ATPS RESEARCH PAPER No. 2

Policy-Induced Local Sourcing of Raw
Materials and Technology Development in
Nigerian Industry

Femi Kayode
Ademola Oyejide
Afolabi Soyode

2002

Published by the African Technology Policy Studies Network, P.O. Box 10081, 0100
General Post Office, Nairobi, Kenya.

© 2002 African Technology Policy Studies Network (ATPS)

PUBLISHED BY THE ATPS COMMUNICATIONS DEPT.

ISBN: 9966-916-76-8

ABOUT THE AFRICAN TECHNOLOGY POLICY STUDIES NETWORKThe African Technology Policy Studies Network (ATPS) is a multi-disciplinary network of researchers,
policymakers, actors in the private sector and other end users interested in generating, promoting
and strengthening innovative science and technology policies in Africa. With a regional secretariate
in Nairobi, the network operates through national chapters in 17 countries, with an expansion plan
to cover the entire sub-Saharan Africa.
One of the objectives of the network is to disseminate research results to policy makers, legislators,
the organized private sector, civil society, mass media and farmers’ groups through ppublications,dialogue and advocacy. Among its range of publications are the Working Paper Series (WPS),
Research Paper Series (RPS), Special Paper Series (SPS) and the Technopolicy Briefs.
Papers published under the RPS are those produced from the small grants process or fromthe regional projects. These papers are subjected to three external reviewers and are
adjudged to be of high academic standards before publishing. To encourage ATPS researchers
to publish under RPS, ATPS offers additional honorarium to any researcher whose paper ispublished under this series.
ATPS is supported by a growing number of donors including the International Development
Research Centre (IDRC), the Carnegie Corporation of New York, the Rockefeller Foundation, theWorld Bank, the OPEC Fund, Ford Foundation, Coca-Cola Eastern Africa, the African Development
Bank, and the Royal Dutch Government.

Table of Contents

Chapter One
Introduction

1

Chapter Two
Background4

Chapter Three
Technology – A Review of Concepts, Issues and Approaches

10

Chapter Four
The Conceptual Framework and Methodology

18

Chapter Five
Analysis of Firm Responses

29

Chapter Six
Raw Material Sourcing Policy and Change Management

47

Chapter Seven
Emerging Issues

57

References

58

Chapter One
Introduction
Manufacturing technology and raw materials are intricately intertwined in a modern economy. But
there does not appear to exist either a rigorously articulate theoretical basis for a robust empiricalvalidation of the relationships between industrial capacity utilization, local sourcing of raw materials
and technology development. It is in an attempt to provide a plausible conceptual and empiricalfor these linkages that this study has its primary justification.
The near-misses in policy responses that have characterized the development experience of many
African countries may find explanation, at least partly, in the absence of adequate understandingof these relationships. Thus, in this chapter, the research problem is situated in the context of thepolicy initiatives and performance responses of Nigeria’s manufacturing sector over the past three
decades.
The Research Problem
The Nigerian manufacturing industry grew quite rapidly during the 1974-80 period that coincidedwith the country’s oil boom. During this period, manufacturing value added recorded an annual
average growth rate of about 12 percent. At the end of the oil boom, however, the sharp fall indomestic demand (resulting from a sharp decline in aggregate income) and drastic reduction in the
country’s import capacity had a direct and significant impact on the manufacturing sector. One
indicator of this effect is the rapid decline of capacity utilization of the manufacturing sector froma peak of 73 percent in 1981 to under 35 percent in 1995. In addition, the share of manuacturingin the economy’s aggregate output and in exports remains stuck at the very low levels of eightpercent and four percent respectively.
The combination of sharply reduced export earnings and high external debt servicing obligationstranslated into a relatively low import capacity during the 1980s and 1990s compared to the 1970s.
The low import capacity was in turn, held largely responsible for the the observed low capacity
utilization rates that have characterized Nigeria’s manufacturing industry over the past one anda half decades.
Policy response aimed at dealing with this problem has taken several forms. In all cases, however,the underlying reasoning appears to trace the following logical chain. Given currently installed

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POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
industrial capacity, and given that the import capacity level of the 1970s is not likely to be restored,
the quickest and most effective way of raising industrial capacity utilization is to promote increased
reliance upon, and use of local raw materials. In addition, the expected increased use of local raw
materials will be made possible primarily through greater technological adaptation and innovation
directed at production, process modification, product improvement and design of new products. In
effect, this perception of the problem would allow for policy intervention in terms not only of
measures to create incentives for encouraging the use of local raw materials (and/or disincentives
against the use of imported raw materials), but also initiatives that are more directly targeted at thepromotion of technological accumulation at the firm level. The research problem identified for the
project, therefore, requires a systematic and comprehensive analysis of the interface between
technology development (particularly at the firm level) and local sourcing of industrial raw materials.
Study Objectives and Justification
The specific objectives of this research project revolve around the problem identified above. In
particular, this study seeks to:• identify and appraise the major policies that have been used to induce local sourcing ofindustrial raw material;• evaluate whether and the extent to which policy-induced local sourcing of industrial raw
materials has been made possible by technology accumulation;• identify the broad types of technology accumulation associated with local sourcing ofindustrial raw materials; and• evaluate the role of local sourcing of industrial raw materials as a factor influencing
industrial capacity utilization.
Given this broad set of research objectives, the project proceeds by implementing a corresponding
set of associated tasks. Firstly, at the analytical level, the study offers a review of policies targetedat promoting the use of local industrial raw materials, and an exploration of how, and the extent towhich policy-induced use of local raw materials could, in principle, be expected to motivate firms
to embark on various types of technology development and accumulation activities. Secondly, inthe empirical sphere, the study provides an analysis of three important issues. One examines theextent of policy-induced local sourcing of raw materials. This aims at isolating the main factors that
explain the extent of local sourcing of industrial raw materials, and demonstrating how the patternof local sourcing of raw materials is related to the degree of policy-inducement. Another issue
examined concerns the broad types of technology development consequent upon or required tofacilitate local sourcing of raw materials. In this context, the study identifies the main factors
explaining the extent of technology development and, in the process, demonstrates how thepattern of local sourcing is related to that of technology development. In other words, it identifies
the broad types of technology development that have been promoted by local sourcing of raw
materials. Finally, a significant issue analysed at the empirical level is the relationship between
local sourcing of raw materials and industrial capacity utilization. This analysis provides a basis
for assessing the role and significance of the local sourcing of raw materials in boosting industrial
capacity utilization.
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ATPS R ESEARCH PAPER NO. 2
The specific objectives articulated above for this research project underpin its justification. Various
studies of Nigerian industry are available. Some of these have focused on the structure, growthand performance of the manufacturing sector (e.g. Sokilsi 1965, Vielrose 1970, Kilby 1969, andSchatz 1973). Several of them have examined questions relating to the components and determinantsof the structure of the incentive system, how, and the extent to which the system has influenced
the growth and structure of the manufacturing sector (e.g Asioudu 1967, Phillips1976, Oyelabi
1972, Oyejide 1973, Robertson 1981, and Teriba and Kayode 1981). Others still have exploredissues relating to technology policy per se and in terms of its contributions to the process ofindustrialization (e.g. Adeboye 1981, Abulifa 1988, Oyeyinka and Adeboye 1988, 1991, andOyeyinka 1991). A more recent effort (Adeboye, Kayode, et al, 1991 examines technology supply
and accumulation against the background of Nigeria’s structural adjustment programmes. Similarly,
in a recent assessment of the structural adjustment programme and its impact in Nigeria, the WorldBank (1994) has offered some significant insights regarding the relationship between importdependence, local sourcing of raw materials and growth in Nigeria’s manufacturing sector. Thus,
the uniqueness of (and hence main justification for) this research project lies in the fact that itprovides the first systematic and comprehensive analysis of the local sourcing of raw materials
technology development capacity utilization nexus, and how policy incentives affect it. The issues
involved in this nexus and the role that specific policies may play constitute major areas ofcontemporary policy concern in Nigeria. A better understanding of these questions could prove
useful for improving policy-making and implementation, not only in Nigeria, but also in otherdeveloping countries that may be expected to learn from the Nigerian experience.

3Chapter Two
Background
Performance of the Manufacturing Sector
In reaction partly to the belief that colonial policy frowned upon the promotion of agro-allied
processing and manufacturing activities in Nigeria and probably also in accordance with thegeneral direction of development economics literature at the time, the country’s post-independence
government expected the manufacturing sector to assume the role of a “leading sector” aroundwhich rapid overall economic growth would be built. Yet, the country started out, in 1960, with an
unusually small modern manufacturing sector. At this time, the sector contributed less than three
percent of the country’s gross domestic product (GDP). As expected, however, the sector’s shareof GDP increased overtime, more or less doubling during the 1970s but ending up at still less than
12 percent of GDP in the early 1990s.
This increase in share of GDP over time reflects the sector’s growth experience relative to the restof the economy. The manufacturing sector recorded an average annual growth rate of almost 15
percent during the 1965-80 (compared with 6.9 percent for total GDP). But this growth performance
worsened at the end of Nigeria’s oil boom; the sector’s growth declined to almost two percent per
annum during 1980-86 before recovering somewhat to grow at an average annual rate of approximately
five percent during the 1986-94 period.
In value terms, manufacturing value-added in Nigeria increased from just over US$ 0.5 billion in1970 through approximately $10 billion in 1985 to about $15 billion in 1994. Thus, Nigeria has oneof the largest manufacturing sectors in Africa. However, its degree of industrialization remains far
behind those of Asian and Latin American countries with broadly similar population and natural
resource base.
The sector’s structure has also changed over time. Between the 1960s and the early 1990s, theshare of consumer goods declined from about 80 percent to approximately 60 percent; that of
immediate goods increased from less than 10 to almost 15 percent, while the share capital goods
has risen to about 20 percent. In terms of recent growth performance, the most important
subsectors of Nigeria’s manufacturing industries include synthetic fabrics, soft drinks, sugar andconfectionery, soap and detergents, and cotton textiles. Other subsectors, particularly thosewhich are heavily dependent on imported raw materials, such as radio and television, vehicle

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ATPS R ESEARCH PAPER NO. 2
assembly, and roofing sheets, have declined substantially.
The domestic-market oriented nature of Nigeria’s manufacturing sector is sharply revealed by thefact that the sector accounts for less than four percent of the country’s total (recorded) merchandise
export, although the existence of large scale smuggling across the borders leads to an underestimationof the sector’s contribution to actual exports.
Industrialization Strategy and Policies
Nigeria enthusiastically embraced an import-substitution-industrialization strategy in the early
1960s. In pursuit of this chosen path to industrial development, a progressively more protective
import regime, based on a system of high and escalating tariffs, import licensing and prohibitions,
was used to insulate most of the domestic import-competing manufacturing activities from foreigncompetition. This phase of Nigeria‘s industrialization experience coincides broadly with the period
during which the manufacturing and processing activities in the consumer goods sub-sector grew
rapidly.
From the mid-1970s, a second phase emerged. As the Nigerian economy experienced a large oil
export boom, the country altered its industrialization strategy. An attempt was initiated to utilize
part of the abundantly available oil revenue to finance an ambitious resource-based industrialization
programme. In the process, public sector investment in manufacturing activities rose sharply as
a vigorous push was made into more capital-intensive areas of intermediate and capital goods asa means of capturing the “commanding heights” of the economy. The basic policy instrument
during this phase was public sector industrial investment which was generously used to increase
the share of the manufacturing sector owned by the public sector by approximately three-fold the
1970-80 period.
The industrialization push of the 1970s was founded on large oil export and government revenues.
The collapse of the world oil market from 1981 led to serious balance-of-payment and difficult debtservicing problems which in turn brought about drastic declines in import capacity. This amounted
to a fatal blow for the predominantly import-dependent industrialization programmes promoted by
the first two types of strategies described above.
The end of the oil boom was, apparently, not immediately recognized in 1981. Hence, an ultimately
futile attempt was made to keep existing industrialization programmes on track by simply resorting
to increased import restrictions through administrative controls and foreign exchange rationing.
Thus, between 1982 and 1985, the intensity and coverage of the import control regime increased
substantially and, as a result, imports were compressed from US$18 billion in 1981 to $8.3 billion
in 1985.
Eventually, the prevailing control regime was replaced by one that combined “austerity withstructural adjustment” in 1986. The new regime shifted the overall strategy of industrial developmentfrom maintaining public-sector-dominated, large scale capital-intensive industries to that of providing

