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UBC Theses and Dissertations

Policies towards wood products exports in Nigeria Enabor, Ephraim Ediale 1976

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POLICIES TOWARDS WOOD PRODUCTS EXPORTS IN NIGERIA by EPHRAIM EDIALE ENABOR B.Sc. Econs. (Hons.), University of Ibadan, 1965 M . F . S . , Yale University, 1968 A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY in the FACULTY OF FORESTRY We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA Ap r i l , 1976 In p r e s e n t i n g t h i s t h e s i s in p a r t i a l f u l f i l m e n t o f the r e q u i r e m e n t s f o r an advanced degree at the U n i v e r s i t y of B r i t i s h C o l u m b i a , I a g r e e that the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and s t u d y . I f u r t h e r agree t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g o f t h i s t h e s i s f o r s c h o l a r l y p u r p o s e s may be g r a n t e d by the Head o f my Department o r by h i s r e p r e s e n t a t i v e s . It i s u n d e r s t o o d tha t c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l not be a l l o w e d w i t h o u t my w r i t ten pe rm i ss i on . r-Oepartment o f The U n i v e r s i t y o f B r i t i s h Co lumbia 2075 Wesbrook P l a c e Vancouver, Canada V6T 1W5 Date C ( (j, j \ p u ] (Cg^ i ABSTRACT S u p e r v i s o r : Dr. D. H a l e y R a t i o n a l use o f N i g e r i a ' s f o r e s t r e s o u r c e s i s a n a l y z e d w i t h t h e o b j e c t i v e o f i d e n t i f y i n g p o l i c i e s towards wood p r o d u c t s e x p o r t s which s h o u l d enhance the c o n t r i b u t i o n o f t h e f o r e s t r y and f o r e s t i n d u s t r i e s s e c t o r t o t h e economy. From an e x a m i n a t i o n o f t h e r o l e o f i n t e r n a t i o n a l t r a d e and e x p a n s i o n o f e x p o r t s i n economic development, i t i s c o n c l u d e d t h a t t h e ex-p e r i e n c e o f c u r r e n t l y u n d e r d e v e l o p e d c o u n t r i e s does n o t v i n d i c a t e t h e ' c l a s s i c a l ' view o f f o r e i g n t r a d e as an "engine o f growth". N i g e r i a n e c o -nomic growth i s c l o s e l y c o n n e c t e d w i t h developments i n f o r e i g n t r a d e . . The f u l l i mpact o f t r a d e on the economy has n o t been r e a l i z e d due t o p o l i t i c a l and i n s t i t u t i o n a l o b s t a c l e s . F o r e s t r y and f o r e s t i n d u s t r i e s can e x e r t a p o t e n t i a l l y p r o p u l s i v e i n f l u e n c e on economic development. S e v e r a l f a c t o r s d e t e r m i n e the r o l e o f f o r e s t r y i n economic growth. The s e c t o r need n o t be a l e a d i n g one i n e v e r y economy. The i m p o r t a n c e o f t h e s e c t o r s h o u l d be j u d g e d on t h e b a s i s o f i t s r e l a t i v e e f f i c i e n c y i n u t i l i z i n g s c a r c e r e s o u r c e s t o promote n a t i o n a l w e l f a r e . S e v e r a l s t u d i e s , p a r t i c u l a r l y by the FAO, have a s c r i b e d a major r o l e to wood p r o d u c t s e x p o r t s i n a c c e l e r a t i n g economic growth i n t r o p i c a l d e v e -l o p i n g c o u n t r i e s . I n t e r n a t i o n a l t r a d e i n t r o p i c a l hardwoods has expanded g r e a t l y i n the l a s t f i f t e e n y e a r s . The d e velopmental p a t t e r n s r e v e a l t h a t the t r a d e i s h e a v i l y c o n c e n t r a t e d on l o g s d i r e c t e d to markets i n i n d u s t r i a l l y advanced c o u n t r i e s . I t i s a rgued t h a t such t r a d e p a t t e r n s l a r g e l y b e n e f i t the i m p o r t i n g c o u n t r i e s . T r o p i c a l d e v e l o p i n g c o u n t r i e s s h o u l d r e g u l a t e t h e i i use of their forest resources for national development through domestic pro-cessing of wood before export." The developmental trends of Nigeria's wood products export trade reveals a striking similarity to those of other tropical developing countries. Logs account for about 86% of the total annual export volume; 70% is in three wood species, and 90% is directed to Western Europe. Over the last decade, the annual volume and value of Nigerian wood products exports have declined continuously. The export decline is attributed to resource deficiency and unsettled policies, rather than deficiency of external demand. Appraisal of the role of forestry in the national economy showed that the sector is declining in relative importance. The sectoral contribution to the economy was assessed using such indicators as, share of GDP, contribution to domestic incomes, employment, foreign exchange earnings, investment and value-added, as well as linkage effects. The pattern of commercial exploitation of timber for export and uncontrolled shifting cultivation are the predominant factors reducing the impact of the sector on the economy. To maximize benefits from use of the forest resource, Nigeria must adopt sound policies towards the wood products export trade. Urgent steps should be taken to increase domestic processing of wood, expand the range of timbers used and diversify markets. Three alternative policies are identified and analyzed on the basis of relevant national goals, evaluation c r i t e r i a , constraints and process. The policy alternatives include, laissez-faire (or "do nothing"), incentives to private industry, and government regulation and control of exports. A laissez-faire policy is rejected because markets for wood products are imperfect. Private industry, motivated solely by profits, cannot be relied on to voluntarily implement the desired change in wood products export patterns. A combination of elements of the other two policy alternatives is j u s t i f i e d . Incentives to private industry should include reduction or elimination of export taxes on processed wood products, lower fees and royal-ties on lesser-known timbers, provision of wood seasoning and treatment f a c i l i t i e s at minimal cost, and assistance in negotiating shipping space and freight. Government should cooperate closely with private industry in research, product development and export promotion. The use of incentives must be j u s t i f i e d to avoid misallocation of the economy's resources. A ban should be placed on exports of premium timbers, such as mahogany, iroko and guarea, in log form. Other timbers may be exported as logs on the condition that there is no domestic buyer. Establishment of statutory marketing of timber under a Timber Marketing Board is rejected. Indigenous enterprises i would be the greatest losers under such a policy. Government should control wood products export marketing by establishing compulsory grading standards and a timber inspection service. The Nigerian Timber Association should be reorganized and partially financed by government. Expansion of wood products exports is not a requirement for Nigeria. The need for consistency between forest and national development objectives is stressed. The basic policy considerations include the productive and protective functions of forests. A forecast of potential wood requirements 3 indicates a possible increase from 60 million m (r) in 1971 to 93 million 3 3 m (r) in 1985, and 130 million m (r) by 2000. Early plans must be made to supply these requirements within the limits of economic f e a s i b i l i t y . The problems of forestry and forest industries development include land use and land tenure, productivity and utilization of the forest resources, poor iv equipment and wood processing methods, inadequate financing, lack of trained personnel and meagre research. These problems must be resolved i f forestry is to contribute significantly to achievement of national goals. The need for integrated planning of the sector is emphasized. Recommendations are made for the attention of government and the wood-based industry. Most im-portant among these, is the establishment of a National Forestry and Forest Industries Development Council, including government and industry representa-tives. The Council should be charged with responsibility for planning of the forestry and forest industries sector, and interpretation of policy. Policy analysis is a complex exercise, especially under the environ-ment prevailing in a developing country. Nonetheless, reliance on foreign trade needs to be de-emphasized. The use of forest resources should be dictated by national goals. V TABLE OF CONTENTS Page Abstract . . . . . . . i Table of contents . . . . . . . . . . . . . . . . v List of tables xi List of illustrations xv List of appendices . xvi Acknowledgements x v i i i Introduction . . . . . . . 