Indigenization | Definition, Advantages, Objectives & Disadvantages

What is Indigenization? Indigenization refers to a government policy aimed at promoting and increasing the involvement of Nigerian citizens in the ownership and management of business organizations previously owned by foreigners. The objective is to transfer ownership of certain foreign businesses operating in Nigeria to indigenous entrepreneurs, thereby reducing foreign control over the economy. In […]

What is Indigenization?

Indigenization refers to a government policy aimed at promoting and increasing the involvement of Nigerian citizens in the ownership and management of business organizations previously owned by foreigners. The objective is to transfer ownership of certain foreign businesses operating in Nigeria to indigenous entrepreneurs, thereby reducing foreign control over the economy.

In 1972, the Nigerian government introduced the Nigerian Enterprises Promotion Decree, the first step towards ensuring active Nigerian participation in the country’s economic development through enterprise ownership and management. The Decree consisted of three schedules or phases.

Schedule 1

Exclusively reserved small-scale businesses for Nigerians, including cinemas, hairdressing, retail trade, block making, clearing and forwarding, and printing and publishing of newspapers. In total, around forty businesses were reserved for Nigerians, requiring 100% equity participation.

Schedule 2

Allowed foreigners to engage in approximately fifty-seven businesses as long as Nigerians held at least sixty percent equity shares. These businesses encompassed banking, insurance, construction, mining, breweries, and more.

Schedule 3

Permitted foreign investments in businesses open to foreign participation, provided Nigerians held a minimum of forty percent equity shares. The businesses in this schedule included textile, tobacco and drug manufacturing, hotels, airlines, telecommunications, and others. The Nigerian Enterprises Promotion Decree underwent revisions in 1977.

Advantages/Objectives of Indigenization:

  1. Increased participation of indigenous people in the economy.
  2. Reduction of foreign control over the economy.
  3. Encouragement of local retention of profits.
  4. Promotion of industrialization.
  5. Creation of employment opportunities for citizens.
  6. Enhancement of self-reliance and reduction in dependency on foreign powers.
  7. Improvement in the standard of living for citizens.
  8. Economic stability for the country.

Disadvantages of Indigenization:

  1. It discourages foreign investors.
  2. It leads to the concentration of wealth among a few indigenous individuals.
  3. It widens the wealth gap between the rich and the poor.
  4. It may result in economic instability.
  5. It may provoke retaliation from foreign countries affected by the policy.
  6. It may lead to political instability.

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