Indigenization Policy: Definition, Aims, Merits & Demerits

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What is Indigenization Policy?

Indigenization Policy refers to a deliberate effort/policy of the government to increase the participation of the nationals in the ownership and management of commercial and industrial activities in the country.

Indigenization Policy
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The ownership and personnel of certain economic activities are reserved for indigenes.

Aims and Objective of Indigenization Policy

The Nigerian Enterprises Promotion Decree was aimed at meeting the following objectives.

  • To create more employment opportunities for Nigerians in order to reduce the unemployment problem.
  • To enable Nigerians have a greater control of their economy by increasing indigenous ownership and control of economic activities and at the same time reduce foreign domination in order to prevent possible economic sabotage and ensure economic security.
  • To increase the local retention of profits from investment thereby saving foreign exchange which would have been lost through repatriation of profits by foreigners.
  • To create greater opportunities for training indigenous personnel in the art of management. This would increase Nigerian participation in the decision-making process of large industrial and commercial establishments.

Benefits of the Indigenization Policy

  • More employment opportunities have been created for Nigerians in various enterprises at various levels.
  • Nigerians now have a greater stake in the management and control of the nation’s economic destiny thereby reducing possible foreign sabotage.
  • There has been increased local retention of profits. So only foreign investors who have genuine economic interests are being attracted.
  • A pool of indigenous personnel with better technical and management skills have emerged.

The Nigerian Enterprises Promotion Decree

The Nigerian Indigenization Decree was promulgated with effect from February 23, 1972 and was amended in 1977 under the ‘Nigerian Enterprises Promotion Decree.’

The 1977 Enterprises Promotion Decree divided industries and commercial enterprises into three schedules.

  • Schedule 1: This comprises enterprises which are exclusively reserved for Nigerians (i.e. 100% indigenous participation and ownership). These include advertising and public relations business, assembling of radios, radiograms, television sets, etc; blending and bottling of alcoholic drinks, bread and cake making, etc.
  • Schedule 2: This comprises enterprises in which Nigerians must have a majority interest at least 60% equity interest. These include banking commercial, merchant and development banking basic iron and steel manufacturing, beer brewing, boat building, clearing and forwarding agencies, etc.
  • Schedule 3: This comprises enterprises in which Nigerians must have at least 40% equity interest. These include distilling, rectifying and blending of spirits such as ethyl alcohol, whiskey, brandy, etc; fertilizer production, manufacture of basic industrial chemicals, tobacco manufacture, etc.