1 CHAPTER ONE FOREIGN TRADE AND ECONOMIC GROWTH . . . . . . 9 1.1 Introduction 9 1.2 Export-led models of economic growth . . . . . 13 1.2.1 Characteristics of the commodity . . . . . 20 1.2.2 Resource base 21 1.2.3 Inhibiting traditions . . . . . . . . 22 1.2.4 International environment . . . . . . . 23 1.3 Nigerian foreign trade development 25 1.3.1 Commodity composition of Nigeria's foreign trade 30 1.3.2 Direction of trade . 3 3 1.4 Performance of the Nigerian economy 36 1.4.1 Gross domestic product . . . . . . . . . 36 1.4.2 Gross capital formation 39 1.4.3 Industrial output . . . . . . . . . . 40 1.4.4 Per capita income 41 1.5 Impact of foreign trade on the Nigerian economy . 44 vi Page 1.5.1 Factor utilization 45 1.5.2 Factor supply 47 1.5.3 Linkages and spread effects 51 1.6 Role of forestry in economic development . . . . 56 1.6.1 Characteristics of forestry and forest industries 59 1.6.2 Range and trend of demand for forest products . 62 1.6.3 Linkages, external effects and interdependences of forestry sector 67 1.7 Summary 73 CHAPTER TWO DEVELOPMENT OF THE NIGERIAN WOOD PRODUCTS EXPORT TRADE 76 2.1 Introduction 76 2.2 International tropical hardwood trade 78 2.2.1 Growth of the international tropical hardwood trade 80 2.2.2 International tropical hardwood trade patterns 83 2.2.2.1 Composition 83 2.2.2.2 Direction of tropical hardwood trade . . . 85 2.2.2.3 Role of in-transit wood processor countries 92 2.2.3 Prospects for the international tropical hardwood trade 94 2.2.4 Policy implications 102 2.3 Nigerian wood products export growth and patterns . 106 2.3.1 The period before 1900 106 2.3.2 The period, 1900 - 1929 108 2.3.3 The period, 1930 - 1949 114 2.3.4 The period since 1950 121 2.3.5 Pattern of Nigerian wood exports 126 v i i Page 2.3.5.1 Product composition . . . 128 2.3.5.2 Direction of trade . . . 131 2.3.6 Possible explanations of Nigerian wood products export patterns . 136 2.4. Factors in Nigeria's wood products export development 139 2.4.1 External factors . . . . . . 140 2.4.2 Internal factors . 1 4 3 2.4.2.1 Resource base . . 143 2.4.2.2 Allocation and pricing of timber . . . . 144 2.4.2.3 Export taxes . . . 146 2.4.2.4 Freight 147 2.4.2.5 Capability of the timber industry . . . . 148 2.5 Summary 151 CHAPTER THREE FORESTRY AND THE NIGERIAN ECONOMY . . 1 5 3 3.1 Introduction . . . . . 153 3.2 Forestry and national product 155 3.3 Employment . . . . . . 158 3.4 Domestic incomes 162 3.5 Foreign exchange earnings . . . 170 3.6 Capital investment and value-added in manufacturing . 172 3.7 Linkage effects . . . . 176 3.8 Supply of goods and services for domestic consumption 178 3.9 Summary . . 181 CHAPTER FOUR WOOD PRODUCTS EXPORT POLICIES IN NIGERA . . . . . 183 4.1 Introduction . . . . . . . . . . . . . . 183 v i i i Page 4.2 The basis of a Nigerian forest policy . . . . . 184 4.3 Significance of wood products export policies for Nigeria 200 4.4 Typology of wood products export policies . . . . 204 4.4.1 Laissez-faire policy . . . . . . . . . . 206 4.4.2 Incentives policy ... . . . . 208 4.4.3 Regulation and control policy 212 4.5 Framework of policy analysis for Nigerian wood products exports 215 4.5.1 Goals of Nigerian wood products export policies . 216 4.5.2 Criteria . 219 4.5.3 Constraints 221 4.5.4 Process 223 4.6 Appraisal of the policy alternatives . . . . . . 226 4.6.1 Laissez-faire policy 226 4.6.2 Regulation and control policy . 229 4.6.3 Incentives policy .. . . . 232 4.6.3.1 Direct price incentives (fiscal) . . . . 233 4.6.3.2 Direct price incentives (non-fiscal) . . . 236 4.6.3.3 Indirect price incentives . . 237 4.7 Policy guidelines on Nigerian wood products exports . 238 4.8 Summary . . . . . . . . . . . . . . . 241 CHAPTER FIVE FOREST DEVELOPMENT POLICY AND PROBLEMS IN NIGERIA . 243 5.1 Introduction 243 5.2 Forest and national development objectives . . . . 244 5.3 Considerations for an optimal forest development policy 256 ix Page 5.3.1 Demand for wood and wood-based products . . . 257 5.3.2 Wood consumption trends in Nigeria . . . . . 261 5.3.2.1 Fuelwood 263 5.3.2.2 Industrial roundwood . . . . . . . . 265 5.3.2-3 Sawnwood . . . . . . 266 5.3.2.4 Wood-based panels . . . 267 5.3.2.5 Paper and paperboard . . . 268 5.4 Forecast of wood consumption requirements in Nigeria 270 5.4.1 Domestic consumption 272 5.4.1.1 Fuelwood 274 5.4.1.2 Industrial roundwood . . . 275 5.4.1.3 Sawnwood 276 5.4.1.4 Wood-based panels 277 5.4.1.5 Paper and paperboard . . . . . . . . 279 5.4.2 Export requirements . 282 5.4.3 Summary of projected wood consumption requirements 284 5.5 Problems of forest development . . . . . . . . 285 5.5.1 Land use and land tenure . . " . . . . . . 286 5.5.2 Productivity and utilization of the forest resources . .. 292 5.5.3 Development of forest industries 298 5.5.3.1 Pitsawing . . . . . . . . . . . . 300 5.5.3.2 Sawmilling industry . 301 5.5.3.3 Wood-based panels industry . . . . . . 308 5.5.3.4 Pulp and paper industry . . . . . . . 310 5.5.4 Investment and financing . . . . . . . . 314 5.5.5 Education and research . . . . . . . '., . 321 X Page 5.5.6 Planning 322 5.6 Summary 323 CHAPTER SIX SUMMARY AND RECOMMENDATIONS 325 6.1 Summary 325 6.2 Recommendations 330 6.2.1 Wood products exports 330 6.2.2 Forestry and forest industries development . . 332 Bibliography 335 Appendices 359 XI Table 1 Nigeria's Foreign Trade, 1950-1970 LIST OF TABLES Page 28 2 Commodity Composition of Nigerian Exports in Selected Years by Value 32 3 Structure of Nigeria's Foreign Trade: Composition of Exports and Imports by S.I.T.C. Categories for Selected Years . . 33 4 Direction of Nigeria's Foreign Trade, 1950-1973 . . . . 35 5 Gross Domestic Product of Nigeria at Factor Cost (Current Values) 1950-1970 37 6 Gross Domestic Product of Nigeria: Sectoral shares and Growth Rates for Selected years 39 7 Gross Capital Formation in Nigeria 40 8 Index of Industrial Production, Nigeria: 1964-1972 . . . 41 9 National Income Per Capita in Nigeria and Selected Countries 42 10 Average Annual Rate of Growth of Total and Per Capita GDP,in Nigeria 44 11 Nigerian Central Government Finance, 1900-1970 . . . . 49 12 Apparent Consumption of Wood Products (1957-1959 Average) . 66 13 Indices of Interdependence of Forest Industries . . . . 69 14 World and Developing Countries' Exports of Wood Products, 1963 and 1973 81 15 Growth and Relative Importance of Tropical Hardwood Trade . 82 16 Composition of Tropical Hardwood Exports, 1961-1974 . . . 84 17 Direction of Trade in Tropical Hardwoods (Logs), 1973 . . 86 18 Direction of Trade in Tropical Hardwoods (Sawnwood), 1973 . 87 19 Direction of Trade in Tropical Hardwoods (Veneer and Plywood), 1973 88 20 Exports of Hardwood Plywood and Imports of Hardwood Logs by Korea and Taiwan, 1957-1969 93 xi i Table Page 21 Annual Export Availability for Major Forest Products in Tropical Developing Countries in 1962, 1975 and 1985 . . . 97 22 Estimated Value of Developing Countries' Exports of Forest Products ($ million) 98 23 Investment Requirements for Expansion of Forestry and Forest Industries Sector in Developing Countries 104 24 Timber Exports from Nigeria, 1900-1913 110 25 Timber Exports from Nigeria, 1923-1928 113 26 Timber Removals in Nigeria, 1932-1938 117 27 Timber Exports from Nigeria, 1945-1949 . . . 120 28 Nigerian Wood Products Exports 1950-1973 122 29 Composition of Nigerian Wood Products Exports, Selected Years 125 30 Unit Values of Forest Products and Proportion of Production Entering into International Trade (1959-1961) 127 31 Volume of Nigerian Timber Exports by Species, Selected Years 129 32 Direction of Nigerian Wood Products Exports, Selected Years (Percentages of Value) 132 33 Direction of Nigerian Wood Products Exports, Selected Years 134 34 Direction of Nigerian Exports of Veneer and Plywood, Selected Years 135 35 Commodity Distribution of Nigerian Wood Products Exports to the Five Leading Markets in 1961, 1965 and 1970 . . . . 