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POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
the macroeconomic environment and other incentives for the private sector to assume the lead rolein promoting manufacturing activities. Key elements of the structural adjustment programme(SAP) include the adoption of a market-based and realistic exchange rate policy, rationalization,
restructuring and reduction of import tariffs, and enhanced trade and payments liberalization.
The most important effect of the SAP regime for the manufacturing sector has been generated by
the alignment of relative prices induced by devaluation and traded liberalization. In effect, SAP has
favoured those branches of manufacturing with high domestic value-added over assembly-type
activities. Thus, those segments of the manufacturing sector that are heavily dependent on
imports have been squeezed by both higher import costs and depressed domestic demand whileothers have been stimulated in the direction of using more local inputs. Capacity utilization,
depressed in the first instance by the drastic import compression of 1982-85, has not fully
recovered, but the differences in sub-sectoral capacity utilization rates across manufacturing
activities clearly reflect the industrial restructuring that SAP policies were designed to accomplish.
The current structure and growth prospects of Nigeria’s manufacturing sector are obviously partof the legacies of the past, dictated largely by the industrialization strategies and policies adopted
over time. The structural deficiencies and problems of the sector can therefore be traced to these
initiatives. An outstanding issue, in this context, is the unusually high import-dependence of thesector. The original import-substitution-industrialization strategy concentrated on final products
and hence, local manufacturers could not effectively tap the potentials of domestic component andinput suppliers. The push into large-scale and complex activities that followed in the next phase
was meant to achieve the required deepening but it failed. Public ownership combined withinadequate technological and managerial capabilities rendered the attempted industrial deepening
largely unviable. Limited skill and technological capabilities precluded the achievement of efficiency
levels needed to attain international competitiveness. Yet, the in-built capabilities for Nigeria’s
petro-chemical, iron and steel projects, as well as those of similar large scale intermediate andcapital goods producing facilities are simply too large to be based entirely on local demand.
Local Sourcing Strategy
In the light of the emerging deficiencies of Nigeria's manufacturing sector discussed above,emphasis of industrial development strategy shifted towards the promotion of the use of locallyavailable industrial raw materials. This shift was meant to tackle the problem of falling industrial
capacity utilization, given the binding constraint imposed by the prevailing low import capacity.
The first in the series of the steps needed for creating the necessary policy package for implementing
the local sourcing strategy was taken in 1985 when the government announced a set of minimum
targets for the local sourcing of raw materials for Nigerian industries with the added stipulation thatthese targets should be met within a five year compliance period. The following are the industrial
sub-sectors and the minimum local sourcing targets established for them:

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ATPS R ESEARCH PAPER NO. 2
Soft drinks and breweries
Agro-food industries
Agricultural processing industries
ChemicalsPetrochemicals and machine tools

:
:
:
:
:

100 %
80%
70%
60%
50%

Having established these quantitative targets, government tried to ensure their achievement bymoving in two complementary directions. Firstly, government’s own research and development(R&D) activities and its assistance for such activities by various research institutes are mainly
directed at obtaining suitable local raw materials and promoting their use by industry. Morespecially, the Raw Materials Research and Development Council (RMRDC) was created in 1988,
under the Ministry of Science and Technology, and charged with the responsibility of allocating
resources for research and development activities aimed at identifying local raw materials forindustrial use. In addition, government finances many (over 20) research institutes and funds
various research projects aimed at the same purpose.
Secondly, government has established special incentives for encouraging domestic industries toengage in research and development activities for the improvement of their products and production
processes. Included in these incentives are the following:• tax relief of up to 120 percent of expenses on research and development, provided that suchresearch and development activities are carried out in Nigeria and are connected with abusiness from which income or profit is derived;• tax relief of up to 140 percent of expenses on research and development on local raw
materials; and• the abolition, in 1991, of excess profit tax for companies with the expectation that all firms
which used to pay this tax would channel the amount into the development and use of local
raw materials.
As expressed in a recent analysis by GATT (1991, p.38):...increasing the local content of Nigerian industrial output through increased use of local raw
materials is given a high priority in Nigerian trade policies. An increase in the level of local sourcingof raw materials is considered by the government to be vital for rising capacity utilization of Nigerianindustries. The government has also been encouraging research and development of identified raw
material substitutes or alternatives through the Raw Material Research and Development Council.

The local sourcing strategy, especially as it applies to the brewing industry, has received further
support from two more specific trade policy measures. Firstly, import of beer was banned in 1978;and secondly, a similar import prohibition was applied to malted barley (the key raw material), in
1988.

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POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
The Brewing Industry
As shown above, the local sourcing strategy established, in 1985, a minimum local sourcing targetof 100 percent for the brewing industry, and specified that this target should be met within a fiveyear compliance period. This makes the brewing industry the ideal case-study candidate for thisresearch project.
Commercial production of beer in Nigeria started in 1949 when the Nigerian Breweries Ltd.
established its first (of four) brewing plant at Iganmu in Lagos. Local competition did not arrive until
the early 1960s with the emergence of Golden Guinea (1962), Guinness (1963), West African
Breweries (1964) and the North Breweries (1970).
A phenomenal growth in the number of breweries occurred in the second half of the 1970s; this was
induced partly by government’s decision to ban the importation of beer into Nigeria in 1978.
Starting, in 1972 with only four breweries producing a total of 1.65 million hectolitres per annum,
there was a dramatic growth in the following decade to 22 brewing plants, in 1982, with total
installed capacity of 11.5 million hectolitres per annum. By 1990, a total of 33 brewing plants
existed with total installed capacity of approximately 20 million hectolitres. But while installedcapacity grew up to the early 1990s, many of the breweries had ceased to be operational. Thus,by 1994, only about eleven breweries remained in operation; capacity utilization had fallen
substantially in many cases and several of the plants had been taken over by the industry leaders.
In terms of structure, the brewing industry in Nigeria was always concentrated. This concentration
was reduced somewhat and only briefly in the mid-1970s with the explosion in the number of new
breweries. However, the exit of many breweries over the past ten years or so has returned theindustry to its earlier degree of concentration, a development not totally unconnected with theeffect of local raw material sourcing policy. Thus, by the early 1990s, the two industry leaders i.e.
Nigerian Breweries and Guinness, accounted for 33 percent of the installed brewing capacity in
Nigeria, while the Nigerian Breweries Ltd. claims 48 percent of actual beer production in 1994.
In the context of the emerging oligopolistic structure in the brewing industry, there exists considerable
product competition especially between the two industry leaders. Initially, Guinness controlled theStout market until the introduction into the market of Legend Extra Stout by Nigerian Breweries.
In the beer market, Nigerian Breweries’ Star competes with Guinness’ Harp. More recently,
Guinness has also introduced Satzenbrau into the market to provide competition for Nigerian
Breweries’ Gulder. In addition Rex and Merit lagers, which have been withdrawn, were introducedin the same year (1986) by Nigerian Breweries and Guinness respectively. In the malt drink
market, Malta Guinness was introduced to compete with Nigerian Breweries’ Maltina, and the lattercompany has responded by launching its own Amstel Malta, due to the loss of substantial shareof the market to Malta Guinness.

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ATPS R ESEARCH PAPER NO. 2
More detailed analysis of the responses of the brewery industry to government policy interventions(i.e. the local sourcing strategy and associated import bans) must await the results of this study’s
survey. It may be pointed out, at this stage, that important aspects of this analysis will include theconsequences of these interventions and responses to them in terms of the industry’s market
structure, performance of the leading firms, as well as the results of their innovative activities.

9Chapter Three
Technology-A Review of Concepts, Issues and Approaches
Introduction
There is a large rapidly growing and wide-ranging literature on technology, technological development
and their various features and attributes. Hence, the review which is presented here is, ofnecessity, selective; this selectivity has been influenced primarily by the focus of this study.
An initial reading of this literature may lead one to a labelling it (similar to the one done on
management some years ago) as a‘technology jungle’. The conceptual disorder and analyticalchaos are palpable. That is probably a harsh indictment.
The apparent disorder represents a variety of viewpoints and approaches for dealing with acomplex subject-matter which technology is. In what follows, we ferret out the concepts, issues
and approaches which feature prominently in the literature and then articulate the perspectives
that are of particular relevance to this study.
Concepts
Increased total factor productivity is predicated usually on technologicaldevelopment, technicalchange or technical improvements (David, 1992). It is this realization that leads to the widely
accepted view that, in all countries, technological change is the engine of growth. Yet, the variable,technology that is changing or developing is often presented in a fluid, if not nebulous manner. Thissection reviews the concept of technology with a view to operationalizing it in the context of thisstudy.
(a) Technology
Technology, in broad terms, relates to ways of doing things. It involves systematic processes usedin achieving a given result (Adeboye et. al, 1994). Technology usually refers to the various
elements of productive knowledge which help to transform materials into goods, create new or
improved products and generate further knowledge which is more advanced and more potent thanhitherto available. In a nutshell, technology may be seen as the study, mastery and a systematic
utilization of the knowledge of the industrial and manufacturing methods in practical terms. It aims

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ATPS R ESEARCH PAPER NO. 2
at making things work effectively (Stewart, 1977).
A firm’s technology can be broken down into four embodiment forms (Technology Atlas Project
Team, 1987), comprising object, people, document and institution embodiment forms.
The object aspect of ‘technoware’ consists of tools, capital goods, land, intermediate goods,
products, crops, physical equipment, machinery, physical processes etc. People embodiment or‘humanware’ is made up of understanding, capacity for systematic application of knowledge,know-how, human capability, human labour, specialised ideas, skills, problem solving capacity
etc. The document aspect or ‘infoware’ is knowledge about physical relationships, scientific and/or other forms of organised knowledge, R&D, technical information, principles of physical andsocial phenomena, standards, computer software, specification etc. The last form, institiutional
embodiment or ‘orgaware’ comprises organisational work assignments, organisation of products,
processes, tools and devices for use by people, day-to-day operations of production, social
arrangements, means for using and controlling factors of production, inter-and-intra-firm networking,linkage with meso institutions, etc.
The disaggregation of technology into different embodiments that technology is not all machines.
It is the knowledge partly embodied in machines, and otherwise embodied in organizational
structures, and processes (Ernst et.al, 1994). Technology is an interplay of machines, skills andprocesses through which organizations adapt means to ends. Thus, division of labour andspecialization underline the complex organization of machines, processes, materials, peoples andproducts by which goods and services are created in modern societies. The nature of the
production system, whether manual, automatic or computerized, determines to a large extent theflexibility, efficiency and effectiveness of the configuration. The types of predominant materials
used for machines and as raw materials determine the quality, the cost of goods and the extent of
production. Whether a product is mass produced or not depends on some features of the products,
processes and materials. The “impressive degree of technological dynamism which has been a
constant source of economic development” (Wright, 1995) has its origins in the possible permutationsof physical and human combinations in the production process.
The concept of technology has different implications for various organizational levels and perspectives.
Within the entity viewpoint, the firm is a “depository of experiential, and tacit knowledge” (Wright
1995, p.20). This view reinforces the conception (Penrose, 1959, p.46) “that the firm is a collective
entrepreneurship”, having individuals who have had to experience working together and challenged
by the environment to match the performances of other firms by seeking to continually reduce its
costs by creating new products and processes, and by continually improving the dimensions of its
products. The notion that the firm produces both products, processes and knowledge justifies a“learning theory of the firm”. The learning is obviously done by individual humans.
Technological acquisition at the firm level requires interactions among various departments andunits of a firm. According to (Ernst et. al., 1994), such interactions take place:

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POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY• between marketing and production (feedback from consumer complaints and suggestions
leading to product improvement)• between production and design (continuous interactions between production engineers
leading to a bottom-up approach to design where the focus is on manufacturability); and• between research and development, marketing and production (joint development teams,
consisting research and development, marketing and production people who are responsible
for the product throughout all stages of its development cycle, right up to the final manufacturing,which has led to a substantial acceleration of “speed to market”).
Any technology acquired by a firm as a result of these processes remains largely confined to thefirm because the personnel and organizational structures facilitating such acquisition belong to thefirm. In other words, the technology is localised within the firm, and can only filter out to other firms
with the active or tacit cooperation of affected firm or its accredited representatives. Moreover,
it is the existence of such interactions within a firm that effectively differentiates the firm fromanother in terms of its production process, effective and efficient utilization of resources, technologicalcapabilities, and indeed, its ability to weather the storm of economic downturns and unfavourable
government policies.
It is clear that the technology at the firm level is a composition, not only of the requisite physicalcapital, but also its depository of practical and tacit knowledge as well as the subsisting interactions
among its various component parts.
Technology at the inter-firm level necessarily involves linkages between productive units as aconception of inter-industry transaction mediated by both pecuniary and non-pecuniary externalities,
specifically, technological externalities. Linkage, in its broad sense, is “an inducement to activity
on the part of one enterprise created by the action of another” (Weiss,1987). In a narrow technicalsense, it refers to the network of relationships of productive units, within a framework of interindustry externalities. Hirchman (1958) identified two broad categories of linkages namely, thebackward and forward linkages. Backward linkages refers to the interdependence of an industry
on its supply sources while forward linkages refer to the relationship between industry and its
users.
Thus, at the inter-firm level, certain production requirements are provided including the transferable
skills of labour, high technologically-intensive skills, and an enhanced knowledge of production
processes. Specialized joint production exists therefore between and among small specialized
firms which involve frequent transfers of an unfinished product between numerous specialized
firms and industries on the one hand, and between the firms and industries on the one hand, andbetween the firms and their customers on the other. Thus, firms interact among themselves witha view to enjoying commonly produced facilities e.g. in large industrial concerns.
Firms in the same industry may also cooperate with each other in order to avail themselves ofopportunities arising from government policies and/or programmes. It is not uncommon for

