INDIGENIZATION. Meaning of Indigenization is the transfer of ownership and control of business enterprises from foreigners to the indigenes.
It typically involves reducing the dominance of foreign-owned enterprises and promoting the development of local businesses, particularly those owned by indigenous communities or citizens.
Indigenization policies are often implemented in countries that have a history of colonization or economic exploitation, aiming to address historical injustices, promote economic empowerment, and foster sustainable development.
These policies can take various forms, including legal frameworks, regulations, and government initiatives.
Indigenization efforts may involve measures such as:
Ownership requirements: Requiring a certain percentage of business ownership to be held by indigenous individuals or groups.
Participation requirements: Promoting indigenous representation in management positions and decision-making processes within companies.
Resource allocation: Ensuring equitable access to resources, such as land, capital, and technology, for indigenous businesses.
Preferential treatment: Providing preferential treatment to indigenous businesses in government procurement, contracts, and licensing processes.
Capacity building: Supporting training and skills development programs to enhance the capabilities of indigenous entrepreneurs and businesses.
It is a policy designed to ensure greater participation of indigenes in the ownership, control and management of business enterprises. The major aim is to reduce foreign domination of the economy and ensure indigenous participation.
In 1972, the Federal Government of Nigeria promulgated the Nigerian Enterprises Promotion Decree.
The decree reserves the right to own and participate in some enterprise exclusively or partially for the government and the people on Nigeria. The decree was divided into two schedules:
They are mainly small-scale enterprises such as cinemas, pool betting, candle and block manufacturing, rice milling and garment sewing.
Schedule II: Under this schedule, foreigners can participate but must reserve 40% equity participation for Nigerians.
Some of the businesses under this schedule are beer brewing cement, soap, bicycle manufacturing, shipping and furniture making.
As a result of the shortcomings of the decree, it was revised in 1977. The decree this time classified enterprises into three schedules:
Schedule I: This schedule was increased by the inclusion of some businesses like clock and jewelry manufacturing. The decree reserved 100% equity participation for indigenes.
Schedule II: Under this schedule, the equity participation of indigenes was increased from 40% to 60%.
Schedule III: This schedule introduced the equity participation of indigenes which must not be less than 40%
The reasons for the promulgation of the Nigerian Enterprise Promotion Decree are as follows:
To ensure that the means of production and distribution are controlled by Nigerian and not foreigners.
To be able to control business enterprises in the country
To ensure that the country is self reliant
For industrial development of the country
So that the indigenes will have control over their resources
ADVANTAGES OF INDIGENIZATION
Ensures indigenous participation: Indigenization ensures greater participation of indigenes in the control and running of business enterprises in the country.
Development of local technology: it leads to the development of local skills and technology.
Acceleration of industrial development: it leads to the promotion and acceleration of industrial development.
Reduces foreign control of the economy: Indigenization can reduce foreign control and domination of the nation’s economy.
Leads to local retention of profit: it leads to local retention of profits which otherwise would have been taken to other countries as capital flight.
Ensures self-reliance: Indigenization eliminates the problem of dependence on foreign goods by ensuring self-reliance.
Provision of employment opportunities: it creates employment opportunities for the indigenes.
Development of private initiatives: when indigenes are encouraged to participate in business enterprises, private initiatives will develop with the industrialization of the economy.
Industrial development: Indigenization will bring about rapid industrialization of the economy.
Increase in standard of living: The standard of living of the people will increase through participation in business enterprises.
DISADVANTAGES OF INDIGENIZATION
Discouragement of foreign investment: Indigenization can discourage foreign investment in a country
It can lead to disharmony between countries: indigenization can lead to disharmony among countries of the world as friendship will be discouraged
It can lead to capital flight: it can lead to capital flight as foreign investors will be forced to relocate to other countries.
Inexperience and incompetence can destroy business: Due to indigenization, business can be transferred to people who are not experienced and competent enough to handle such business.
Rich people can hijack economy: Few rich people can use their financial wealth to buy and take over all such business