136 36 Gross Domestic Product of Nigeria by Sectors at 1962 Prices (Factor Cost) 156 37 Employment Status in Agriculture and non-Agriculture, Nigeria, 1970 159 38 Employment in Nigerian Wood-based Industries, Selected Years 161 39 Wages and Salaries of Nigerians in Wood-based Industries, Selected Years 164 40 Wages and Salaries of Nigerians as a Proportion of Value-added in Wood-based Industries, Selected Years 166 41 Average Wages of Nigerians in Wood-based and All Manufacturing Industries, Selected Years 167 xi i i Table Page 42 Distribution of Wages in Wood-based and A l l Manufacturing Industries in Nigeria, 1963 and 1970 169 43 Contribution of Wood Products to Nigerian Export Earnings, 1951-1973 171 44 Paid-up Capital and Value-added in Nigerian Wood-based Industries, Selected Years 173 45 Estimated Contribution of Domestic Supplies to Wood Products Consumption in Nigeria, Selected Years 181 o 46 Forest Production Targets, Nigeria; 1960-1991 (million f t Roundwood) 195 47 Proportion of Total Wood Consumption in Various Categories in Selected Countries at Different Levels of Economic Development (1960) 259 48 Average Income Elasticity of Demand for Various Types of Paper in Relation to Level of Per Capita Income, 1954 . . . . 260 49 Composition of Paper and Paperboard Consumption in Nigeria, 1961-1973 270 50 Consumption of Fuel wood in Nigeria in 1971, 1985 and 2000 A.D. (million m3(r)) 275 51 Industrial Roundwood Consumption in Nigeria in 1971, 1985 and 2000 A.D. (million m3(r)) 276 52 Sawnwood Consumption in Nigeria in 1971, 1985 and 2000 A.D. (million m3(r)) 281 55 Total Wood Consumption in Nigeria in 1971, 1985 and 2000 A.D. (million m3(r)) 281 56 Projected Exports of Nigerian Wood Products, 1985 and 2000 A.D. (million m3(r)) 284 57 Projected Total Wood Consumption Requirements in Nigeria, 1985 and 2000 A.D. (million m3(r)) 285 58 Land Use Pattern in Nigeria 287 59 Comparative Statistics of Forest Land Area in Selected African Countries in 1970 287 60 Distribution of Forest Reserves in Nigeria, 1968 . . . . 289 61 Nigeria's Plantations Area by Species, 1967 (Hectares) . . 296 xiv Table Page 62 Forest Industries in Nigeria, 1964, 1970 and 1973 . . . 300 63 Production Trends in the Nigerian Sawmilling Industry, 1964, 1970 and 1973 303 64 Distribution of Nigerian Sawmills by Size, 1974 . . . . 304 65 Pro f i t a b i l i t y of Teak and Gmelina Plantations in Western Nigeria 318 66 Pr o f i t a b i l i t y of Teak and Gmelina Plantations in Western Nigeria Under Alternative Product Price Assumptions . . . 320 X V LIST OF ILLUSTRATIONS Page FIG. 1. Effects of an Improvement in the Terms of Trade on a Country's Production Possibility and Real Income . . 16 FIG. 2. Approximate International Tropical Hardwood Trade Flows, 1973 90 FIG. 3. Total Volume and Value of Nigerian Wood Products Exports, 1950-1973 123 FIG. 4. Growth Trends of Nigerian Exports of Logs, Sawnwood, and Veneer and Plywood, 1960-1973 124 FIG. 5. Financial Yield of Teak and Gmelina Plantations in Western Nigeria 313 FIG. 6. General Relationship Between Mill Size and Capital and Production Costs in the Pulp and Paper Industry . . 319 xvi LIST OF APPENDICES Page Appendix 1 Value of Nigerian Exports by Major Commodities, 1958-1973 359 Appendix 2 Forest Products Flow Chart 360 Appendix 3 Interdependence in Nigerian Economy, 1959-1960 . . . 361 Appendix 4 Trade and Trade Prospects in Tropical Broad!eaved Woods 362 Appendix 5 Tariff Rates on Selected Wood Products in Japan, U.S., U.K. and EEC Countries, 1972 363 Appendix 6 Apparent Wood Consumption in Nigeria, 1961-1973 . . 364 Appendix 7 Schedule of Plantation Costs for Teak and Gmelina in Western Nigeria, 1973 365 Appendix 8 Table 1 Nigerian Log Exports by Species and Destination, 1950 366 Table 2 Nigerian Log Exports by Species and Destination, 1953 367 Table 3 Nigerian Log Exports by Species and Destination, 1957 368 Table 4 Nigerian Log Exports by Species and Destination, 1960 369 Table 5 Nigerian Log Exports by Species and Destination, 1963 370 Table 6 Nigerian Log Exports by Species and Destination, 1967 371 Table 7 Nigerian Log Exports by Species and Destination, 1972 372 Table 8 Nigerian Sawnwood Exports by Species and Destination, 1950 373 Table 9 Nigerian Sawnwood Exports by Species and Destination, 1953 374 Table 10 Nigerian Sawnwood Exports by Species and Destination, 1957 375 xvii Page Table 11 Nigerian Sawnwood Exports by Species and Destination, 1960 376 Table 12 Nigerian Sawnwood Exports by Species and Destination, 1963 377 Table 13 Nigerian Sawnwood Exports by Species and Destination, 1967 378 Table 14 Nigerian Sawnwood Exports by Species and Destination, 1972 379 Appendix 9 Forest Map, Nigeria . 380 x v i i i ACKNOWLEDGEMENTS I w o u l d l i k e t o acknow ledge t h e con t i nuou s g u i d a n c e , e n c o u r a g e m e n t , and c o n s t r u c t i v e c r i t i c i s m f r om my S u p e r v i s o r and f r i e n d , Dr . D. H a l e y . H i s h e l p , b o t h i n w r i t i n g o f t h e t h e s i s and i n my p r i v a t e l i f e i n V a n c o u v e r , was most v i t a l t o c o m p l e t i o n o f t h e s t u d y . I p a r t i c u l a r l y w i s h t o t hank D r . G .B . H a i n s w o r t h who drew my a t t e n t i o n t o many p r e v i o u s l y u n f a m i l i a r works and f o r h i s k i n d words w h i c h h e l p e d s u s t a i n my m o r a l e . Thanks a r e a l s o due t o P r o -f e s s o r R.W. W e l l w o o d , f r om whom I l e a r n t much a b o u t t h e i m p o r t a n c e o f c o n -s i s t e n c y i n w r i t i n g and c l a r i t y o f e x p r e s s i o n . P r o f e s s o r J . H . G . Sm i th a l s o r e a d t he t h e s i s . I am g r a t e f u l f o r h i s most v a l u a b l e comments f o r i t s i m p r o v e -ment . D r . S.M. O b e r g , F a c u l t y o f Commerce, o f f e r e d v a l u a b l e a d v i c e w h i c h h e l p e d i m p r o v e t h e t e x t . S i n c e r e t h a n k s go t o my f r i e n d and c o l l e a g u e , D a v i d R o b e r t s , w i t h whom I d i s c u s s e d many u n q u a n t i f i a b l e p o i n t s . The s t u d y was made p o s s i b l e t h r o u g h a gene rou s g r a n t o f s t u d y l e a v e and f i n a n c i a l a s s i s t a n c e f r o m my e m p l o y e r , t h e U n i v e r s i t y o f I b a d a n , f o r w h i c h I am g r a t e f u l . F i n a n c i a l a s s i s t a n c e g r a n t e d by t h e F a c u l t y o f F o r e s t r y , U n i -v e r s i t y o f B r i t i s h C o l u m b i a i s he reby a c k n o w l e d g e d . My g r e a t e s t i n d e b t e d n e s s i s t o my w i f e , J o s e p h i n e , and o u r c h i l d r e n , G e o r g e , E h i z o g i e , C y r i l , Kenneth and O s e y i , who so p a t i e n t l y e n d u r e d my f o r c e d l o n g ab sence f r o m home. W i t h o u t t h e i r c o o p e r a t i o n and u n d e r s t a n d i n g , t h e s t u d y w o u l d n e v e r have been s t a r t e d . M i s s D i ana C a s s r e l s d i l i g e n t l y t y p e d t h e m a t e r i a l f r o m a v e r y rough d r a f t . F i n a l l y , t h e a s s i s t a n c e o f many wood p r o d u c t s e x p o r t e r s i n N i g e r i a , and o t h e r f r i e n d s , who w i s h e d t o r ema i n anonymous i s a c know ledged w i t h t h a n k s . x i i "Actions affecting exports should be evaluated for as consistent an achievement of national, regional and local goals as possible. Disagreement over the success of existing programs designed to protect certain seg-ments of industry results at least partially from con-fusion over what goals we are trying to achieve. An important f i r s t step in evaluating alternative programs, including export programs, should therefore be assess-ment of our goals with priorities assigned. Our policies and the efforts of the forest i n -dustry should be directed at whatever goals are deemed most important. This should significantly reduce the need for short-term actions undertaken only after a problem has become serious". Thomas E. Hamilton, 1971 XI D E D I C A T I O N This thesis is dedicated to my wife, Josephine, for her unending sacri-fices and to my late brother, Peter, who has made the supreme sacrifice. 