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domestic and foreign firms to enter into ventures which are of mutual benefit to themselves whether
in terms of seeking collaboration for research and development, staff training or updating plant andmachinery.
Thus, Ernst et. al. (1994, p.20-21) see interactions among firms in terms of linkages which“encompass such diverse activities as the procurement of materials, parts and components andservices and the related exchange information with suppliers, the sharing of marketing anddistribution activities and the sharing and joint development of product design and production
technology and of related scientific knowledge”. Within this context, it is easier to interprettechnical change as a “collective enterprises” within an organized market. Thus, enterprise-levellinkages enhance technological learning (Mytelka 1991, p.13). Small-technology-based firms(STBF) need access to external formal technology or technological externality. And as Mytelka(1993) argues, such firms now find it is “cooperation not competition that can enhance modernization”.
In the same vein, a firm’s boundary no longer contains its size; on the contrary, the size isdetermined largely by its knowledge-base (Wright, 1995, p. 27).
The knowledge-base should be immediately linked to the existence of a developed domestic
supply base. Materials technology, materials and components supply and cost are quite importantfor performance and quality of individual firm’s production.
(b) Technological Capability
Ernst et. al. (1994) define technological capability as the great variety of knowledge and skills
which firms need to “acquire, use, adapt, change and create technology”.
It transcends engineering and technical know-how to include organizational know-how knowledgeof behavioural patterns of workers, suppliers and customers. This knowledge and skills derived
from “iterative trial-and-error, cumulative learning by doing, by using and by interacting” within thefirm (between marketing and production, between production and design and between researchand development, marketing and production) and between the firm and its customers, andsuppliers. To Bell and Pavitt (1993), technological capability constitutes a change-resource“needed to generate and manage technical change including skills, knowledge and experience andinstitutional structures and linkages”.
Once we move away from the basic concept of technological capability and its broad definition,
opinion diverges, sometimes quite widely, regarding what the component parts of technologicalcapability are, how firms acquire them as well as the factors that may promote their acquisition andaccumulation.
Thus, in terms of the component parts, Lall (1993) recognizes three, i.e. investment capability,
production capability and linkage capability. The first describes the firm’s ability to identify andprepare projects, procure equipment, design, construct, and install a production facility. The

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POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
second deals with actual operation, quality control, plant maintenance, product innovation, etc;
while the third capability deals with technical relationships with suppliers and customers.
In comparison, Ernst et. al. (1994) identified six different technological capabilities, three of which
are similar to or are essentially the same as those articulated by Lall. Thus, in addition toinvestment, production and linkage capabilities, Ernst et. al. added such new capability concepts
as minor change, major change and strategic marketing capabilities.
Whatever may be the differences in the specific categorization of technological capabilities, it
seems to be generally agreed that the acquisition of these capabilities involves a learning process
particularly at the firm level and that the process is impinged upon by national level technologicalcapabilities, the prevailing macroeconomics environment the incentive system and competitive
pressures (Lall, 1993).
(c) Technological Development
The firm has been posited as being in the best position to enhance innovation through knowledge
and learning (Chandler, Shapiro, 1991). The firm acts as an organization for storing knowledge(including tacit knowledge), is an enduring institution which can reproduce that knowledge andinculcate it in new entrants or share it with other firms and it acts as a social agent which canestablish trust and cooperation (Wright, 1995). The firm thus represents a continuum of relations
that develop over time through productive experience. Given experience-based nature of technologicalcapabilities attained from learning-by-doing, firms must draw on their internal capabilities andcapacity in order to produce and develop new products. Thus the firm, large or small, provides thevehicle for technological development and innovations by discussing, purifying and codifying
necessary changes, adaptations to work routines, processes and products. It is obvious why
dearth of technical skills will be a constraint to technological development.
Technological development of technical change provides a linkage between technological capability
and increase productivity as a stage where better ways of transformation of components andmaterials to final products are developed through either the adaptation of imitative technologicalinnovations or experience-based learning. It is the manifestation of the evolution over time of
cumulative deeper forms of technological capabilities.
Technical change generates large productivity increases and ultimately, economic growth. As
Branscob (1992) points out, any society’s economic prospects are likely to be strongly influenced
by its capacity for sustained technological development.
One of the major issues in the analysis of technical change is the capacity of and speed with whichdeveloping countries can absorb and adapt new technological innovations as against possessing
the capability of creating new technological innovations of their own. It is suggested that theabsorption and application of these new ideas would more probably sooner launch developing

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ATPS R ESEARCH PAPER NO. 2
countries on the “threshold of technological competition” than the attempt to “re-invent the wheel”(Weiss Jr., 1993). It is through the cumulation of a myriad of small technical improvements andincremental modifications of the production process (David, 1992) that the technology adopting
firm generates increases in total factor productivity in the long-term. Any enterprise involved in thisvariety of technological development is regarded as the primary agent of technological change.
Existing and varying market conditions, and the macro-economic policy environment, to a large
extent, influence the efforts to modify, adapt and improve production processes. Market conditions
on the one hand facilitate the need to efficiently produce and adapt innovative ideas in the
production process, thus leading to improved quality of products. On the other hand, macroeconomic policy environment in conjuction with adequate and appropriate technological infrastructure,including the requisite political will of the government to put in place regulatory framework of theright, act as inducements to the firm in its choice of cheaper alternatives for the productive process,modification and adaptation of its existing technology.
Issues and Approaches
How do firms and countries acquire technological capabilities and use these to further enhancetheir levels of technological development? Does this process respond best to market-based
incentive systems or does it require broad or specific government interventions? This is an issue
that has for long dominated the debate in the literature, particularly in relation to ability ofdeveloping countries to “catch-up” with the more developed world in the area of technology.
As literature reveals, thinking has evolved over time with regard to the role of market versus thatof government in general economic development as well as with specific reference to technology
development. An earlier, neo-classical, perspective treated technology as an exogenous economic
development under the idealistic assumptions of perfect competition, constant returns to scale andabsence of externalities. This perspective required no active involvement of government in firmlevel decisions; the useful role of government was limited to eliminating distortions and providing
a stable macro-economic environment and a reliable legal framework (Justman and Tenbal, 1991)
within which firms could operate.
Given its underlying assumptions, the view of the relative roles of government and the market in
the promotion of technological development implied by this perspective could not endure once one
admits that, in the real world, competition is not necessarily perfect, that there can be non-constantreturns to scale, and that significant externalities may exist. Hence, a new perspective crept in to
replace it. This new perspective has been referred to as the “market-friendly approach” (Singh,
1995). Under this approach, the role of the government in economic development is regarded asimportant, although it is best limited to providing the social, legal and economic infrastructure,creating a suitable climate for private enterprise, and ensuring a high level and appropriatecomposition of human capital formation.

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POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
The role assigned to the state in the market-friendly approach is larger than that provided for in the
neo-classical perspective but is regarded as too limited by those who regard the acquisition oftechnological capabilities and the development of technology (whether through adaptation or
innovation or both) as an incremental and long-term process that of necessity, requires concerted
national effort. In the context of this view of technological progress, it is argued that the government
must play an active, leading, direct and crucial co-ordinating role (Singh, 1995).
Towards a New Focus
The debate in the literature has apparently established a consensus on several issues. For
instance, learning, in its various forms, is recognized at the basis for the acquisition of technologicalcapability which enables firms not only to access existing technologies but also to expand thefrontiers of technological knowledge. In addition, the development of technological capabilities isdynamic as its stages are influenced by changing industrial and firm-level strategies as well as
national level government policies. More specifically, the macro-economic environment, domestic
market competitiveness, and international competitiveness as moderated by national-level trade
policies are important factors affecting the acquisition and accumulation of technological capabilities
at the firm level.
Given these areas of consensus, the focus of research on technology development need to shift
away from the debate as to whether one should have a market-based technology development
paradigm or a state-led technology development paradigm. It seems clear that importantelements of both paradigms are involved and the real issue should be how to manage the interface
between them. In other words, once it is recognized (a) that government policy interventions are
required in certain respects to assist in guiding and co-ordinating enterprise-level efforts in theacquisition of desirable technological capabilities and (b) that firm-level responses to those policy
interventions will be affected by a number of factors (including their organizational structures andownership pattern, as well as market structures and incentives), then it is important to pay attention
to the process through which policy interventions are expected to bring about particular firm level
responses. More specifically, appropriately managing that process of change becomes crucial to
the success of the entire effort.
The management of change thus constitutes an important aspect of the technological development.
A movement from one technological development phase to another would necessarily involve somany parties: individuals and firms on the private sector side of the public sector. Unprogrammed,
these individuals, firms and groups would arrive at some technological development point which
may or may not be optimal and the national perspective. We hasten to suggest that the various
individuals and groups in the private and public sector can be consciously programmed for a moredesirable result. Our focus on change management derives its rationale from this reasoning. In
other words, isolated policy articulation and injection may achieve the desired objectives. But a
set of policies articulated on the basis of the various interests (at times conflicting); on the basisof information disseminated to promote overall benefits; and taking into account the psychological16

ATPS R ESEARCH PAPER NO. 2
and economic calculus of operating participants is more likely to result in very beneficial outputs.
This analytical framework, while taking cognisance of the conscious sustained efforts of government
and individual enterprises in technological development, views change management and individual
enterprises in technological development, views change management as an important factor forsmoothening the process of change and ensuring improved policy effectiveness. In this perspective,
the issue of technological development goes beyond the role of government and the firm and thus
should focus on how technological change ought to be conceived and managed.
The response of the firm to government policies for inducing technological development cannot betreated in isolation. Firm’s responses depend partly on their organizational and ownership
structures. A firm’s ownership structure will influence the enthusiasm with which it embraces thetechnological development effort. The firm which is foreign-owned may frown at locally-based
research and development and be favourably disposed towards foreign-based research anddevelopment efforts, thus the interests within the firm must be consciously weighed. The attitudeof the management towards change will also be influenced by the level of understanding of theprocess of technological change as well as the exposure to information on the available incentives.
This perspective, which assigns an important role to change management and focuses on theinterface between government policies and the response of private sector firms in the process oftechnological development, forms the basis of the conceptual framework articulated for this study.
It is more fully described in the next chapter.

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Chapter Four
The Conceptual Framework and Methodology
Introduction
This section provides a theoretical framework for understanding and validating the relationships
between government policy on one hand and technology development and capacity utilization on
the other. It proceeds by first providing a narrative version of the main links embedded in the nexusof technology development, raw materials policy and industrial capacity utilization. We next
attempt to trace how other important variables impinge upon the interface which constitute theprimary focus of our research.
Narrative Version of the Framework
As observed earlier, persistent low capacity utilization in the manufacturing sector triggered theneed for a policy response. Thus, ultimate target of policy was seen as the boosting of capacity
utilization. This was expected to be achieved explicitly by increasing the use of local raw materials,
given the fact that binding foreign exchange constraints sharply restricted import capacity and thus
made the traditional reliance on imported raw materials no longer viable or even feasible. An
important component of this chain argument, which was largely left implicit, was that the technology
development required to make the use of local raw materials both feasible and efficient either
already existed or could be easily established.
In principle, therefore, a simple narration of the linkages to be researched should explicitly
recognize an ultimate target of policy, i.e. industrial capacity utilization, as well as two immediatetargets, i.e. technology development and local sourcing of raw materials. Figure 4.1 offers a linear
presentation of these linkages. More specifically, the figure shows that appropriate and specificpolicy initiatives could be directed to influence local sourcing of raw materials through linkages (a);this would, in turn, lead to a boosting of capacity utilization via linkage (b). In addition, the figure
provides explicit recognition for a second channel of policy impact. In this case, specific policy
measures would target technology development through linkages (c), which would in turn enhancethe efficiency with which local raw materials could be used (linkage (d)) and ultimately boost
capacity utilization via linkages (e).

