Trade Liberalization and the Nigerian Automotive Industry (2000 2011)

ABSTRACT 

This paper examined the impact of the new wave of trade openness on the Nigerian automotive industries. We observed that states who adopt trade liberalization policy are required to first of articulate and put in place a sound trade management framework that will serve as both external trade defense mechanism and internal stimulator for industrial global competitiveness, without which their economies will remain a dumping ground for more proactive and industrialized countries. Aside the indigenous auto component firms that recorded a significant growth in investments, production output and technical innovation in spite of the deplorable infrastructures and poor government incentives, we found out that trade liberalization policy implemented in Nigeria in the last decade did not stimulate growth of the automotive sector as witnessed in the Newly Industrialized Countries like China, Malaysia, Brazil, India and South Africa, as its evident that the auto TNCs have either shut down completely or closed most of their production lines. Contrary to the position of most studies that a shift from economic protectionism to free trade will eventually lead to the eclipse of the local industries, we strongly argue that the missing link in the Nigerian trade reform programme is the government poor management of our intereconomic relations and without addressing this inhibiting factor, there cannot be an economic turnaround in Nigeria, even if the government reverts to protectionism. Our study anchored its analysis on the theory of collective interconnectedness and generated data from secondary source and used the qualitative descriptive technique as our method of data analysis. This research focused on providing empirical evidences that satisfactorily answered the following research questions: (a) Did the Nigerian trade liberalization policy implemented between 2000 & 2011 stimulate the growth of the automotive sector? (b) Is there adequate government intervention on the manufacturing structure under the open trade regime (between 2000 and 2011) to promote the global competitiveness of the Nigerian automotive industries? We strongly affirm that unless government resist the pervasive political corruption and hastily and sincerely invested the huge petro-dollar to put in place an adequate infrastructural base, sustained raw material production, pragmatic human capital training, flourishing R&D, and viable sectoral interlink, the Nigerian vision of becoming a Newly Industrialized Country by 2020, in the new era of free trade, remains a mirage.

TABLE OF CONTENTS

Title page- - - - - - - - - - - i

Approval Page- - - - - - - - - - ii

Dedication- - - - - - - - - - - iii

Acknowledgement- - - - - - - - - - iv

Table of Contents- - - - - - - - - - v

List of tables - - - - - - - - - - vii

List of Diagrams - - - - - - - - - - viii

Abstract - - - - - - - - - - - ix

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study - - - - - - - 1

1.2 Statement of the Problem - - - - - - - 9

1.3 Objectives of the Study - - - - - - - 12

1.4 Significance of the Study - - - - - - - 12

CHAPTER TWO

LITERATURE REVIEW

2.1 LITERATURE REVIEW - - - - - - - 14

2.4 Gaps in Literature - - - - - - - - 42

CHAPTER THREE

METHODOLOGY

3.0 Introduction - - - - - - - - - 24

3.1 Theoretical Framework - - - - - - - 24

3.2 Hypotheses - - - - - - - - - 26

3.3 Research Design - - - - - - - - 26

3.4 Methods of Data Collection - - - - - - - 28

3.5 Methods of Data Analysis - - - - - - - 28

CHAPTER FOUR

THE HISTORICAL DEVELOPMENT OF THE Nigerian AUTOMOTIVE INDUSTRY

4.1 The Genesis of the Nigerian Automotive Industry - - - - -31

4.2 Trade policy shifts & the current crisis in the Nigerian auto industry import substitution (1975-1987) - - - -- - - 36

4.3 Oil Glut and Economic Stabilization (1982-1987) - - - - - 39

4.4 Re-adoption of trade liberalization & its impact on the auto sector -- - 44

4.5 Government Divestment Policy (Privatization) - - - - 45

4.6 Emerging Of Indigenous Vehicle and Auto Spare Parts Manufacturers - - 48

4.7 The Entrepreneurial Dynamism of the Nnewi Automotive Investors- - 49

4.8 Growth in Auto Investment and High Capacity Utilization - - - 49

4.9 Growth in Technical Innovation Capacity - - - - - - 51

CHAPTER FIVE

THE EFFECT OF THE TRADE LIBERALIZATION POLICY ON THE GROWTH OF THE NIGERIAN AUTOMOTIVE INDUSTRY

5.1 Open Trade and its impact on the Auto Sector- - - - - 53

5.2 The growth of the auto industry under the open trade regime - - - 55

5.3 Pre-open trade period and evidences of poor auto industrial growth- - 58

5.4 Comparing the effect of free trade on other emerging economies- - - 61

5.5 Poor trade management and the automotive industry crisis- - - - 64

5.6 The tariff system and poor productivity of the Nigerian auto makers- - 65

5.7 Regional weakness of the Nigerian government in influencing the ECOWAS tariff policy- - - - - - - - 69

5.8 Limited Application of WTO Remedial Safeguards Measures for the Revival Collapsing Domestic Industries (Safeguard & Antidumping Tools)- 74

5.9 Undue Delay in the Establishment of a Trade Defense Authority - - - 76

5.10 Lack of Trade Safeguard for the Resuscitation of the Auto Industry - - 77

5.11 Government Failure to Combat Smuggling- - - - - - 79

CHAPTER SIX

THE IMPACT OF MANUFACTURING STRUCTURAL DEFICIENCY ON THE

AUTOMOTIVE SECTOR

6.1 Weak manufacturing structure and low auto sector competitiveness - - 81

6.2 The cost burden of dilapidated infrastructure and poor intersectoral links onthe Auto sector- - - - - - - - 82

6.3 Poor infrastructure and low competitiveness of the auto industry- - - 83

6.4 Weak linkages between the automotive sector and other key sectors:Core raw material industry, R&D and education institutes, banks, policymaking authority, market, port and transport logistics facilities-- - - - - 96

6.5 Limited intersectoral linkages and industrial productivity in the auto sector- 966.6

Infrastructural inadequacy and low investment propensity in the auto sector- 996.7

Poor industrial climate and limited credit access to auto firms- - - 1016.8

Inadequate R&D funding and poor competitiveness of the auto sector- - 1036.9

Low core industry capacity and poor industrial productivity in the auto industry- 110

CHAPTER SEVEN

SUMMARY, CONCLUSION AND RECOMMENDATION

7.1 Summary - - - - - - - - - 112

7.2 Conclusion - - - - - - - - - - 114

7.3 Recommendation- - - - - - - - - 116

BIBLIOGRAPHY - - - - - - - - - 118