
• In collaboration with relevant agencies at the state and local government levels, coordinate and facilitate the implementation of an effective competitive industrialization strategy
• Promote joint ventures and provide incentives to facilitate the flow of foreign direct investment in partnership with existing small and medium-size enterprises.
• Implement a government procurement policy that supports locally produced goods and services, especially of small and medium-size enterprises.
• Promote the production of good-quality goods and services in Nigeria to facilitate a competitive export-oriented manufacturing sector.
• Strengthen the Loan Guarantee Scheme, which will enable banks to make loans to small and medium-size enterprises.
Services
The service sector has witnessed a boom in recent years. Liberalization led to a substantial increase in the volume of activities in the banking and other financial services industries. The recent liberalization of the communications industry led to huge increases in telephone service per capita and created many new job opportunities. Improvements in the service sector are expected to strengthen performance of the real sector.
Information and communication technology
The following issues represent Challenges to improving information and Communication services:
• High cost of private provision of power
• Lack of local manufacture or maintenance of information and telecommunication equipment and the lack of local software development capacity
• Absence of effective and efficient postal communication.
Policy thrust
Under NEEDS, the government is committed to the following policy thrusts:
• Inadequate human capacity and indigenous technical know-how
• Develop and sustain a modern information and communication technology to support private sector—driven growth and economic development and to improve the quality of life and reduce the level of poverty significantly
• Improve access to Internet connectivity and raise the level of computer usage and literacy.
• Facilitate the development of a national multimedia supercorridor, including provision of appropriate incentives for private sector involvement.
• Aggressively promote information and communications technology as an instrument of mass education, growth, and development.
Targets and strategies
NEEDS sets the following targets:
• Increase telephone density to one telephone per 25 people.
• Make telecommunications accessible to a wider range of Nigerians, regardless of where they live.
• Develop a national communications and telecommunications backbone, including a national multimedia supercorridor.
NEEDS adopts the following strategies:
• Use a combination of fiscal and financial incentives to encourage private sector investment in service provision in the industry.
• Enforce intellectual property rights, and promote entrepreneurship, training, and partnerships.
• Pursue a local content policy in the manufacture of electrical and electronic equipment and communications and telecommunications equipment, including handsets, accessories, and components.
• Facilitate access to special financial support (through NEXIM, the Bank of Industry, SMEIES, and other institutions) for private sector—driven wireless telephony and Internet connectivity development in rural areas.
• Foster an enabling environment for developing software capacity.
• Provide incentives to develop industrial parks in information and communications technology.
Tourism
Nigeria’s tourism industry has great potential for attracting foreign investment, which would generate employment and foreign exchange. The industry is constrained by several factors, however:
• Inadequate facilities at established tourist centers
• Low level of global awareness of tourist attractions in Nigeria
• Undeveloped tourist infrastructure
• Lack of security
• Low level of investment
• Poor attitude and disposition towards recreation and vacation by Nigerians.
Target

The primary focus of NEEDS in the tourism sector is to make Nigeria the preferred tourist destination in West Africa. The key target in the immediate term is to increase tourist arrivals into the country by 10 percent a year.
Strategies
To achieve this target, the government will:
• Concession existing tourist attractions and provide support infrastructure for tourism.
• Encourage private sector investment in the tourism sector, and participation in the management of national parks.
• Improve security to encourage foreign tourists to visit Nigeria.
• Launch an awareness campaign within and outside the country on the benefits and potentials in the sector
• Reorient visa officials to a pro-tourism approach.
• Establish a tourism database.
• Establish a private sector—oriented institute for hospitality and tourism, regulated by the government.
• Pursue an aggressive environment policy that supports and encourages the tourism industry.
Film industry
The Nigerian film industry has significant foreign exchange—earning capacity. Recent reports indicate that some 2,000 Nigerian videos were rented or sold in a single month in a single outlet in the United States. The potential market for Nigerian films is large, but the industry is held back by several constraints:
• Low level of technological input in the industry.
• Uncertain intellectual and proprietary rights
• Underdeveloped distribution structure
• Lack of access to adequate financing
• Lack of professionalism and inadequate human capacity
• High rate of informality
Policy thrust
The government’s policy thrust is to facilitate the development of a technologically competitive, private sector—led film industry in Nigeria that will create employment, wealth, and net foreign exchange earnings.