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ATPS R ESEARCH PAPER NO. 2

Figure 4.1: Linking Policy to Intermediate and Ultimate Targets(c)Technology
Development

GOVT
POLICY

(e)
(d)
(a)

Local Raw
Materials

CAPACITYUTILIZATION(b)Other Elements of the Model
We have highlighted three variables – capacity utilization (the problem variable), raw materials
policy, and technology development. There are other variables which are important and may appear
necessary to be highlighted. These other variables are grouped into two, namely, those that will befurther clarified but not incorporated into our model and those to be incorporated and thus extend thelinear model.
(a) Concepts of Technology
Technology, technological capability and technology development will be further clarified but will not
be treated separately in the expanded model. Like the linear model, the expanded model will contain
only the variable technology development. It is clear from our discussion in sub-section 3, that we
believe that the three concepts are different, even though there may be some over-lap and interrelationship. It is, however, sufficient for this study to clarify some of the confusion, but not complicate
our model unnecessarily by treating them separately in the expanded model. For now, we summarize
the essence of the three concepts, highlighting the same of the distinctions thereof.
The distinguishing feature of technology is that it refers tostock. With this feature, some of the earlier
definitions will read thus:• the stock of the ways of doing things• the stock of the knowledge partly embodied in machines, organizational structures andprocesses.
• the stock of physical capital, depository of practical and tacit knowledge.

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POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRYWith technological capability, the emphasis is on access to and/or ability to use ability to use
available technology, it is a flow concept. There is some overlap between technology broadly
defined and technological capability. For example, the four embodiment forms of technology
earlier highlighted, namely, technoware, humanware, inforware and orgaware appear to us tooverlap with technological capability especially in the last three embodiment forms. As thedefinition of technology becomes more robust, the overlap with technological capability becomes
greater.
Technological development is concerned with change often times expected to be of substantial
magnitude and/or rapid: at times, it may be of less magnitude. It can be limited to technology alone,
but invariably would involve technological capability. Figure 4.2 summarizes the relationships
among the concepts.
Figure 4.2: Technology, Technological Capability and Technology Development – A Relationship
SchemaTechnological Development

ChangeTechnological Capability

Flow

Technology

Stock(b) Change and Change Management
Change is a variable that is further clarified and incorporated into the model. Though simple,
Figure 4.1, by bringing out the key components and the various linkages, reveals the processfeature of the relationships. Being a process, change is implicitly involved. Surprisingly, becauseof the implicit feature, change is not usually identified and treated as an element in the policy
response model. The need to treat change and an element in the policy response model whichplaces emphasis on technical/technology improvement, development and change. The three
involve some departure from, or modification to the existing state of doing things, either of which
involves change.
If change is accepted as crucial, the management of change is even more crucial. How change
is managed is a major determinant of the effectiveness and efficiency of the linkages inFigure 4.1.
Change management is therefore a major determinant of, and indeed, the key to the effectivenessof policy response. There are numerous reasons why change management is crucial to thesuccess of policy response and in particular to technology development. Some of these are dueto the general nature of change, some derive from the involvement of people and others are

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ATPS R ESEARCH PAPER NO. 2
technology related. Earlier in subsection three, we highlighted the various interests that are
involved in the policy of local sourcing of raw materials as well as those involved in the technologicaldevelopment associated with it. Our concern here is the effect of change and change managementon policy response.
To fully appreciate the relationship between change management and policy response, it becomes
critical to understand change generally. Change involves altering or modifying an existing
situation which invariably tends to encounter opposition or resistance. One of the common
illustrations by the psychologists of the effect of changes on its environment is the effect of apressed finger on an air-filled balloon — the contour of the balloon visibly changes at the point ofcontact and not always obvious is the stretched effect on the entire balloon. The message fromthe balloon illustration is clear and valid for technology development, namely, changes may leadto pressures, conflicts and resistance to change.
Most changes are initiated by people. The responses to change by people are well illustrated by
the Hawthorne experiments performed by Roethlisberger and his associates. This was anexperiment in employees’ attitude to produce response that is conditioned by feelings towards
change - in the specific case of the Hawthorne experiment, it was testing the effect to changes inillumination on worker productivity. The feelings of the workers about the experiment itself became
an important variable.
Feelings are not a matter of logic. As rightly put, “logic alone is an ineffective means of trying tomodify feelings because it does not get at them directly” (K. Davis and J. W. Newstrom p. 285).
Yet the feelings determine to a large extent the resistance to change. The resistance to change
consists of any employee behaviour designed to discredit, delay or prevent the implementation ofa proposed changed. According to Davis and Newstrom (p. 290).
Employees resist change because it threatens their needs for security, social interaction, status or
self-esteem. The perceived threat stemming from a change may be real or imagined, intended orunintended, large or small. Regardless of its nature, employees will try to protect themselves fromthe effects of change. Their actions may range from complaints, foot-dragging, and passive resistance
up to absenteeism, sabotage and work slowdowns.

Change management becomes critical in minimizing resistance to change. The management
starts with the type of change. This is important because not all changes are resisted. How andwhen the change is introduced, who introduces the change and how much dialogue is involved in
the change are other dimensions of change management to be properly and frankly addressed.
For example, it is generally true that pseudo participation may not enlist positive response. Thus
change management (or implementation of change) is crucial in minimizing resistance andobtaining positive response.
The discussion so far is on change generally. It is important to emphasize that the issues raised

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POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
are applicable also to technological development (change). At the heart of this change are people.
With the recognition of “man”, the effectiveness with which the policy change is managed becomes
crucial.
(c) Firm Characteristics
There are numerous dimensions of a firm that may enlist positive or negative response-most ofthese are double-edged swords. The most critical of these are size, ownership structure, sourceof technology, management structure and general outlook-inward or externally outside the country.
Our objective is to collect information of these and other characteristics and attempt to use themto assess the response to local sourcing strategy as well as any resulting technology development.
We show in Figure 4.3 some of the variables used to measure each of these dimensions.
Table 4.3: Selected Firm Characteristics and their Measures
Dimensions and MeasuresTypeownership
structure

Firm size

Source oftechnologicalcapabiligy

Management
structure

Linkagebehaviour& tendency

Privatemajority
owned foreignsubsidiary(PFS)

Asset base Fully depend
on foreign

Compositionof board &management

Fully outward Profitability(weak internal)

Privateminority
owned foreign
participation(PMS)

Manpower Partial
size
dependence

Compositionof technicalgroupsParitial
linkage

Liquidiity

Independent
endogenous
private (IEP)

Physical
outputhectolitre

Significancelinkage

Reserves

Endogenously Composition
drivenof skilled
technology
workforce
effortState-owned
Turnover ________(SON) majority
Nigerian
NOTE: Reading is vertical, no meaningful horizontal inferences are expected.

22

Performance__

ATPS R ESEARCH PAPER NO. 2(d) The Economic Environment
The concern here is the environment that is external to a firm. A few observations are worthhighlighting here.
The first is that the general policies and strategies of government are designed to create anenabling environment. It will, therefore, not be necessary for us to treat these policies andstrategies separately in our model. It is pertinent to note a recent assessment of the importanceof the enabling environment in Africa [Global Coalition for Africa (1994, p. 12)] which states that:
Creating an enabling environment for private investment has lagged behind other economic andstructural reforms in many African countries. Potential investors continue to be deterred byexcessive bureaucratic procedures, the unavailability of medium or long-term financing, a lack ofconfidence in the judicial system and complex, rigid labour laws.
The second point to highlight is that the environment contains several sub-components apart fromthe economic aspect mentioned. The political, technical and institutions dimensions are also
important. Our concern in the environment, except where quantifiable dimensions are possible,
would learn more on the assessment of the actors in the breweries and their responses to the local
sourcing strategy.
(e) Encumbrances
Most, if not all of the breweries rely on external technical input, obviously in varying degree. Thereis, therefore, foreign interest in most of the breweries, even when the ownership is 100 percent
Nigerian. It is important to note the stakes in the breweries and the conflicts of interests which may
arise with local sourcing and the attendant reluctance to promote technology development.
It is best to regard some of these interests not only as conflicting, but constraining and in mostcases hidden. The problems inherent in managing these interests are likely to be lost if they are
regarded as constraints the way economists would normally treat them. They are likely to be
similarly down-played if they are lumped with the enabling environment. We believe theseinterests must be highlighted and addressed up-front if meaningful policy response is desired. We
have labelled these types of interests as encumbrances, borrowing from the legal profession. The
choice of the concept is dictated by the property transfer implied by the change to be effected. The
legal concept consequently has the greatest appeal.

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POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
The Model
We summarize in Figure 4.4 some of the critical relationships among the elements highlighted
above. The model enables us to see at a glance:•
those elements that affect the raw materials policy•
those elements that affect the strength of the relationship between two elements, and•those elements that the materials policy affectAs shown in the figure, and as we expect, the raw materials policy affect capacity utilization andtechnology development. Thus, both in linear model and the expanded model(Figure 4.4) show
two routes through which the material policy is expected to impact on capacity utilization. For easeof reference, the various relationships are labelled as follows:
Figure 4.4: A Model of Raw Materials Sourcing Policy
Technology Development

Firm characteristics

R6

R3
S6

S2

Encumbrances
R7

S3

Capacity
Utilization

R1

S1

R9

R2

Raw materials
sourcing policy

R5

S5

Economic
environment

S4

R4Change management

R8

R1 - materials policy and capacity utilization
R2 - materials policy and technology development
R3 - technology development and capacity utilization
R4 - change management and materials policy
R5 - external environment and materials policy
R6 - technology development and firm characteristics
R7 - encumbrances and external environment
R8 - change management and external environment
R9 - change management and external encumbrances
The above labels are used for the relationships between two components of the model. As shownin figure 4.4, there are more relationships than those listed above. There are relationships between
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ATPS R ESEARCH PAPER NO. 2
a component and some of those already highlighted. Such relationships are shown in broken lines.
These broken lines tend to weaken or strengthen the relationships they are linked to. For ease ofreference we labelled them differently as follows:
S1 - R1 - and change management
S2 - R1 - and technology development
S3 - R2 - and change management
S4 - R5 - and change management
S5 -R6 - and change management
S6 - R2 - and encumbrances
The S—lines can be regarded as boosting or weakening the R-relationship. The figure shows thatchange management, technology development and encumbrances are the sources of theseboosters or weakening forces. In terms of the number of R-relationships affected, the change
management would appear to be the most important of the three sources. Indeed, this assertion
is further reinforced by R 9 which shows a relationship between change management and encumbrances.
Further assessment of the relative importance of these sources might be possible from the field
results. We discuss below other relationships, and the postulates thereof, that we hope to test
based on the field result:• the more successful the material substitution, the higher the level of capacity utilization (R1 )• material sourcing should promote technology development (the field result will reveal themagnitude of such development/change) (R2 )• the greater the resulting technology development, the higher the level of capacity utilization(R3)• the more effective the change resulting from material sourcing in terms of participation,
education etc., greater would be the success of materials sourcing policy (R4 )• the more favourable the external environment, the more successful the materials policy (R5 )• firm characteristics will greatly influence technology development (R6 )• the external environment determines to a large extent existence and retardative effects ofencumbrances (R7 )• effective change management can produce favourable external environment generally but
particularly for a given policy (R8 )• effective change management will minimize and can, indeed, eliminate the negative effectof encumbrances.
The above are broad hypotheses in that some of them incorporate other sub-hypotheses. For
example for R6 selected firm characteristics will each be tested for the effect on technology
development. The same is true of R 5 for which selected components of the external environment
will each be used for testing the hypothesis therein. Where quantification poses a problem for
hypothesis testing, we may for this study, simply classify firms on the basis of kind of responsesuch as positive, negative, none, for such components as technology development. Other
variables may be scored in terms of high, low or medium for the classification exercise.

