Economics – Indigenization and Nationalization

Economics, SS2, Week 6

Topic: Indigenization and Nationalization

Contents:

1. Meaning of Indigenisation
2. Advantages of Indigenisation
3. Disadvantages of Indigenisation
   
4. Meaning of Nationalisation
5. Reasons for Nationalisation
6. Advantages of Nationalisation
7. Disadvantages of Nationalisation

Meaning of Indigenisation

Indigenization can be defined as the transfer of ownership and control of business enterprises from foreigners to the indigenes. It is a policy designed to ensure greater participation of indigenes in the ownership, control and management of business enterprise.

It is the fact of making something more native; transformation of some service, idea, etc. to suit a local culture, especially through the use of more indigenous people in administration.

Advantages of Indigenisation

• indigenization program in Nigeria is that oil is a very strong export good, leading to a stronger economy.
• Ensure self reliance: indigenization eliminates the problem of dependence on foreign goods by ensuring self reliance.
• Development of private initiatives: Encouraging indigenes to participate in business enterprise, private initiative will develop with indigenization.
• Reduces foreign control of the economy: It helps to reduce foreign control and domination of the nation’s economy
• Leads to local retention of profit: It leads to local retention of profit which otherwise would have been talent to other countries as capital flight.
• It ensures indigenous participation: This policy ensures greater participation of indigenes in the control and running of business enterprise in the country.

Disadvantages of Indigenisation

The disadvantages of indigenization are :

• It can lead to capital flight: Capital flight will occur as a result of the fact that foreign investors will relocate to their country.
• Discouragement of foreign investment: Indigenization can discourage foreigners to investment in a country.
• Lack of experience and incompetence can destroy business: Indigenization can make business to be transferred into the hands of incompetent people, thereby making business to fail
• It can lead to disharmony between countries: Indigenization can help to discourage friendship between countries.
• It becomes easy for the rich people to take over the economy: The rich people can use this as a means of getting all such business enterprise
• The economy will get weaker

Nationalisation

Definition of Nationalisation

Nationalization is a deliberate policy by which government takes over the control and ownership of private enterprises due to economic, political , social and strategic reasons.

It is the process by which the government takes over the ownership and management of an industry from private control to the exclusive control of the government.

Reasons for Nationalisation

The following are the reasons for nationalization

• To prevent exploitation
  
• To avoid foreign dominance of the Economy
• To provide uninterrupted services
• To prevent wasteful competition
• For the ability to provide adequate capital

Advantages of Nationalisation

• It helps to eliminate and prevent wasteful competition
• Nationalization ensures the provision and steady supply of essential services
• It helps to check exploitation
• It eliminates monopoly by private individuals
• Mobilization of capital

Disadvantages of Nationalisation

• It brings about corruption and mismanagement
• There is low productivity and inefficiency
• Resources can be mis-allocated
• Consumers can be exploited

Test and Exercise

1. Define Indigenization
2. Define Nationalization
3. Give reasons for Nationalization
4. Give the advantages and disadvantages of Indigenisation

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