1 INTRODUCTION Nigeria is located in West Africa and l i e s entirely within the tropics. Its total land area of 923,733 Km is s l i g h t l y less than that of the Province of British Columbia and compares with that of Tanzania and Venezuela. According to the 1973 census, the country has a total popula-tion of nearly 80 million as against 56 million in 1963. This represents an annual rate of growth of over 5%. If the 1973 population estimate were accepted as accurate and reliable,''" Nigeria would rank among the ten most populous countries of the world and, certainly, as the largest on the African continent. The economy of Nigeria is broadly based. It produces a wide range of agricultural commodities and minerals for both domestic consumption and for export. The principal products include palm produce, cocoa, groundnuts (peanuts), cotton, rubber, t i n , timber and petroleum, as well as a large num-ber of food stuffs, such as yams, cassava, millet and guinea corn, destined entirely for domestic consumption. Agriculture is the predominant economic activity, accounting for about 50% of the Gross Domestic Product and employ-ing over 70% of the total labour force in 1970 (IBRD, 1974). Unlike most de-veloping countries, characterized as dual economies with a foreign-dominated Population censuses in Nigeria have always been the subject of contro-versy. See, for example, 0. Aboyade, 1966. Foundations of an African economy. F. Praeger Publishers, New York. p.3. It is therefore not surprising that the 1973 census results were rejected following a change of government in July, 1975. The figure of 80 million i s used here on the assumption that an accurate estimate, i f possible, is likely to be within ±10% of the 1973 estimate, which does not materi-all y alter this '.Titer's view of a too high rate of population growth for Nigeria. 2 e x p o r t s e c t o r ( B a l d w i n , 1963), a g r i c u l t u r a l p r o d u c t i o n i n N i g e r i a i s i n t he hands o f m i l l i o n s o f s m a l l s c a l e ( p e a s a n t ) f a r m e r s each c u l t i v a t i n g between o n e - h a l f and f i v e a c r e s , w i t h p a r t i c i p a t i o n o f f o r e i g n e n t e r p r i s e l i m i t e d l a r g e l y t o d i s t r i b u t i o n and m a r k e t i n g a c t i v i t i e s ( B a u e r , 1954; H e l l e i n e r , 1 960 ) . The i n d u s t r i a l s e c t o r o f t he N i g e r i a n economy i s s t i l l v e r y s m a l l b u t has shown r a p i d g rowth i n r e c e n t y e a r s , i t s s h a r e o f t h e G r o s s Domes t i c P r o d u c t r i s i n g f r o m 4% i n 1S67 t o 9% by 1972 ( C e n t r a l P l a n n i n g O f f i c e , 1973 ) . The Gros s Domes t i c P r o d u c t has a l s o shown s i g n i f i c a n t g r o w t h , r i s i n g f r om abou t $4 .0 b i l l i o n i n 1967 t o abou t $7 .5 b i l l i o n ( i n c u r r e n t p r i c e s ) by 1972 ( F e d e r a l O f f i c e o f S t a t i s t i c s , 1973; IBRD, 1 9 7 4 ) . Howeve r , t h e e s t i -mated p e r c a p i t a income i n N i g e r i a i n 1970 was o n l y $80. In t e rms o f t h e l e v e l o f economic d e v e l o p m e n t , N i g e r i a can t h e r e f o r e be s a i d t o rank among 3 t h e l e a s t d e v e l o p e d c o u n t r i e s o f t he w o r l d . The p r o b l e m o f a c c e l e r a t i n g t h e r a t e o f economic d e v e l o p m e n t i n N i g e r i a has been d e a l t w i t h i n s e v e r a l s t u d i e s ( IBRD, 1954; 1974 ; H e l l e i n e r , 1966; A b o y a d e , 1966; L e w i s , 1967; B e r r y and L i e d h o l m , 1 9 7 0 ) . E f f o r t s t o improve t h e l i v i n g s t a n d a r d s o f t h e p e o p l e a r e b e i n g m o b i l i z e d t h r o u g h t h e f o r m u l a t i o n o f n a t i o n a l deve l opment p l a n s . ' R ecen t a s s e s s m e n t s o f t h e c o u n t r y ' s d e ve l opmen t p r o s p e c t s have r e a c h e d g e n e r a l l y f a v o u r a b l e c o n c l u s i o n s . U . N . , 1972. Yea rbook o f n a t i o n a l a c c o u n t s s t a t i s t i c s , 1972 , U n i t e d N a t i o n s , New Y o r k . F i g u r e r e f e r s t o pe r c a p i t a n e t n a t i o n a l i n come. P e r c a p i t a income a l o n e i s no t an a d e q u a t e measure o f a c o u n t r y ' s l e v e l o f economic deve l opmen t and i s used h e r e o n l y as a rough i n d e x . See , f o r e x a m p l e , M e i e r , G .M . , 1970. L e a d i n g i s s u e s i n e conom i c d e v e l o p m e n t : A s t u d y i n i n t e r n a t i o n a l p o v e r t y . (Second E d i t i o n ) . O x f o r d U n i v e r s i t y P r e s s , L ondon . 758pp. T h r e e n a t i o n a l deve l opment p l a n s have been l a u n c h e d i n N i g e r i a s i n c e 1962. The T h i r d N a t i o n a l Deve lopment P l a n c o v e r s t h e p e r i o d 1975 -1980. 3 The conclusions were based largely on the current boom in Nigeria's petro-leum exports which have considerably eased the country's foreign exchange constraints and vastly expanded government revenues as well as on the rapid growth of the industrial sector (Lewis, 1967; Pearson, 1970). Given the right quality of leadership and political s t a b i l i t y , one may therefore ex-pect that Nigeria should soon enter the phase of sustained modern economic growth. For more than a century Nigeria's economic growth prospects have been closely linked to her fortunes in foreign trade (Aboyade, 1966). Palm produce exports constituted the main stimulus to economic growth in the second half of the 19th century, especially through the introduction of an exchange economy and the demonstration effects of luxury goods im-ports (McPhee, 1971; Ekundare, 1973). By the beginning of the 20th cen-tury cocoa, cotton, groundnuts, rubber and timber became important export commodities. Since 1960, petroleum has dominated Nigeria's export trade accounting for 85% of the total annual export value and 60% of government revenues in 1973 (Schatzl, 1973; Pearson and Scott, 1973). Timber, or wood products, f i r s t entered Nigeria's export trade in 1897 (Dike, 1956). These were specialty wocds such as mahogany, ebony and camwood, demanded overseas for decorative or ornamental uses (Pollard, 1955). The value of timber exports in 1911 was $156,000 but rose rapidly to reach $2.3 million in 1947. The peak of the timber export trade seems to have 3 been reached in 1964, when a record total wood products volume of 704,100 rn valued at $26.6 million, was exported. Since 1964, the volume and value of Nigeria's wood products exports have declined steadily and, by 1973, were no higher than their level in 1914. 4 Statement of the Problem Forests constitute a basic natural resource that can be mobilized for accelerated economic development in a developing country, such as Nigeria. Several studies, especially those undertaken by the Food and Agri-culture Organization of the United Nations, have sought to show the poten-t i a l l y important contributions of forestry to economic development which should rank the sector highly in the national development programs of de-veloping countries (Westoby, 1962; Osara, 1963; Nautiyal, 1967; Sartorius and Henle, 1968). Forests provide a large number of goods and services essential to domestic consumption and welfare. Forests can earn and/or save foreign exchange, provide a ' f i l i p ' to the general industrialization process through significant forward and backward linkages, create employ-ment opportunities in and stabilize rural communities and,act as a 'pro-pulsive' influence on the course of general economic development (Westoby, 1969.) In many tropical developing countries, especially of West Africa and South-east Asia, forestry is making i t s most significant contribution to economic development through the export of wood products (FAO, 1964; Rola, 1974; Takeuchi, 1974). However, a very high proportion of the ex-ports is in the form of roundwood (sawlogs and veneer logs) which goes either directly to industrially advanced countries of Europe, North America and Japan, or indirectly to the in-transit wood processor countries (Taiwan, South Korea, Singapore and Israel). These last mentioned countries re-export most of their imports of logs from tropical developing countries to the same destinations after processing into more advanced products. At the same time, the tropical developing countries import almost a l l their re-5 q u i r e m e n t s o f p r o c e s s e d wood p r o d u c t s ( e s p e c i a l l y p u l p , p a p e r and p a p e r -boa rd ) f r o m t h e i n d u s t r i a l c o u n t r i e s . These p r o d u c t s a c c o u n t f o r a s i g n i -f i c a