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POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
Methodology(a) Objectives and Tasks
The research methods derive from the primary objectives of the study and the major tasks forachieving these objectives. The data gathering methods flow logically from the tasks. The major
objectives include the following:• identify and appraise the policies that have been used to induce local sourcing of raw
materials by the manufacturing sector;• determine the impact of such policies on the industrial sector;• evaluate whether, and the extent to which, policy-induced local sources of raw materials has
been made possible by technology accumulation;• identify the different types of technology accumulation associated with local sourcing of raw
materials; and• evaluate the role of local sourcing of raw materials as a factor influencing capacity utilizationin Nigerian industries.
The above objectives have a number of sub-objectives that are derivable from them including:• assisting in answering questions related to the appropriateness, usefulness and effectivenessof policy response;• isolating the major factors explaining the extent of local sourcing of raw materials;• identification of the main lessons for policy-making and implementation; and• determining the role and significance of local sourcing of raw materials in boosting capacity
utilization.
(b) Data Gathering Methods
Given the variety of the major tasks, a number of data gathering methods were employed including:• desk study• brain-storming sessions• field work to cover:- professional associations within the brewing industry;- selected brewing firms;- relevant government ministries;- selected research institutes;- RMRDC.
The desk research involved a thorough search for relevant documents and information. Throughthis, we were able to identify sources of data and information relating to the history and developmentof the brewery industry in Nigeria, highlighting the various changes that had taken places. It wasalso possible to identify the sources of information on the effect of both government and company
policies on the substitution of local raw materials. Similarly, we were able to identify sources of26

ATPS R ESEARCH PAPER NO. 2
information on the implication of these policies on the performance of various companies within
the industry and the survival strategies of the companies. For the field work, three methods were
employed:- visit to elicit positive response- preliminary visit to selected breweries- survey of:* breweries* government ministries and agencies* research institutes
Visits were made to elicit positive response to our questionnaires and further indepth interviews
were conducted at the secretariat of the brewery sub-group of the Manufacturers Association of
Nigeria (MAN). The visit also made it possible to access the list of members in the industry. This
provided an insight into the evolution of the industry over the last decade, bringing out membersthat are still surviving and those who have either been merged or acquired by bigger companies.
Visits were made to selected breweries to have a broad overview of their operations and collect
preliminary data and information on their activities.
For the full survey of selected breweries, research institutes and government ministries andagencies, three types of structured questionnaires were designed and were administered.
The questionnaire for government ministries focused on the management of policy. The following
four government ministries were selected for interview:• The Federal Ministry of Industries• The Federal Ministry of National Planning• The Federal Ministry of Science and Technology• The Federal Ministry of Finance
The research institutes were selected for information on technology development. The following
three institutes were selected:• Federal Institute of Industrial Research, Oshodi (FIIRO)• Project Development Institute (PRODA)• Institute of Agriculture Research (Zaria or Ibadan)
Two levels of interviews were planned for the breweries. At the first level, all the functioning
breweries were to be interviewed. The plan was to distribute the questionnaires during one of themeetings of the sub-group. At the second level, we intended to have more indepth interview witha small number of the breweries selected after the analysis of the questionnaires. We intended
to select at least a brewery from the following categories:• the leaders in the industry - Nigeria Breweries Plc and/or Guinness Plc• the moderately sized breweries such as International Brewery Ltd., Ilesa and/or Premier
Brewery, Onitsha• those not performing well, e.g. Standard Brewery, Ibadan or Associated Brewery.

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POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
Research Constraints
Three sets of questionnaires were prepared for the breweries as individual firms and government
agencies, ministries and three research institutes.
While the research institutes were generally well disposed to answering the questions, this was
not the case with the breweries. Initially the research team did approach the Manufacturers
Association of Nigeria (MAN) and had fruitful discussion with the Director-General. The DirectorGeneral introduced the researchers to the Breweries Manufacturing sub-group. It turned out thatthe rivalrous relationship between the firms would make cooperation concerning this researchalmost impossible. Our initial proposition to treat the questionnaire jointly, was accepted but later
rejected. In the end, we had to revert to the option of individual company visits, an exacting anddifficult exercise. We had to employ extant goodwill and all manner of clandestine means to obtain
information.
As for the government ministries and agencies, only a few of these on our initial list were directlyor remotely concerned with the substitution exercise. The National Planning Commission, Federal
Ministry of Finance, claimed not to have had input into the exercise. All the listed agencies werevisited but to our surprise, only the Federal Ministry of Science and Technology and some of its
agencies, were involved. In short, the real actions that brought about the substitution was at thelevel of the companies and government agencies.

28

Chapter Five
Analysis of Firm Responses
The empirical component of this study explores the relationships hypothesized in the conceptual
framework presented earlier. Before the main findings are analyzed, however, it is useful todescribe the data and summarize the main questions that guided their collection.
The sources of data used in the study are primary and secondary. Questionnaires were distributed
to 12 firms, to obtain data relating to issues of interest in the brewing industry from six - two market
leaders, two moderately-sized breweries and those not performing well. Secondary source of data
was used primarily to complement primary sources especially in areas where there were insufficient
primary data. The primary data were cross-sectional, covering the six breweries. Annual reports
and statement of accounts of relevant firms were used as secondary sources to obtain data on
impact receiving variables. Data were collected and analyzed in respect of Nigerian Breweries Plc,
Guinness Nigeria Plc, Sona Breweries Plc, Consolidated Breweries Plc, Vitamalt Plc and Standard
Breweries Plc. For the purpose of confidentiality, these companies have been represented by A,
B to F, with the alphabetical order not corresponding to the arrangement of company names.
Questions that were asked in the questionnaire related to pre-policy state of affairs of relevant
firms. For instance, ownership structure, pre- and post-policy sources of most important materials,
foreign relationship of firms as well as questions bothering on the performance of firms are
addressed in the questionnaire. Also, government agencies and local research institutions werecovered in the attempt to address some issues relating to policy formulation and implementation.
Analysis of Firm Responses
The local sourcing of raw materials policy induced different responses, according to empiricalfindings. These responses are examined within expectations of the conceptual framework for thisstudy.
(a) Materials Policy and Capacity Utilization
To start with, a re-statement of relevant hypothesis is in order. First, we hypothesized a linkage
between materials policy and capacity utilization. More specifically, the more successful thematerial substitution, the higher the level of capacity utilization (R1). Data available show thatmaterials substitution policy has been successful as 100 percent substitution levels have beenachieved for sorghum and maize by virtually all sample firms. While firms A, B and E achieved 100
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POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
percent substitution in sorghum earlier (1986, 1987 and 1987 respectively), firms C and F achieved
it in 1990. For maize, all firms achieved 100 percent substitution level in the late 1980s, except
firm C, which lagged behind, achieving the level in 1990 (Table 5.2). Also, data available onTable
5.1 show that all sample firms source 100 percent of sorghum and maize locally. 50 percent of firms
source sugar locally while the remaining 50 percent obtained the material from foreign sources.
In addition, only Firm C has achieved some measure of local sourcing for hops (30 percent). The
remaining 75 percent of firms still utilise hops from wholly foreign sources. These findings showthat relying on domestic sources of local raw materials was imperatively brought about by thepolicy stance of the discontinuation of imported barley for brewing purposes, hence the resort tolocal supply base and the enhancement of local value added.
Data obtained on the capacity utilization of firms A and E show that capacity utilization has beenon the decline. For instance, with an installed capacity of one million hectolitres for Firm A, only
45 percent and 30 percent level were achieved respectively in 1991, 1992 and 1993. For Firm E
which has 750,000 hectolitres as installed capacity, capacity utilization fell from 500,000 hectolitresin 1989 to 350,000 and 180,000 hectolitres in 1993 and 1994 (Table 5.3). Therefore, empiricalfindings have rejected the R 1-relationship. The implication here is that another R-relationship, R 5 ,is proven to be true.
(b) External Environment and Materials Policy
R5 postulates that the more favourable the external or economic environment, the more successful
the materials policy. Given the acute economic depression in Nigeria, and with the adverse
impacts of deregulation, devaluation, liberalization and privatization going on in the economy, theharsh economic environment brought about by these factors account more for the failure materials
policy to transform into higher level of capacity utilization.

30

ATPS R ESEARCH PAPER NO. 2
Table 5.1 Percentage (%) Sources of Raw Materials
Materials

Sorghum
Maize
Sugar
Hops
Local
Foreign Local
Foreign Local
Foreign Local
Foreign

A
B
C
D
E
F

100
n.a
100
n.a
100
100

n.a
n.a
-

100
n.a
100
n.a
100
100

n.a
n.a
-

100*
n.a
100
n.a
10

n.a
n.a
100
90

30
n.a
-

100
70
n.a
100
100

100

-

100

-

50

-

25

-

50

-

75

Hops
(%)

Year
of
subst.

Yeast
%)

Year
of
subst.

n.a
n.a

-

-

n.a
no
subst.
nosubst.

n.a
-

n.a
no
subst.
-% ofcompany
in localsourcing% ofcompany
in foreign sourcing*
Utilize yeast instead of sugarn.a
Did not provide percent source of materials
Source: Field survey

Table 5.2 Level of Subtitutions Achieved (%)
Comp Sor- Year Maize
any ghum of(%)(%) subst.

Yearofsubst.

Sugar
(%

Year
of
subst.

A
B
C

100
100
100

1986 100
1987 100
1990 100

1986
1987
1990

n.a
100

D
E

100
100

n.a
100
1987 100

n.a
1987

n.a
-

n.a
n.a
no
30
change
n.a
n.a
10

F

100

1990 100

1986

10

n.a

Source: Field survey

31

10

-

POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY(c)Materials Policy and Technology Development

A priori expectation established a strong linkage between materials policy and technology development.
Materials policy should promote technology development (R2). Table 5.3 provides data on
production line changes and modification induced by materials policy. While some firms established
new production lines, some did not, preferring only substantial modification to existing productionlines. 33.3 percent of sample firms established new production lines, while majority of them, 66.7
percent modified existing lines. Companies which establish new lines as well as modified existingones constitute 33.3percent. Two firms, (E and F) established new lines and modified existing
ones. Firms C and D only carried out modification on their existing production lines while Firms
A and B neither established nor modified existing plants. Newly established lines by Firms E andF include malting sorghum lines and fermentation, sorghum supplementary unit, kettle filter andheater. Modified production lines include filter mesh, malt plant, brewing kettle, barley malt line
and kettle filter among others.
Apart from production process changes proxied by production lines changes, other characteristics
also signify different firm level responses to local sourcing of raw materials policy. These include
the establishment of own agricultural farms, the use of contract farmers, establishment of hitherto
non-existent departments (e.g. R&D) as well as new skills acquisition. These are depicted inTables 5.4 and 5.5. From Table 5.4, source(s) of most important materials are indicated. Threeof sample firms (i.e Firms B, C and D) obtain their materials from the open market only. One firm,
Firm A, utilises own farm and open market while another, Firm F, makes use of own farm, contract
farmers. Firm E alone obtains its materials from the three indicated sources i.e own farm, contract
farmers and open market sources. Neither of them uses contract farmers alone nor own farmsource alone. Moreover, none of the firms obtained its materials from a combination of open
market and contract farmers alone.
Table 5.3: Production Process Changes
CompanyA
B
C
DE
F% change offirms which
establishednew line or
modifyEstablished New Production Lines
None
None
None
None
Sorghum supplementary units,kettle filter
and heater
Malting sorghum lines and fermentation

Modified Existing Production Line
None
None
Filtration machinery
The grist case
Barley malt line and kettle filter

33.3%

Filter mesh, malt plant and brewing
kettle
66.7%

66.7%

33.3%

Source: Field survey

32

ATPS R ESEARCH PAPER NO. 2
Table 5.4: Source(s) of Most Important Materials
Source(s) Company

Own farm

Contract farmers

Open market

A
B
C
D
E
F

1
0
0
0
1
1

0
0
0
0
1
1

1
1
1
1
1
0

Key: 1 = Yes
0 = NoSource: Field survey
From Table 5.5, 50 percent of firms created new departments to cope with materials policychange. These are Firms D, E and F. All the firms retained existing departments. In a related
issue, 66.7 percent of firms employed new skills to cope with policy change. These include C, D,
E and F. Nearly all, 83.33 percent provided training (in-house and/or overseas) for existing skillsin their respective firms.
Table 5.5 Creation of New Departments and Employment of Newskills
Measurescompany

Create new
departments

Close existing
departments

Employ new
skillsTraining of existingskillsA
B
C
D
E
F
Create new
department %Retained
existing
department %Employ new
skills%Train existingskills %Key: 1 = Yes

0
0
0
1
1
1

0
0
0
0
0
0

0
0
1
1
1
1

1
n.a
1
1
1
1

50

-

-

-

-

100

-

-

-

-

66.7

-

0 = No

-

-

83.33

Source: Field survey

33

POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
As a result of production process changes and use of local raw materials, information was obtained
to evaluate the changes in quality, taste, colour and prices of beer produced and sold. According
to data on Table 5.6, 50percent of customers like the quality of beer produced from local materials,
33.3percent of them do not like the quality while only 16.7 percent are indifferent to pre- and postlocal materials use quality. Also, half of customers provided information that the beer taste is
alright and a third are indifferent. Only 16.7percent think that the tastes are not so good as whenwholly imported materials were used. Majority of customers, 83.3percent still think that beer colour
and prices are in order.
Table 5.6: Consumer Information Feedback
Company

Beerquality

Beer
taste

Beer
colourBeer
pricesProblemarea for company

A
B*
C
D
E
F
%like very much% do not like% indifference

_
+
0
+
+
_
50
33.3
16.7

0
+
+
_
+
0
50
16.7
33.3

+
+
+
+
_
+
83.3
16.7
_

+
+
+
+
n.a
+
83.3
_
_

Quality
None
None
Taste
ColourQuality___

Key: (+) = like very much; (-) = do not like; (0) = indifferent; (*) = Quality, Taste, Colour and Priceof Malt Drink
Source: Field survey

In view of the responses of firms relating to materials policy change through the establishment of
new or modified production processes, creation of new departments and acquisition of new skills,
the conclusion can be drawn that the effect of materials policy change was strong on technology
development and technological capability.
Thus, materials policy, according to empirical evidence, has brought about substantial technology
development to the brewing industry.
(d)Technology Development and Capacity Utilization

