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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Manufacturing sector plays a catalytic role in a modern economy and has many dynamic benefits crucial for economic transformation. In a typical advanced Country, the manufacturing sector is a leading sector in many respects. It is an avenue for increasing productivity related to import replacement and export expansion, creating foreign exchange earning capacity; and raising employment and per capital income which causes unique consumption patterns. Furthermore, it creates investment capital at a faster rate than any other sector of the economy while promoting wider and more effective linkages among different sectors. In terms of contribution to the Gross Domestic product, the manufacturing sector is dominant but it has been overtaken by the services sector in a number of Organization for Economic Co-operation and Development (OECD) Countries.

Before independence, agricultural products dominated Nigeria’s economy and accounted for the major share of its foreign exchange earnings. Initially, inadequate capital investment permitted only modest expansion of manufacturing activities. Early efforts in the manufacturing sector were oriented towards the adoption of an import substitution strategy in which light industry and assembly related manufacturing ventures were embarked upon by the formal trading companies. Up to about 1970, the prime mover in manufacturing activities was the private sector which established some agro-based light manufacturing units such as vegetable oil extraction plants, turneries tobacco processing, textiles, beverages and petroleum products. The strategy of light and assemblage manufacturing shifted some what to heavy Industries from the period of the third National Development plan (1975-1980) when government intervened to establish care industrial plants to provide basic imports for the downstream industries.

The import dependent industrialization strategy virtually came to a...