This paper examines the extent to which market reform has contributed to deindustrialization in Nigeria during the period under review. The result of our investigation confirms that the reform has a negative impact on the industrial sector in Nigeria. As a panacea to redress this deplorable condition, the paper suggests that the government should address the issue of infrastructure decay, particularly theinfrastructure decay, that has been the bane of industrial sector in Nigeria.

Industry or manufacturing sector has long been recognized for its role as a “leading sector” or “engine of growth” in the development process (Kaldor, 1966). As a means for giving credence to this, throughout most of the post-independence era, Nigeria pursued an industrialization strategy based on import substitution. With the windfall from the crude oil sales during the commodity boom in the 1970s, successive governments, both at the Federal and state levels, dabbled the economic activities aside from their basic social responsibilities. Similarly, private sector investment in manufacturing increased too, taking advantage of an array of government incentives available as the Pioneer Status, Approved Users Scheme and Indigenization Decree (for a detailed discussion see Ekundare, 1972: 40-48; Adejugbe, 1980: 225-242 and Egwaikhide, 1997)

By the late 1970s, a clear picture of the structure of the manufacturing sector had emerged. As stated in the Industrial Policy of Nigeria (FRN, 1988:1), the sector was characterized by high geographical concentration, high production costs, low value-addition, serious capacity underutilization; high import content of industrial output and low level of foreign investment in manufacturing. However, by the early 1980’s, as the country’s foreign exchange earnings declined significantly arising from the oil glut, the high import dependence of the manufacturing sector became a serious liability on the economy. The problem was even aggravated by the poor performance of the public enterprises as reflected in low returns on investment. In fact, many industrial projects, in which huge amounts had been expended, remain largely uncompleted.