n t p r o p o r t i o n o f t h e i r annua l t r a d e d e f i c i t s (FAO, 1 964 ) . The p a t t e r n o f e x p o r t s o f wood p r o d u c t s by d e v e l o p i n g c o u n t r i e s , o f w h i c h N i g e r i a i s o n e , i n v o l v e s c o n s i d e r a b l e economic l o s s e s , i n te rms o f t h e f o r e g o n e v a l u e -added m a n u f a c t u r i n g p r o d u c t s , a d d i t i o n a l employment and s k i l l s d e v e l o p m e n t o p p o r t u n i t i e s , and t h e l i n k a g e e f f e c t s on t h e r e s t o f t h e economy, f r o m d o m e s t i c wood p r o c e s s i n g . I t r a i s e s t h e i m p o r t a n t q u e s t i o n o f t he r a t i o n a l use o f a v i t a l n a t u r a l r e s o u r c e ; i . e . , s h o u l d t h e d e v e l o p i n g c o u n t r y d r a i n h e r f o r e s t r e s o u r c e s p r i m a r i l y t o t h e b e n e f i t o f o t h e r c o u n t r i e s w h i l e i t must expend h e r l i m i t e d c a p i t a l r e s o u r c e s on heavy b i l l s t o pay f o r t h e same p r o d u c t s r e t u r n e d t o he r i n p r o c e s s e d fo rm? T h i s i s t h e c e n -t r a l p o l i c y i s s u e f o r f o r e s t deve l opment w h i c h demands u r g e n t b u t c a r e f u l c o n s i d e r a t i o n . The b r o a d p r o b l e m a d d r e s s e d i n t he p r e s e n t s t u d y i s t h e r a t i o n a l use o f N i g e r i a ' s f o r e s t r e s o u r c e s . The s t u d y p r e s u p p o s e s t h e need t o u t i -l i z e t h e r e s o u r c e i n a manner w h i c h e n s u r e s i t s maximum c o n t r i b u t i o n t o t h e c o u n t r y ' s e conom ic deve l opment and w e l f a r e . I t has been a r g u e d ( A d e y o j u , 1968) t h a t f o r e s t r y has c o n t r i b u t e d s i g n i f i c a n t l y t o t h e N i g e r i a n economy i n the p a s t n o t o n l y i n te rms o f the a b s o l u t e o f annua l f o r e i g n exchange e a r n i n g s f r o m t i m b e r e x p o r t s b u t a l s o t h r o u g h t h e " w i d e r a n g e " o f f o r e i g n c u r r e n c i e s i n v o l v e d . However , i t may be n o t e d t h a t wood p r o d u c t s e x p o r t s have n e v e r c o n s t i t u t e d a ma jo r f o r e i g n exchange e a r n e r f o r N i g e r i a , a c c o u n t -i n g , a t m o s t , f o r abou t 5% o f t he t o t a l annua l e x p o r t v a l u e . A l t h o u g h t h i s a rgument i s n o t i n i t s e l f s u f f i c i e n t g round f o r n e g l e c t i n g wood p r o d u c t s e x p o r t s i n N i g e r i a , t h e r e i s a c l e a r need f o r a r e - e x a m i n a t i o n o f t h e t r a d e , 6 e s p e c i a l l y i n view o f i t s p r e v a i l i n g p a t t e r n , i n o r d e r to e n s u r e t h a t i t produces t h e maximum p o s s i b l e net b e n e f i t t o the n a t i o n a l economy. The s i g n i f i c a n c e o f the p o l i c y problem posed i n the p r e s e n t s t u d y r e s t s on t h e f a c t t h a t the wood p r o d u c t s e x p o r t t r a d e i n v o l v e s s e v e r a l p a r t i e s - t h e government, p r i v a t e i n d u s t r y and the N i g e r i a n wood consumer - whose aims and i n t e r e s t s i n t h e f o r e s t r e s o u r c e may f r e q u e n t l y d i v e r g e . One aim o f a p o l i c y a n a l y s i s o f the wood p r o d u c t s e x p o r t t r a d e o f N i g e r i a s h o u l d b e, i n t h i s w r i t e r ' s o p i n i o n , t o promote harmony among the aims and i n t e r e s t s o f the p a r t i e s i n v o l v e d i n c o n f o r m i t y w i t h t he g o a l s o f n a t i o n a l economic pel i c y . Purpose o f the Study The purpose o f the st u d y i s t o i d e n t i f y and a n a l y z e p o l i c i e s t o -wards wood p r o d u c t s e x p o r t s i n N i g e r i a which s h o u l d enhance t h e c o n t r i b u t i o n o f the f o r e s t r y and f o r e s t i n d u s t r i e s s e c t o r to n a t i o n a l development and w e l f a r e . The u n d e r l y i n g h y p o t h e s i s o f the st u d y i s t h a t t h e p a s t p a t t e r n s o f wood p r o d u c t s e x p o r t s have not c o n t r i b u t e d the maximum p o s s i b l e b e n e f i t s to N i g e r i a n s from the use o f t h e i r f o r e s t r e s o u r c e s . Scope and Method o f Study The s t u d y i s an attempt to examine some g e n e r a l o r t h e o r e t i c a l p r i n c i p l e s o f e f f i c i e n t r e s o u r c e use and t o a p p l y such p r i n c i p l e s t o an a n a l y s i s o f wood p r o d u c t s e x p o r t s i n a d e v e l o p i n g c o u n t r y . I t aims a t h i g h -l i g h t i n g the major problems o f f o r e s t r e s o u r c e use and development i n N i g e r i a and s u g g e s t s a s e t o f p o l i c i e s which s h o u l d govern t h e c o u n t r y ' s wood p r o d u c t s e x p o r t s i n f u t u r e . As su c h , t he s t u d y i s e s s e n t i a l l y a p o l i c y 7 analysis of the forestry and forest industries sector of the economy rather than a study of the commercial and technical problems germane to the conduct of the wood products export trade. The method of study is both descriptive and analytical. It employs Worrell's (1970) framework of forest policy analysis, embracing goals, c r i t e -r i a , constraints and process, to appraise the identified alternative policy choices on wood products exports. The study comprises of six chapters. Chapter One provides a review of the basis of international trade theory and the foreign trade experience of developing countries. The growth of the Nigerian economy since 1950 is examined and the impact of foreign trade evaluated. The role of forestry in economic development is discussed. Chapter Two is an appraisal of the growth and patterns of the Nigerian wood products export trade against the back-ground of trends of the international trade in tropical hardwoods. Possible explanations of the observed patterns of the trade are advanced and the underlying factors discussed. An assessment of the role of forestry in the Nigerian economy is provided in Chapter Three. Chapter Four examines alter-native policies towards wood products exports in Nigeria. Three alternative policies are identified and analyzed to arrive at a set of rules (or policies) to guide future wood products export activities in the country. Chapter Five is a synthesis of an optimal forest development policy for Nigeria. The aim of this chapter is to establish the basis and identify the problems of for-estry and forest industries development in Nigeria. Possible solutions to some of the major problems of the sector are suggested. Chapter Six contains the summary and conclusions of the study as well as specific recommendations for the attention of the government, the forestry administrations and the 8 timber industry. In conclusion, i t is necessary to recognize the potential short-comings of the study. Policy measures have been suggested in the study partly on the basis of what economic theory would suggest and partly on the basis of personal knowledge of the Nigerian forestry and forest indus-tries sector. However, appropriate policy is not always dictated by eco-nomics nor can this writer claim complete knowledge of the forces at work in the Nigerian forestry sector. Secondly, the paucity of data has been a major source of d i f f i c u l t y and the heavy reliance on secondary sources has made i t necessary to qualify some conclusions. It is hoped, however, that the study should prove useful not only in improving understanding of the total environment surrounding conduct of the Nigerian wood products export trade but also in f a c i l i t a t i n g the choice of appropriate policies in the future. CHAPTER ONE FOREIGN TRADE AND ECONOMIC GROWTH 1.1 Introduction The relationship between foreign trade and the economic growth of a country has been a subject of interest to economists from early times. Formal statements of the beneficial effects of trade on a country's econo-mic growth date back to the mercantilist era. Thus, wrote Thomas Mun in 1664: "... the ordinary means therefore to increase our wealth and treasure is by forraign trade, wherein we must ever observe this rule; to sell more to strangers yearly than we consume of theirs' in value".! Quoted in Allen, W.R., 1965. International trade theory: Hume to Oh!in. Random House, New York. p.6. 