The greater the resulting technology development, the higher the level of capacity utilization (R3).
The impact of local sourcing of raw materials policy, though having induced considerable technology
accumulation, did not seem to have been brought out in the industrial sector, as capacity utilization
has successively fallen (Table 5.3 and 5.7). Though data showed substantial new production lines

34

ATPS R ESEARCH PAPER NO. 2
establishment and old lines modification, capacity utilization fell consecutively from 45 percent
level in 1991 to 35 percent and 30 percent levels respectively in 1992 and 1993 for Firm A. In
addition, Firm E experienced fall in capacity utilization from 500,000 hectolitres in 1989 to 350,000
hectolitres in 1993 and 180,000 hectolitres in 1994. Therefore, the role of local sourcing of raw
materials policy in engendering technology development was not carried through to increased
capacity utilization. Empirically then, technology development did not induce increased capacity
utilization. The reason for the absence of this linkage was enumerated in the R 5 relationship, as
the unfavourable economic climate existing in the overall economy adversely impacted on firmlevel capacity to utilize effectively and optimally the resources available to it.
Table 5.7: Capacity Utilization for Selected Years in HectolitresYear

Firm A

Firm E

Installed capacity
1982
1989
1991
1992
1993
1994

1,000,000
n.an.a
450,000
350,000
300,000
n.a

750,000
750,000
500,000
n.a
n.a
350,000
180,000

Source: Field survey(e) Change Management and Materials Policy
The hypothesis linking these variables states that the more effective the change resulting frommaterials sourcing in terms of participation, education etc., greater would be the success ofmaterials sourcing policy, R 4 .
The concept expressed in this linkage derives from the effect which participation, education, etc.
should have on the success of materials policy. In effect, the expectation consists, in the high level,
efforts to persuade firm level interests to appreciate the long run benefits of local sourcing ofmaterials, as against unavoidable short run costs. Ordinarily, given the uncertainty and instabilityof economic expectations vis-a-viz actualization by firm level interests, and the resulting inertia tochange emanating therefrom, firm level interests tended to heavily discount future long run
benefits, and to this extent, perceived disparencies exist regarding short run cost and long
benefits. Rationality pre-supposes that properly weighed, maximization of short run benefits is the
optimal option for firms.
Available data did not indicate any attempt to fully involve private sector interests in the implementationof the materials policy. Data also showed the involvement of few government agencies (e.g.

35

POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
National Planning Commission and Nigeria Standard Organization) in the policy management,
limiting efforts to media promotion and campaigns, and coercive economic measures (e.g ban on
importation, etc.) rather that persuasion, education, participation, etc., of relevant interests. To theextent that effective change management was absent at the implementation stage, the materials
policy recorded partial success. This result however has not diminished the potency of the
hypothesis, only that empirically, proper change management has tended to be weak, and thus
has adversely affected the success of the policy.
(f) Technology Development and Firm Characteristics
The expectation here is that firm characteristics will greately influence technology development(R6). The evidence from the study is that both variables tend to move in opposite direction in somecases, and directly in others, and thus is inconclusive.
Tables 5.8, 5.9a-5.9d, and 5.10 show firm characteristics of ownership pattern, foreign assistance,
type of foreign relationship, type of foreign technical support, foreign technical staff assistance,and relationship with local research and development institutions. Firm E and F have all therequisite foreign administrative and technical support, including that of local research and development
institutions, and thus have very strong foreign technical relationship. They also possess anownership structure that is more foreign than say, Firm C, which also has very strong foreigntechnical relationship. Therefore, on the one hand, we have a strong foreign technical relationshipwith strong foreign ownership (Firm E and F), and on the other, a strong foreign technicalrelationship with weak foreign ownership (Firm C).
After policy change, Firm E and F established new production lines as well as modified existingones while Firm C only modified its existing production lines. Furthermore, Firms C and F achieved
100 percent subsitution level in sorghum in the same year (1990) while Firm E had done the samein 1987 (Table 5.1). Similarly, Firms E and F achieved 100 percent maize substitution respectively
in 1987 and 1986 while Firm C achieved the level in 1990. Therefore, a situation exists where more‘foreignness’ which is perceived to create encumbrances to policy and hence detrimental to the
speed of technology development is not borne out by facts. Another situation also exists wheremore ‘Nigerianness’ which is perceived to posess less encumbrances to policy implementationand hasten the pace of technology development is not also borne out by available facts. Thus,though firm characteristics is perceived to influence technology development, the establishmentof direction of causality is inconclusive in this study.

36

ATPS R ESEARCH PAPER NO. 2
Table 5.8: Ownership Pattern (%)
Company
A
B
C
D
E
F

Nigerian shareholding
n.a
n.a
78
60
60
60

Foreign shareholding
n.a
n.a
22
40
40
40

Source: Field survey

Table 5.9a: Foreign AssisstanceCompany

Technical partner

Type of relationshipType of Tech. assistance

A
B
C

None
Formerly XYZ.Now none
Y Ltd, Europe

None
Use of brand names
Equity participation
Brand names
Technical support

D

X of D, Europe

Use of brand names

E

IB ofB, Europe

Equity participation
Brand names
Technical supportF

HH, Europe

Equity participation

None
None
* Spares and components* R&D for new processes
and production* Plant refurbishment* Major annual
maintenance* Raw materials* Spares and components* Plant refurbishment* Provision of yeast* Spares and components* R&D for new proceses
and production* Plant refurbishment* Major annual
maintenance* Raw materials* Spares and components* R&D for new proceses
and production* Plant refurbishment* Major annual
maintenance* Raw materials

Source: Field survey
N.B. Real Names of technical partners have been coded to maintain confidentiality
37

POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
Table 5.9b: Type of Relationship
Company Equity participation
A
B
C
D
E
F

0
0
1
0
1
1

Use of brand Technical support
names
0
1
1
1
1
0

Total

0
0
1
1
1
1

0
1
3
2
3
2

Key:1 = Yes; 0 = No; Total column: 0 = Very weak; 1 = weak; 2: = Strong; 3 = Very strong
Source: Field survey

Table 5.9c: Type of Technical AssistanceCompany

A
B
C
D
E
F

Spare parts R&D for
Plant refuandnew process rbishment
components and produc
tion

Major
annualmaintenance

Rawmaterials

Total

0
0
1
1
1
1

0
0
1
0
1
1

0
0
1
0
1
1

0
0
5
2
5
5

0
0
1
0
1
1

0
0
1
1
1
1

Key:1 = Yes; 0 = No; Classification onTotal column: 0 = Very weak; 1 = weak; 2: = Strong; 5 = VerystrongTable 5.9d: Foreign Technical Staff AssistanceCompany

Type of assistance

Number of staff

A
B
C
D
E
F

None
None
Engineers
Engineers and technicians
Technical & production manager
Product developers

None
None
6
5
5
3

Source: Field survey
38

ATPS R ESEARCH PAPER NO. 2
Table 5.10: Relationship with Local Research and Development Institutions
Company

R&D institutions

Nature of linkage

Incentive behind linkage

A
B
C
D
E

None
None
None
None
Ministryof Scienceand Technology

None
None
None
None

F

Federal instituteof industrial research

None
None
None
None
Policy negotiation,pilot scale
New productdevelopment
New productdevelopment

None
New product development

Source: Field survey
Impact of Local Sourcing of Raw Materials
In this section, analyses of the effect of materials policy change on product range, production
costs, turnover, value added and capital employed are provided. Owing to the concentration which
has occurred in the brewing industry, two firms, Firms E and F, will be used in the analyses
concerning turnover, value added and capital employed. The rest of the analyses will bother on
all sample firms.
(a) Turnover, Value Added and Capital Employed
These variables are used as proxies for capacity utilization, owing to incomprehensive data
provided by respondent regarding capacity utilization.
The nominal and real values of turnover, value added and capital employed are provided inTable
5.11 to 5.16 for both companies, the nominal values having been deflated by the composite
consumer price index to obtain their real values. 1988 is the base year in the analyses as itcorresponds to the year of total import restriction of raw materials for the brewing industry. The
period of analyses is 1986 to 1994.
Firm F experienced an unstable growth trend in its turnover over the years (Table 5.11). It grewby 33 percent in 1987, fell by three percent in 1988 and rose moderately by five percent in 1989.
It reached a peak in 1994 at 57 percent growth rate. Between 1990 and 1992 however, growth wasstable around an average of 36 percent. On the average, growth rate was approximately 19 years
over eight year period (i.e. 1986-1994). The average growth rate since the outright ban (1988) on
imported materials was 18 percent. The slight difference (one percent) in the average growth rate

39

POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
could be the result of the raw materials stocking policy of the firm which largely derived from theexpectation of the ban, and hence has stored substantial imported materials to even out theadverse effect of total import restriction on production and sales.
Table 5.11: Turnover of Firm F
Year

N Mn
nominal
value

N Mn
real
value

Index ofreal value
1988 = 100

Cummulative
growth rate(%)(%)
yearlygrowth

1986
1987
1988
1989
1990
1991
1992
1993
1994

205
341
515
811
1180
1709
2899
4992
7143

195
294
284
297
403
517
606
604
767

69
103
100
105
111
182
213
213
270

-31
3
0
5
41
82
113
113
170

33
-3
5
36
41
31
0
57

Source: Computed from annual reports and financial statement of Firm F

The data on value added on Table 5.12 present similar unstable yearly growth. It grew by 15
percent, one percent and 17 percent respectively in 1987, 1988 and 1989. The year 1990, 1991
and 1992 also witnessed some relatively stable growth, 31 percent, 47 percent and 30 percent
respectively, after which it fell to 16 percent 1993 and peaked at 58 percent the following year.
Table 5.12: Value added of Firm F
Year

N Mn
nominal
value

NMn
real
value

Index ofreal value
1988 = 100

Cummulative
growth rate(%)(%)
yearlygrowth

1986
1987
1988
1989
1990
1991
1992
1993
1994

146
191
299
526
716
1061
1777
3285
4585

139
164
165
193
244
321
372
397
493

84
99
100
117
148
195
225
241
299

-16
-1
0
17
48
95
125
141
191

15
1
17
17
31
47
30
16
58

Source: Computed from annual reports and financial statement of Firm F.

40

ATPS R ESEARCH PAPER NO. 2
Capital employed is a measure of the total investment in a company. From Table 5.13,the growthrate of capital employed reached a peak in 1990 at 108 percent and was at its lowest in 1988 at-45 percent. The growth was relatively not too divergent between 1989 and 1991 when the growth
rates were 76 percent, 108 percent and 48 percent respectively in 1989, 1990 and 1991. One
striking feature common to the three variables i.e. turnover, value added and capital employed, isthat between 1989 and 1992 they exhibited relative stability, probably denoting the adjustment
effects of change in materials policy of 1988. The relative stability would therefore indicate an
adjustment tendency to the shock of policy shift.
Table 5.13: Capital employed of Firm F
Year

N Mn
nominal
value

NMn
real
value

Index ofreal value
1988 = 100

Cummulative
growth rate(%)(%)
yearlygrowth

1986
1987
1988
1989
1990
1991
1992
1993
1994

173
192
208
548
952
1249
1839
2817
3501

164
165
114
201
324
378
384
341
376

144
145
100
176
284
332
337
299
330

44
45
0
76
184
232
237
199
230

1
-45
76
108
48
5
-38
31

Source: Computed from annual reports and financial statement of Firm F

The growth rate of the real value of turnover of Firm E exhibited successive increases in the three
years following the change in raw materials policy (Table 5.14). Though Firm E has achieved 100
percent substitution for maize and sorghum in 1987, the effect did not manifest until 1989 whenturnover grew moderately by five percent, then increased phenomenally by 25 percent in 1990 andpeaked in 1991 at 43 percent. Considering all the years together, the growth trend was unstable,
reaching negative values in 1988 and 1992 respectively.
Value added also showed increases in the four years following the year of imported materials ban(Table 5.15). It reached its peak in 1992 at 166 percent and its trough in 1993 at - 160 percent.
In between these extreme rates , average growth rates range between 10 percent and 31 percent.

