Import Substitution Strategy and Industrial Sector Performance in Nigeria
Abstract
This study re-examines the import substitution strategy and its relevance in promoting rapid industrialisation in Nigeria. The variables used to buttress this relationship are: industrial output, import substitution, export promotion, non-oil export promotion, non-oil exports, imports, and trade openness. The data were collected for the period 1986-2015 and were evaluated using the Bayesian maximum likelihood estimation technique. The study found that the effect of import substitution on industrialisation is not significant; however, it had a latent effect. This indicates that the quest for replacing imported goods with local content has not been fully realised. Non-oil exports were, however, significant and affected industrial output positively, implying that if the import substitution strategy is rigorously adopted, the growth of the industrial sector will be imminent – driven by non-oil exports. In addition, the findings revealed that dependence on foreign trade poses no threat to the quest for industrialisation in Nigeria. It concluded that the strategy of import-substitution is relevant to rapid industrialisation in Nigeria. The study recommended, among others, that government should, in addition to expenditure switching to import substitution, optimise different forms of linkages within and outside the industrial sector.
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