10 Although the c l a s s i c a l economists disagreed with the mercantilists on questions of approach they (the c l a s s i c a l economists), nevertheless, as-signed to foreign trade a dynamic role in economic development. Adam Smith (17S4) described the role of trade as an "engine of growth" i n the follow-ing terms: "By opening up a more extensive market for whatever part of the produce of t h e i r labor may exceed home consumption, i t encourages them to improve thei r productive powers and to augment i t s annual produce to the utmost and thereby to increase the real revenue and wealth of the society". M i l l (1963) discounted Adam Smith's 'vent for surplus' theory of interna-tional trade, arguing that the real benefits consisted i n the " i n d i r e c t effects which must be counted as benefits of a high order". M i l l ' s " i n -direct ef f e c t s " approximate the "dynamic gains" from trade (Myint, 1954) in the form of "the technological progress and demonstration effects which are even more important to a country s t i l l at an early stage of i n d u s t r i a l advancement and whose resources were previously undeveloped for want of energy and ambition in the people". Subsequent modifications and elabora-tions of the c l a s s i c a l trade theory have largely concentrated on i t s bases rather than the benefits derived therefrom (Ricardo, 1891; Heckscher, 1919; Ohlin, 1933; Harrod and Hague, 1963; Haberler, 1959; Cairncross, 1960). The basic conclusion reached by the t r a d i t i o n a l or c l a s s i c a l trade theory i s that to maximize i t s benefits from foreign trade, a country should specialize in product lines as dictated by i t s prevailing cost structure and resource endowments. In simple terms, each country's p a r t i c i p a t i o n in foreign trade should r e f l e c t i t s comparative (cost) advantage. This, i t was assumed, would ensure competitiveness of a country's products i n world 11 markets, permit effective and f u l l e r utilization of her resources and bring about longrun economic progress and welfare. The importance of foreign trade for economic growth of presently underdeveloped countries has been heavily stressed in several studies (U.N. 1963; Prebisch, 1964; Hagras, 1965; Furtado, 1973; Maizels, 1968; Levin, 1960; Nurkse, 1961). In particular, they need foreign exchange to finance imports of capital and consumer goods required to prosecute industrialization programmes and for the servicing of external debts. As Maizels (1968) pointed out, the economic growth potential of an underdeveloped country is a function of i t s import capacity which, in turn, depends on i t s level of export earn-ings. As foreign aid disbursements decline, export earnings have assumed increasing importance as the primary determinant of development performance. Chenery and Strout (1966) have expli c i t l y employed the criteri o n in measuring such performance and in ranking underdeveloped countries for foreign aid assistance. Hultman (1967) has, however, stressed that the benefits of foreign trade to an underdeveloped country are "much more than that in terms of foreign exchange earnings". A widely debated hypothesis in the trade and development literature is that foreign trade, or exports, constitute an "engine of growth" for a country. The historical experience of such countries as the United Kingdom with cotton textiles and woollen manufactures; the U.S.A. with cotton and wheat; Canada with fur, cod fi s h , wheat and timber; Sweden with timber; Australia with wool exports and Japan with s i l k exports, are widely cited to support this hypothesis (North, 1961; Baldwin, 1956; Watkins, 1963; Lock-wood, 1960; Cairncross, 1960). However, the view that, for presently under-developed countries, foreign trade may have operated more as a retarding in-12 fluence than as an engine of growth has gained an increasing number of ad-herents in recent years (Singer, 1950; Myrdal, 1954; 1956; Nurkse, 1959; Prebisch, 1959; 1964; Baldwin, 1963; Levin, 1960; Myint, 1954). Al-though many of these countries have experienced a considerable expansion in their volume of trade, i t s growth-transmitting or "carry-over" effects on their economies have been slight. They have remained poor and undeveloped. Meier (1968) has summarized the nature of the problem as "the conflict be-tween the gains from trade and the gains from growth". Furtado (1973) has pointed to the fact that in the underdevel-oped countries today, there is widespread frustration and general dissatis-faction with the prevailing pattern of international economic relations. Caves and Jones (1973) gave a l i s t of their grievances as including unsatis-factory and worsening terms of trade and ins t a b i l i t y of export earnings. The 'alleged' worsening of trade is the result of a 'forced' pattern of specialization which confines the underdeveloped countries to the role of primary exporters (Levin, 1960), while the instability of exports is the direct result of the nature of their commodities. As a consequence, there is a growing "trade pessimism" which is forcing the underdeveloped countries to adopt the only alternative l e f t to them; which is to direct their own development through "diversification of output for their home markets" (Nurkse, 1960). The causes of underdevelopment and, in particular, the role of foreign trade remain unexplained. Although economists have been generally unsuccessful in providing a comprehensive l i s t of the necessary and s u f f i -cient conditions for modern economic growth (Nautiyal, 1967), there seems to be a consensus that foreign trade can stimulate economic growth. The debate, 13 with respect to the latter, centres on the conditions under which i t can do so. Kindleberger (1962) has discussed three models relating foreign trade to economic development with the former as a leading, lagging and balancing sector of the economy, respectively. In the f i r s t , foreign trade and exports constitute the prime-mover of development. In the second, foreign trade is passive and domestic investment plays the leading role. In the third, we have "the case of trade expansion which is not demand-led, but rather based on autonomous supply pushes in the export sector" (Watkins, 1963). Aboyade (1972) has observed that "there is always an external trade element to every development strategy that has been devised". More specifically, Emery (1968) put forward the policy prescription that "countries eager to increase their growth rates should adopt the type of policies that will stimulate their exports1'. The present chapter w i l l , therefore, examine the bases of theories which link a country's economic growth to export growth (export-led models of growth), evaluate the Niger-ian experience and indicate the potential role of forestry as a special case. 1.2 Export-led models of economic growth The fundamental assumption of the export-led models of economic growth is that exports constitute the leading sector of the economy. The growth of exports leads to rising and sustained increases in a country's aggregate real income particularly by stimulating ac t i v i t y in other sectors. Two formulations of the export-led growth model are the vent-for-surplus theory (Myint, 1954; Caves, 1965) and the staple theory (Watkins, 1963; Chambers and Gordon, 1966) of economic growth. The two models (or theories) 14 c f e x p o r t - T e d g r owth a r e e s s e n t i a l l y t he same, w i t h t he e x c e p t i o n t h a t t h e v e n t - f o r - s u r p l u s model a p p l i e s e q u a l l y t o b o t h p r i m a r y p r o d u c t s and manu-f a c t u r e d e x p o r t s . F o r p r e s e n t p u r p o s e s , t h e r e f o r e , t h e two t h e o r i e s w i l l be t r e a t e d as c o n g r u e n t . The n a t u r e o f t h e r e l a t i o n s h i p between e x p o r t s and econom ic g r o w t h and the p r o c e s s e s ( o r mechan i sms) by w h i c h t h e g r o w t h - t r a n s m i t t i n g e f f e c t s o f e x p o r t e x p a n s i o n a r e r e a l i z e d have been most t h o r o u g h l y e l a b o r a t e d i n t he c o n t e x t o f Canad i an economic deve lopment where a f o r m a l s t a t e m e n t o f t h e s t a p l e t h e o r y f i r s t emerged ( W a t k i n s , 1963 ; C a v e s , 1 9 7 5 ) . A n o t a b l e e f f o r t