41

POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
Table 5.14: Turnover of Firm E
Year

N Mn
nominal
value

NMn
real
value

Index ofreal value
1988 = 100

Cumulative
growth rate(%)(%)
yearlygrowth

1986
1987
1988
1989
1990
1991
1992
1993
1994

268
308
474
751
1005
1510
2155
3921
5202

254
265
262
275
343
456
451
474
559

97
101
100
105
131
174
172
181
213

-13
1
0
5
31
74
72
81
113

14
-1
5
26
43
-2
9
32

Source: Computed from annual reports and financial statement of Firm E

Table 5.15: Value added of Firm E

Year

N Mn
Nominal
Value

N Mn
Real
Value

Index ofReal Value
1988=100

Cummulative
Growthrate(%)(%)
Yearlygrowth

1986
1987
1988
1989
1990
1991
1992
1993
1994

190
156
236
389
535
730
1042
1891
2390

180
134
130
143
183
221
438
229
257

138
103
100
110
141
170
336
176
198

38
3
0
10
41
70
236
76
98

-35
-3
10
31
29
166
-160
22

Source: Computed from annual reports and financial statement of Firm E

The growth pattern of capital employed by Firm E is similar to the previous two: unstable and fairly
divergent, osciallating between more negative and positive rates (Table 5.16). It reached thehighest growth rate of 154 percent in 1993 and lowest of - 38 percent in 1988. It exhibited positive
growth rates in the two years immediately following the material policy shift, suggesting increased
requirement of capital to implement firm level policy response.

42

ATPS R ESEARCH PAPER NO. 2
Differential impacts of individual company’s dividend policy would confuse any meaningful interpretationof the effect which materials policy would have on capital employed. Ideally, capital employedshould grow in the years following materials policy change (i.e. if unexpected) and taper off, ceterisparibus, in later years when liberal dividend policy would be undertaken. The behaviour of capital
employed growth in Firm E seems to confirm this hypothesis but because the firm achieved 100
percent substitution prior to policy (i.e. policy is not unexpected), no meangful conclusion can bemade in this respect.
As a concluding remark, both companies’ growths of turnover, value added and capital employedappear to grow at relatively stable increases within three to four years (i.e. 1989 - 1992) of the local
sourcing of raw material policy.
Table 5.16: Capital employed of Firm E

Year

N Mn
Nominal
Value

N Mn
Real
Value

Index ofReal Value
1988=100

Cummulative
Growthrate(%)(%)
Yearlygrowth

1986
1987
1988
1989
1990
1991
1992
1993
1994

194
208
237
546
617
687
913
3232
3535

184
179
130
200
210
208
191
391
380

142
138
100
154
162
160
147
301
292

42
38
0
54
62
60
47
201
192

-4
-38
54
8
-2
-13
154
-9

Source: Computed from annual reports and financial statement of Firm E(b) Product Range
The changes in the range of products of sample brewing firms are shown inTable 5.17.Nigerian
Breweries and Guinness have added two new products each to their range. These are Rex Lager
beer and Amstel Malta in the case of Nigerian Breweries, and Satzenbrau Lager beer and Malta
Guinness. Consolidated and Standard Breweries maintained their pre-materials policy productrange. Sona Breweries and Vitamalt have respectively lost one and two lager beer after policychange.

43

POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
Table 5.17: Range of productsCompany

Before policy

After policy

Difference

Nigerian
Breweries Plc

Star lager
Gulder lager
MaltinaStar lager
Gulder lager
Rex lager
Maltina
Amstel Malta

Rex lager
Amstel MaltaStar lager
Harp lager
Satzenbrau
Malta Guiness
Merit lager

Satzenbrau
Malta Guiness

Guiness
Nigeria Plc

Stout
Harper lager
Merit lager

(+2)

(+2)

Sona
Breweries Plc

Gold lager
Tusk lager
Wilfork Dark Ale
Maltonic

Tusk lager
WilfortMaltonic

Gold lager(-1)

Consolidated
Breweries Plc“33” lager beerHi -malt“33” lager
Hi - malt(0)

Vitamalt
Breweries Plc

Top lager
Baron lager
Vitamalt

Vitamalt

Top lager
Baron lager(-2)

Standard
Breweries Plc

Club lager
Club Malter

Club lager
Club lager(0)

Source: Field survey(c) Costs of Production
Table 5.18 depicts the production cost effect of change in production processes induced bymaterials policy change. 66.7 percent of firms currently experience higher costs of production asa result of the substitution exercise, 40 percent of which carry 20 percent - 30 percent additionalcost. Only one firm, Firm A reported a lowering of production costs, with the reduction being lessthan 10 percent. Given that production process change required the establishment of new facilities
such as new departments, own farms, new production lines, employment of new skills as well as
retraining of existing skills, the higher production costs are explained by these factors.

44

ATPS R ESEARCH PAPER NO. 2
Table 5.18: Production costs
Company

Production cost changes

Percentage change (%)

A
B
C
D
E
F

Lower
n.a
HigherHigherHigherHigherLess than 10n.a30
20 - 30
20 -30
10 -20Source: Field survey

Some Policy Implications
This study has attempted to evaluate the responses of the Nigerian Brewing Industry to the policyof local sourcing of raw materials. It has also examined the way the policy was managed and theimpact of policy on the brewing industry. Finally, in the process, it has uncovered variables orfactors which confound the direct relationship between policy and responses and between policy
and performance. There are important policy implications that are pertinent in each of these areas.
The policy to promote local sourcing of key raw materials in the brewing industry was accomplishedthrough the banning of the importation of these inputs. Evidence presented in this study revealed
that the policy succeeded broadly in achieving its primary objectives. The wholesale adoption andacceptance of the policy was predicated on the number of favourable features and characteristics
of policy itself. In other words, the firms found it largely in their own interest to adopt the policy
because of the cost, convenience and foreign exchange savings arising from it. Also, the policy
provided sufficient lead-time for many of the firms to reorganize many of their production processes
in accordance with the requirement of the use of the locally sourced materials. In short, theconsonance between government’s and firms’ objectives assured the success of the materials
policy. The main lesson here is that the policy which takes explicit account of the interests of those
it affects is more likely to elicit the expected range of responses.
The policy itself resulted from a careful determination of what is feasible technologically. Researchstudies, production using raw materials in a pilot scheme, planting of grains (e.g. wheat, etc.), allwere done to confirm the feasibility of the local sourcing of raw materials years before theimposition of the ban and hence of the local sourcing of raw materials policy. The logical planningand design of this policy as well as the consultation between government and the affected sectorsof the private promoted a fuller understanding of the limit of technical feasibility, the implications
for technology acquisition, the availability of local substitute and the financial implications of thepolicy prior to its implementation. In any case the thorough understanding of the technical andconceptual process on the government side made it difficult for government to succumb topressure for a reversal of that policy. In all, it seems clear that the process of designing and

45

POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
managing this policy exhibited a number of strong features that enhanced its success.
This policy was implemented at a very difficult time of the Nigerian economy. Although, the firms
upon which this policy directly impacted responded eagerly and in the appropriate direction thegenerally depressed condition of the Nigerian economy led to a number of unexpected results. For
instance, a ‘shake-out’ occurred in the industry: the number of breweries fell drastically fromaround 50 to less than 20 while capacity utilization among the surviving breweries also declined.
Perhaps, it is conjectural to suggest that the survivors remaining is because of the policy. In otherwords, it would be incorrect to ascribe this undesirable result to the policy itself. We do know thatthe share prices of these companies are doing well on the stock market indicating that thecompanies are individually liquid and profitable. For instance, the share prices of one of the firms
rose from 380 kobo in January 1992 to 497 kobo in January 1994, while for another, the shareprices rose from 578 kobo in January 1992 to 890 kobo in 1994. An important policy lesson may
be that major policy changes are more likely to achieve their objectives without some initial
negative effects if they were implemented in more accommodating and political environment.

46

Chapter Six
Raw Materials Sourcing Policy and Change Management
Introduction
This is a preliminary assessment of RMRDC on its local raw materials sourcing and technologicalefforts, an appraisal based on certain fundamental data derived largely from secondary sources.
Against this background, it is also necessary to place the objectives, strategies and performanceof the RMRDC in proper perspective using our model developed inFigure 4.4. In doing this, we
hasten to add that all the problem variables less the firm-level characteristics are deemed relevant,that is, raw materials sourcing policy, technological development, capacity utilization, encumbrances,change management and economic environment. It is recognized that encumbrances embody
hidden actors whose differing interests and objectives may be at variance with those of the policy
initiators and implementors. In the same context, the economic environment in existence relates
to the availability of the macro- and micro-level incentives and the totality of the accommodating
environment. The component of the model which is thought most relevant to RMRDC and in which
it is perceived as the most critical single agent of change concerns the change management
variable. In this case, therefore, RMRDC is conceived as the prime agent of transformational
leadership and a change manager whose basic objective functions should involve activities
spanning the domain of social engineering, inclusive of the techno-economic function.
The natural point of departure is the presentation of the mandates, action programmes andactivities of the RMRDC.
Mandates
Raw Materials Research and Development Council (RMRDC) is a Nigerian parastatal createdunder Decree 39 of 1987. Its mandates are nine in number, namely, to:• draw up policy guidelines and action programmes on raw materials acquisition, explotationand development;• review from time to time raw materials resources availability and utilization, with a view toadvising the Federal Military Government on the strategic implications of depletion, conservation
or stock-piling of such resources;• advise on adaptation of machinery and processes for raw materials utilization;• encourage publicity of research findings and other information relevant to local sourcing of47

POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
industries;• encourage growth of in-plant research and development capabilities;• advise on and devise awards or systems for industries that achieve any breakthrough or
make innovations and inventions;• organize workshops, symposia and seminars designed to enlighten people on new developments
and solutions discovered from time to time;• consider and advise on special research grants for specific objectives, and;• consider and advise on any other issue capable of enhancing the objectives of the council.
From the mandates enunciated above, it can be deduced that the Nigerian government views thepersistently low local raw materials utilization by industries as the national problem to be tackled.
Ignoring the overlap in Mandates four and seven, the catch-all Mandate nine allows RMRDC somelatitude to seek and gain government support along new lines as it gets increasingly to have thefeel for issues involved in the problem variable.
ProgrammesWith the mandate constantly in view, the following policy initiatives, action programmes andprojects have been derived (from techno-economic surveys carried out by some ten or so multidisciplinary task forces commissioned by RMRDC) and are in various stages of actualization:(a)stock-taking of available raw materials and determining scale and scope of theiruse by the manufacturing sector;(b)
enumerating present industries’ raw material and technology needs where they aresourced and the extent to which they can be improved upon, copied or modified
cheaply and efficaciously;(c)
inducting new machines, methods and commercialisable products that will tap
local raw materials;(d)inaugurating catalytic model factory projects and pilot plants possessing demonstrativevalue in various parts of the country-these model factories are for raw materials
processing and have the virtue of being largely designed and fabricated by local
engineering and technological talents;(e)providing venture capital for turning endogenous processes and prototype technologies
into pecuniary and gainful enterprises that rely increasingly on local content andvalue added manufacturing and;(f)evolving inter-organizational and multilateral collaborative alliances and planetary
networking agreements for transfer, elaboration and advancement of technology
as well as for carrying out consultancy services, including plant installation,
trouble shooting, etc.

48

ATPS R ESEARCH PAPER NO. 2
Activities
In assessing the role of RMRDC in the fostering of endogenous know-how related to the methods
and techniques of transforming locally-obtained mineral and agro-based raw materials into industrial
inputs and finished products, one has got to see and think through its activities to date.
On the mineral side, for example, RMRDC has audited equipment fabricators and identified anumber of machinery items like hammer mills for size minification, mixers for liquid blending,blenders for solid mixing, tanks of various forms and shapes and varieties, dryers and ovens andkilns for drying and callacination, furnaces for melting of non-ferrous metals and for cast iron, silos
for bulk storage, extruders, semi automatic weighing and packaging equipment, mechanical andhydraulic press for dewatering, cyclones and hydrocyclones for wet and dry classification.
The snag in most of all this is that local manufacture of complete plants for processing mineral raw
materials is found to be in prototype stages only. This is because equipment fabricators areconstrained by:• Scarcity of appropriate materials of construction, and• Low level of commercialization of most of the locally fabricated machinery and equipment
items resulting from their short service life, unreliability, lack of standardization, poor
engineering design, inappropriate materials in terms of efficiency and output capacity
compared to their imported machinery counterparts.
So, while the potential ability for configuring complete mineral plants exists among some known
equipment fabricators, what obtains in the majority of cases and in reality for now is specialized
production of specific items of equipment.
As for the side of agro-based raw materials, the story is not much different. Again, most of the
manufacturing activities are concentrated on simple single items such as mills, grinding machines,
manually operated press for dewatering and oil extraction, crackers, grater and shelter. In otherwords, a preponderance of the total equipment in use is imported - distillation equipment, heatexchanges, mills, to name just a few.
Outcropping from the various techno-economic surveys already referred to is the adoption of anumber of research and development programmes and catalytic projects in the quest for endogenous
technology in identifiable priority areas such as the production of refractor bricks, sweeteners, highgrade titanium dioxide, enzymes, foundary crucibles, kenaf pulping for paper making and extractionof oleo resin from ginger. Other strategic projects of research and development interest to RMRDC
are starch derivatives, lead and zinc smelting, seed multiplication, agro-minerals fertilizers, andpoultry feed formulations. But the high financial outlays required for setting up these projects haveallegedly limited the success ratio.

