by DYI Team
In recent times, import substitution is incessantly becoming more common among African countries who are relying on the strategy to boost their manufacturing industry and increase job creation. The millennium-era technique involves obstructing the importation of manufactured goods and increasing the demand for locally-made goods.
The idea seems quite simple — Why import foreign-made goods when they could be produced at home by citizens? However, there are significant downsides when a country is solely fixated on import replacement,including poor and ineffective resource allocation, absence of external competition, and reduction in the country’s economy’s size.
According to the president of African Development Bank (AfDB), Dr Akinwumi Adesina, “the economic and wide divergence between wealthy-developed and low-income developing countries simply derives from their different levels of industrial manufacturing. Wealthy nations export value-added products while poor countries export raw materials”.
He made this statement at the 50th anniversary celebration and 49th Annual General Meeting of the Manufacturers Association of Nigeria in Abuja where he was a guest speaker.
He disclosed that “African countries import manufactured products, in a race to the bottom, where the only commonality in the face of limited industrial manufacturing is rise in poverty, export of jobs, vicissitudes of volatility of commodity prices and import dependency”.
As far as the renowned economist and former Minister of Agriculture is concerned, “Import substitution, while important, is a very restrictive vision. It looks towards survival, instead of looking to create wealth through a greater export market and value diversification. The end result is a manufacturing sector that cannot develop nor compete globally, but limits itself to ”survival mode”, not a “global manufacturing growth mode”.
In comparative tone, he said,
“While Asian countries have focused on the export of manufactured products, Nigeria’s approach has been on import substitution. The manufacturing sector of Nigeria represents only 3% of total revenues from exports, but accounts for 50% of imports in the country. Instead of being forward looking in expanding the share of the manufactured goods in its total export revenue, Nigeria focuses on the model of import substitution”.
While making a call for a change in perspective and the need to rapidly diversify the African economy, especially Nigeria, he advised that:
“to grow Nigeria’s economy in a transformational way, there is a compelling need to move away from a primary dependency on managing demand for forex to expanding the supply and availability of forex through greater export-oriented manufacturing”.
Just like Dr. Akinwumi Adesina, our editorial poll results during our last office coffee break at the Del-York International branch in Lagos rightly show that African must dump its idea of import substitution as it does not have enough policy in place to sustain the strategy. Significantly focusing its trade and forex initiative on import substitution has greatly affected the continent in ways not limited to poor and ineffective resource allocation, absence of external competition, and reduction in the country’s economy’s size.
Conclusively, Dr Adesina encouraged stakeholders and the MAN association to nurture greater ambition for the country’s manufacturing sector by incorporating and raising global and regional value chains and promoting a robust competitiveness and specialization.
Read Next: Why You Invest In Africa -Dr. Akinwumi Adesina