to a p p l y t h e s t a p l e t h e o r y t o an e x p l a n a t i o n o f t he e c o n o m i c g r o w t h o f t h e U n i t e d S t a t e s i n t h e 18th and 19th c e n t u r i e s i s c o n t a i n e d i n t h e work o f N o r t h ( 1 9 5 6 ) . The c e n t r a l p o s t u l a t e o f t he s t a p l e t h e o r y i s t h a t r i s i n g and s u s t a i n e d e x t e r n a l demand f o r a c o u n t r y ' s s t a p l e e x p o r t ( u s u a l l y a r e -s o u r c e - b a s e d p r i m a r y p r o d u c t ) can t r i g g e r o f f a mechan i sm, t h r o u g h a s e r i e s o f s e c o n d a r y a c t i v i t i e s , whose c u m u l a t i v e e f f e c t s l e a d t o s u s t a i n e d e c o n o m i c g rowth " beyond t h e l e v e l w h i c h wou ld p r e v a i l i n t h e t y p i c a l u n d e r d e v e l o p e d c o u n t r y " ( W a t k i n s , 1 963 ) . Caves and Jone s (1973) have i d e n t i f i e d t h r e e avenues f o r t h e o p e r a t i o n o f t h e mechanism - n a m e l y , t h e e f f e c t s o f e x p a n -s i o n o f the s t a p l e e x p o r t i n i m p r o v i n g d o m e s t i c f a c t o r u t i l i z a t i o n ; i n e x -pand i n g f a c t o r s u p p l i e s ; and i n g e n e r a t i n g l i n k a g e s ( s t i m u l t i n g s e c o n d a r y i n d u s t r i e s ) i n t he economy. The i n t e r a c t i v e i n f l u e n c e s o f t h e m e c h a n i s m s , wh i ch may o p e r a t e s i m u l t a n e o u s l y , t end t o e x h i b i t t h e m s e l v e s i n t h e f o r m o f what W a t k i n s (1953) r e f e r r e d t o as " a d i s a g g r e g a t e d m u l t i p l i e r - a c c e l e r a t o r med i an i sm " . A c a r d i n a l a s s u m p t i o n o f the s t a p l e t h e o r y i s t h a t t h e c o u n t r y has an u n u s u a l l y f a v o u r a b l e man t o l a n d r a t i o , such t h a t l a n d i s a r e l a t i v e l y 15 abundant resource. Moreover, there is widespread open or disguised unem-ployment, a feature of many presently underdeveloped countries (Lewis, 1955). Such an economy is probably operating at an equilibrium of some sort with income at a very low level (Leibenstein, 1963). Under these pre-existing conditions, economic growth is initiated by an autonomous spurt in external demand for the country's staple. Opening up the economy to traae with the outside world brings new opportunities for the expansion of output through the employment of some of the previously idle resources of land and labour. Ultimately, the country may be able to capture significant dynamic gains from trade i f export expansion leads to a permanent outward shift of the production possibilities frontier, as a result of the improve-ment in terms of trade. An il l u s t r a t i o n of the effects of an improvement in the terms of trade on the production possibilities and real income of a country is given in FIG. 1. Take a hypothetical country "Z", which is a closed peasant eco-nomy comprised of only two sectors - a subsistence sector producing food solely for domestic consumption and a 'manufacturing' (handicrafts) sector producing simple tools and clothing. In such an economy, the level of pro-duction and pattern of distribution of the output are l i k e l y to reflect the prevailing distribution of the labour force among the different a c t i v i t i e s and traditional sharing arrangements. For a variety of reasons, for example, underemployment of labour and an undeveloped technology, this economy i s currently producing at a level below its potentially feasible production possibility frontier (the point A in FIG. 1). The economy's output i s , by definition, i t s consumption bundle. Now, open this country up to world trade by any means whatsoever. 16 FIG. 1. EFFECTS OF AN IMPROVEMENT IN THE TERMS OF TRADF ON A COUNTRY'S PRODUCTION POSSIBILITIES AND REAL INCOME FOOD 2 T CLOTHING Source: Caves, R and R.W. An introduction, p. 546. Jones 1973. World trade and payments L i t t l e , Brown and Company, Boston. 17 Given the world terms of trade (relative prices of the country's exports with respect to imports from the rest of the world), as depicted by P ^ (FIG. 1), Z will now expand i t s output of the exportable commodity (food) presumably by employing more land and/or labour, so as to eventually reach its production possibility curve TT at A^. Z's consumption bundle is re-presented by the point at real income level Y^. Suppose now that as a result of external distrubance(s), a change in the world relative prices (terms of trade) between Z's food exports and her imports occurs in Z's favour,this will induce Z to reallocate i t s resources towards s p e c i a l i -zation in food production, and an exapansion of food exports in exchange for manufactured imports from the rest of the world. In practical terms, 1 11 there is a movement (FIG. 1) from point A to A on TT with the new terms of trade V ^ Z ' 9 a l n s ^ r o m trade for Z is represented by a rise in its real income from Y^  to Y2 with the new consumption bundle at C*1. The foregoing situation depicts the "static gains" from trade (Meier, 1968) where expanding exports in response to favourable terms of trade enables the country to increase aggregate real income and causes an improvement in welfare as the population i s now able to enjoy a more varied bundle of com-modities. It is not necessary for Z's production function to change for these gains to accrue. Nor can growth and development be assumed to be a sine guanon. Suppose further, that at the new terms of trade, Z is enabled to expand its output sufficiently so as to shift the production p o s s i b i l i t i e s frontier permanently from TT to T^T^ (FIG. 1 ) , output can then be increased from A ^ to A*** and a further increase in real income from Y,, to Y^ is achieved. Z's consumption bundle now consists of C^*. The enlarged pro-18 duction possibility curve involves dynamic gains from trade, with an a l l round increase in the country's productive capacity, improvement in welfare with important consequences for growth and development. It could be des-cribed in terms of Meier's (1968) "gains from growth" or Myint's (1958) dynamic "productivity" theory of international trade. Fundamentally, dy-namic gains from trade entail the transformation of a country's production function, involving not merely a once and for a l l change but a continuous change in resource allocation required to sustain an on-going development process. Another strand of the development through trade mechanism is the possibility of export expansion inducing an expansion of a country's factor stock. From this standpoint, i t can be assumed that a country's natural resources endowments (known and unknown) including land, are fixed and given. However, effective and efficient u t i l i z a t i o n of the resources in response to external demand may depend on c r i t i c a l inputs in the form of capital, skilled labour, technology and entrepreneurship. Expanding exports and the expectation of their continuing expansion could induce an inflow of such f a c t G r s from external sources into the country concerned. Caves (1975) has illustrated how a massive inflow of foreign capital, labour and the associated technology, s k i l l s and entrepreneurship into Canada during the wheat boom of 1901 to 1911 enabled the country to sustain r i s i n g exports and real income without increasing to a significant degree, the adverse effects of inflation which would otherwise have occurred. Foreign capital inflow took the form of direct foreign investment and savings brought in by immigrant workers. These were invested in developing transport networks and creating other social overheads which, in turn, generated their own 19 secondary effects on the economy. In addition, improved domestic real i n -comes meant an increase in domestic savings, much of which was made available for productive investment. Finally, immigrants into Canada and other newly settled regions in the 19th century were generally s k i l l e d or semi-skilled, inclined to innovate and possessing considerable entrepreneur! experience. Caves (1975) therefore concluded that "expanding trade and induced factor inflows thus played a major role in placing these regions among the fastest-growing countries in the 19th century". Perhaps the most crucial aspect of theories of development