49

POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
Nevertheless, as far back as 1983, RMRDC had begun to engage in joint venture projects, to hostinvestment fora, to set up a risk fund scheme as well as a mineral development fund to finance local
resource-based long-gestation-period investments. For example, the Nigeria (brick) Refractories
Limited is a joint venture company between Ajaokuta Steel Company Limited, Trad Stamps Limited
and RMRDC.
There are at least five model factories currently being financed by RMRDC aimed at catalyzing theestablishment of such factories in Nigeria by prospective entrepreneurs, viz: soda ash processing,talc processing, phosphate beneficiation, pharmaceutical grade kaolin, and cocoa processing.
Also pilot plants being supported by RMRDC include production of amylase enzyme, castor oil, dyestuff, sorghum malt, science and laboratory chemicals and reagents, ginger processing.
Besides, it tries to give a fillip to local design and fabriacation of critical process equipment andtheir components as a way of promoting local engineering capability. Such fabrications include
coal briquetting machine, full fat soya extruder, ginger slicing machine, imported hammer and ballmills.
Be it remembered that RMRDC also concerns itself with current level of activities and developments
taking place in the utilization of new and advanced materials in the country and beyond, particularly
the threats and opportunities embedded in their emergence. For instance, engineering ceramics
and plastics are feared to be capable of rendering obsolete or reducing the importance of
conventional materials like iron and steel in equipment manufacturing industry. In this wise,RMRDC tries to explore areas of complementarity where conventional materials may serve as
feedstock for new and advanced materials.
Assessment
In making a critique of the RMRDC, two approaches were adopted: appraising RMRDC programmes
and activities against its mandates is one; the second consists of assessing its programmes andactivities vis-a-vis the theoretical model developed inFigure 4.4. The first level of assessment isbased on Figure 6.1. Among its action programmes, there exists the preponderance of thedevelopment of new machines and process designs that will tap local raw materials. There also
exists a large coverage in the area of making raw materials available for use and the determinationof the scale and scope of use by the manufacturing sector. To a lesser extent, its activities coverenumeration of materials and technological requirements for industries; finance and inaugurationof catalytic model factories; provision of venture capital; and collaboration for technologicaltransfer and advancement. Support services are provided through consultancy, plant installation,
trouble shooting and joint ventures. In effect most of the mandates have been covered leading tothe ostensible conclusion that RMRDC has fared well in carrying out its statutorily assigned roles.

50

ATPS R ESEARCH PAPER NO. 2
Table 6.1: RMRDC Mandates and Action Programmes
Programmes/ Stockactivities
taking andmandatescale ofmaterialsuse

Raw material
acquisition,
expolitation
anddevelopment
Rawmaterials
availability
and utilization

Enumera- Develop- Finance Venture Collabo- Consultancy Engagement of inaugura- capital ration services,tion ofment inmaterials newtion ofprovision for
plant
joint
and tech. machines catytic
techno- installation, venture
requirment and
model
logy
troubleprojects
process fatories
transfer, shooting
designs
advance
ment

X

X

X

Technical
Adaptation

X

X

Publicity of
R&D

X

In-house
R&D
encouragement
Incentives

X

Research
grantsX

Catch-all

X

X

X

X

X

51

X

X

X

X

POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
Table 6.2: RMRDC Mandates and Problem Variables
VariablemandateRaw material
acquisition,
expolitation
anddevelopment
Rawmaterials
availability
and utilization

Raw
Technology Capacity
materials development utilization
sourcing

Encumbrances Economic
ChangeEnvironment management

X

X

X

Technical
Adaptation

X

Publicity of
R&D

X

In-house
R&D
encouragement
Incentives

X

Research
grantsX

X

Catch-all

X

X

X
X

X

X

X

However, the width and depth of such activities reveal a different story altogether especially when
cognisance is taken of the model with which an ideal relationship is posited. This is the second
level of assessment mentioned earlier and is shown in Figures 6.2 and 6.3.

52

ATPS R ESEARCH PAPER NO. 2
Table 6.3: RMRDC Programmes and Problem Variables
VariablemandateRaw
Technology Capacity Encumbrances Economic
Changematerials development utilization
enviornment
sourcing

Stock taking andscale material use
Enumeration ofmaterials andtechnology
requirement

X

X

X

Developementof new machines
and processes
designs, etc.

X

Finance andinauguration of
catalytic model
factories

X

X

Venture capitalprovision

X

Collaboration fortechnology transfer advancement
Consultancy
services plantinstallation
troubleshooting

X

X

Engagement inventure projects

X

53

POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
Figure 6.2 It is clear that RMRDC’s mandates cover all areas addressed by the problem variables
except the economic environment, this probably being due to the exogeneity characteristic it
possesses. It is also obvious that, given its primary area of jurisdiction that is, local raw materials
sourcing, the Council is also mandated to play major and vital roles in engendering technology
development and the breaking down of barriers induced by unwilling interests through incentives.
The former is reflected in its function to advise on machinery adaptation possibilities and raw
materials utilization enhancement, encouragement of in-house research and development andother issues which positively impact on the Council’s objectives. In fact, this “catch-all” mandateis treated as being relevant to all the problem variables, since the possibility of overlap exists. The
latter, that is, breaking down barriers to change, is expected to be achieved principally by its
mandate on provision of incentives through devising awards for innovating and inventing firms.
Only the requirement to regularly review raw materials availability and its utilization explicitly
recognizes the need for industrial capacity utilization expansion. It is noteworthy here that thechange management variable can only be related to the publicity of research and development
mandate given to RMRDC. It may be embedded in the ‘catch-all’ mandate in which case anarticulate and directional programme or activity towards the variable will be impossible, and ofcourse will render its objective assessment a herculian task. Thus conspicuously, while raw
materials sourcing and technology development are fully recognized by the core mandates, otherproblem variables i.e. capacity utilization, encumbrances and change management are presumed
to possess less importance.
Against this backdrop, Figure 6.3 attempts to relate various programmes and activities of theCouncil to date, to how it has fared in strengthening the variables. As expected, programmes andactivities are skewed in the direction of materials sourcing and technological development, at least
prima facie. Also revealed in the figure is the fact that none of the other variables has been
expressly captured by the RMRDC’s activities. What obtains is a tacit or hidden expectation, orat best an assumption that capacity utilization enhancement, alleviation of encumbrances, effective
change management are being met by activities such as provision of venture capital, consultancy
and plant installation services.
In effect, RMRDC’s conduct has not been substantially in consonance with the relationships andlinkages depicted in the model. From a critical review of its actions and programmes, some factorsthat are responsible for the non-consonance are identified as follows:• objectives not properly defined to seek harmony amongst conflicting sub-objectives; e.g
import substitution, self-reliance promotion, in raw materials area; and low cost locallydeveloped and nurtured technology against high cost technology transffer, adaptation andadvancement;• too broad areas of activities;• inadequate recognition of the country’s stage of development;• lack of sequential, result-based implementation of programmes.

54

ATPS R ESEARCH PAPER NO. 2
These factors have separately and severally impacted negatively on the achievements of RMRDC,
with the implication that most areas of its operations are yet to be completed. This is not to suggestthat RMRDC has insurmountable shortcomings. What is being stressed is the need to rejuvenate
its activities in the most desired direction for the most impact.
From these conclusions, it follows we must properly address the issue of change management.
The most critical factor that needs recognition here is an articulate definition of the objective ofchange, at least prior to its effective management. In addition, recognition needs to be accorded
to the existence of many stakeholders, some constraining, others strengthening, in the process ofgenerating change. This implies, as well, that different layers or types of interests exists which will
unavoidably lead to different individual objective which in turn mitigate the pacing of the change.
Another dimension is that, temporally, the benefit-cost ratio of change is unequal among thestakeholders. This benefit-cost ratio may be very high in the long-term, depending on effective
management, while may be for the short term, ambiguous, also depending on change management
efforts.
Therefore, the change manager is the key to effectiveness and efficiency of policy response; assuch he is the minimizer of resistance to change with respect to the various conflicting interests
all in an effort to ensure that the short-term costs involved in the technological change associatedwith local sourcing policy is least. RMRDC, in this connection, is expected to be a change manager,
to identify the hidden factors, initiate or create enabling environment for stakeholders and their
participation. What was discovered is that the ‘scientific’ nature of RMRDC’s organization limits
its ability to conduct itself effectively as a change implementation management agent. Morespecifically, beyond the support services of Audit, Budget Administration, the essential focus wason agro-based, mineral-based, raw materials, and technology development. This make-up closely
mirrors the Civil Service Ministry’s pattern, clearly providing little modification regarding thespecial role of RMRDC as a major change agent. Quite often, structure determines strategy andprocess. Put equivalently, just as strategy should shape structure, so structure-organization,
information systems, personnel systems and overall work environment-should shape strategy.
RMRDC has not totally provided the social engineering component needed for raw materials policy
impact. The use of seminars, workshops, and publicity helps if, and only if, the contents andthemes constantly emphasize the need for change, how to cope with change-induced dislocations,the temporal benefits and cost ratios to the individual and the society, and also the intergenerationaland environmental benefits of change. These are not possible if there is no organizational unit incharge.

55

POLICY-INDUCED L OCAL SOURCING OF R AW MATERIALS AND TECHNOLOGY D EVELOPMENT IN N IGERIAN I NDUSTRY
Options
Undoubtedly, RMRDC has achieved a lot regarding its mandates. But this achievement can be
improved upon especially in impact-yielding areas. For most impact, it must divest its interests insome of the demonstrative projects. It is suboptimal to be present in all activities e.g. venture
capital, research grants, joint venture and simultaneously fulfil its pivotal mandates. Therefore, it
should:• concentrate on policies that will enhance its impact among the citizens e.g. in costs ofproduction reduction, and lowering prices of locally produced goods, etc.
• consider credit guarantee schemes for pioneer entrepreneurs• limit its joint-ventures to within a very short time-frame• sequence its programmes and activities no matter how narrow such may appear• consider the country’s stage of development in technology issues. It is most rational tocommence technology development at rudimentary level and seek further improvements
later, rather than try to catch up overnight with the technologically advanced countries.
• reflect the need for social education and social engineering in a more fundamental sense.

56

Chapter Seven
Emerging Issues
Thus far, we have attempted to examine critically the various issues stimulated by local raw
materials sourcing policy. Such issues include the presumption that local sourcing policy would
on the one hand enhance capacity utilization and, on the other, stimulate technological development.
As for technology, the conceptual disarray was streamlined to suit the scope of this study leading
to the suggestion that the relationship existing among technology, technological capability andtechnological development can best be described in terms of stock, flow and change. These andmany more factors highlighted in the course of this study have thrown up serious questions andissues requiring answers and more clarifications:• What is the degree of success in the understanding and management of the interface
between the two technological development paradigms i.e. state-led and market based?
Have government and its agencies paid due attention to the dynamic processes throughwhich policy changes affect firms such that negative responses are minimised and positive
impact appropriately enhanced?
• How has the technological challenge posed by policy been handled? Aggressively? Lukewarm?
or How?
• Has proper evaluation been made regarding effective control over market, strength andpattern of effective demand in the areas affected by policy? For instance, a large homemarket would be supportive and accommodating to policy change responses. Foreignbased market may be constraining to policy success.
• What factors are responsible for the choice of projects to be researched on or evenembarked upon: What are the primary considerations in fashioning a relationship withongoing or completed projects and indeed new project ideas?

57

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59

For more information on this series and ATPS, contact:
The Executive Director
The African Technology Policy Studies Network
3rd, Floor, The Chancery,
Valley Road
P.O. Box 10081
00100 General Post Office
Nairobi, Kenya
Tel: 254-2-714168/092/498
Fax: 254-2-714028
Email info@atpsnet.org

Acknowledgment

We are grateful to many people and organizations who have helped us in the process of preparing
this report. We especially thank the African TechnologyPolicy Studies Network, Nairobi, forproviding us with the research funds; the staff of the breweries in Nigeria and the Manufacturers
Association of Nigeria for assisting with the completion of the questionnaires.
We like to place on record, our special thanks to:(1) Prof. G. O. A. Laditan (engineer),(2) Dr. Banji Oyeyinka (engineer),(3) Dr. Shyngle Balogun (pyschologist),
and to our research assistants - Abiodun Bankole and Silas Owa (both of FEE) and I. M.
Nwaedozie, R. Moses (of NISER)
Finally, we appreciate the secretarial assistance of Newborne Enterprises, Mrs Feyisitan and Mrs.
Olowola who typed and word processed the report.
We are happy to share the credit of any positive contributions of this report with all those who
assisted us but absolve them of any responsibility for imperfections of this report which we assume
fully.

Femi Kayode, Ademola Oyejide and Afolabi Soyode work at the Foundation for Economic Educationin Ibadan, Nigeria