through trade is the question, to what extent does expanding trade generate linkages within or "spread" effects on,the rest of the economy? Put another way, is the expanding export sector able to carry with i t the rest of the eco-nomy by expanding domestic investment and production for home consumption, inducing the creation of complementary industries and transportation f a c i l i -t ies, i n s t i l l i n g labour s k i l l s , encouraging local entrepreneurship and rai s -ing the rate of domestic saving? Or does the export sector remain an "island", coexisting with a large and backward peasant sector, exhibiting traits of dualism (Baldwin, 1953; 1966) and fostering growth without devel-opment (Clower, Dalton, Harwitz and Walters, 1966)? Quoting Fay (1934), Watkins (1963) provided one succinct answer: "... the emphasis is on the commodity i t s e l f : i ts significance for policy; the tying in of one ac t i v i t y with another; the way in which a basic commodity sets the general pace, creates new activities and is i t s e l f strengthened or dethroned by i t s own creation". Thus, the character of the commodity is the singular most impor-tant determinant. However, the traits of the economy ( i . e . , i t s resource 20 base, institutions, values and traditions and the power relations in the society) and the influence of the international environment, are other factors which must be taken into account (Baldwin, 1963; Watkins, 1963; Caves, 1975; Hymer and Resnick, 1975) 1.2.1 Characteristics of the commodity Characteristics of the staple product are defined in terms of the production function and the input requirements of the process. These will determine not merely levels of efficiency and real income but also the pattern of distribution of incomes resulting from the export a c t i v i t y . The basic consideration is the nature of the technology of the industry, the scope for factor substitutability and returns to scale. The characteristics of the staple export will also determine, at least partly, the degree of realization of the various linkage effects. The linkage effects may be broadly classed into backward, forward and final demand linkages. Backward linkage takes the form of the simul-taneous establishment of industries to supply inputs required by the export sector. Forward linkage entails establishment of industries to buy the output of the export sector for further remanufacture before domestic con-sumption and/or export. Final demand linkage is a measure of the induce-ment to invest in domestic industries producing consumer goods for factors in the export sector. The possibilities of backward linkage depends on i n -put requirements of the complementary industries as well as a v a i l a b i l i t y and prices of factors. The forward linkage effects will be determined by the possibilities of processing and the incidence of restrictions on 21 manufactured imports in foreign markets. The final demand linkage will be a function of the size of the domestic market which, in turn, depends on the level of the aggregate income, i t s distribution between domestic and foreign factors and size of population. In this regard, both the patterns of income distribution and expenditures by recipients of export income be-come crucial determinants. Where high proportion of export income goes to foreign capital and/or absentee shareholders, final demand linkage is weakened by income , leakages abroad. Furthermore, a high proportion of incomes received by foreign labour in the export sector may be remitted abroad and/or spent on imported goods. These leakages are aggravated in the case where domes-ti c recipients of export income tend to imitate their foreign counterparts' tastes and become what Levin (1960) called "luxury importers". Thus, the characteristics of the staple export may be such as to present limited scope for factor substitutabi1ity or, otherwise, permits substantial leak-ages of income abroad. Under such conditions potential linkage effects will be vitiated by low domestic demand and a consequent low inducement to invest in domestic industry. 1.2.2 Resource base In the longrun, growth of the staple economy cannot be sustained by exports of a single staple even where necessary measures are taken to deal with problems of slack demand and/or cost-reducing innovations are adopted to eliminate problems on the supply side. "Sustained growth then, requires resource f l e x i b i l i t y and innovation to permit shifts into new export lines or into production for the domestic market" (Watkins, 1963). Resource f l e x i b i l i t y or the "capacity to transform" (Kindleberger, 1962) of an economy is determined partly by its range of original natural re-source endowments and partly by its technological capabilities. Resource f l e x i b i l i t y may increase as success in staple production may generate secondary activities such as domestic investment in transportation f a c i l i -ties and other infra-structure, which lead to the discovery of new re-sources. 1.2.3 Inhibiting traditions The expansion of staple exports could i n i t i a l l y stimulate growth by attracting foreign factor inflows. In the longrun, however, domestic availability of required factor inputs becomes more crucial. This is par-ticularly true of technology and entrepreneurship. The entrepreneur plays the vital role of a catalyst in organizing and combining factor inputs for the effective utilization of available resources. As Watkins (1963) has pointed out: "The key factor is entrepreneurship, the a b i l i t y to perceive and exploit market opportunities. Entrepre-neurial functions may be f u l f i l l e d by foreigners ... It may flow freely into the export and import trades but f a i l to exploit domestic opportunities. An ade-quate supply of domestic entrepreneurship is crucial". The development of local entrepreneurship depends partly on the character of the staple and pattern of organization of production for ex-port and partly on the values and institutions of the society. Absence of inhibiting traditions can f a c i l i t a t e development of local entrepreneurship 23 through a favourable attitude to risk and innovation, increased social mo-b i l i t y , more even distribution of income and equality of eocnomic oppor-tunities for the population. Staple production may significantly improve incomes of the masses of the population, such as in peasant export crop production. In that case, the chances for the development of institutions and values conducive to the rise of a strong domestic entrepreneural class, which will challenge and eventually displace foreigners, may be greater. 1.2.4 International environment One serious implication of the staple theory of economic growth is that the development prospects of an economy depends largely on the interactions with, and opportunities offered by, the rest of the world. The rest of the world exerts i t s impact not only by supplying a demand for the country's staple(s); i n i t i a l l y , i t may also provide the necessary comple-mentary factor inputs for production of the staple and for starting other associated activities locally. However, the conditions of the contemporary international environment may be such that effectively i t retards the country's achievement of modern economic growth. One example is where a given staple economy starts out as a colonial outpost or, what Frank (1966) called a " s a t e l l i t e " . The staple economy can benefit from the "mother country" or "centre" through assured markets for i t s product(s), special trading arrangements and an easier supply of necessary input factors, tech-nology and entrepreneurship. Factor inflow to a staple economy for exploitation of an exportable natural resource, under a s a t e l l i t i c relationship may f a i l to generate long-term self-sustained economic growth. This is particularly the case where 24 colonial policy is to discourage development of local industries and en-^  trepreneurship, limit investment outside the export sector, institute the wrong type or quality of education and, generally, starve the staple eco-nomy of infra-structure. Hymer and Resnick (1975) observed that the pro-blem of uneven development has its roots in the existing p o l i t i c a l struc-ture in underdeveloped countries and their relations with the "centre". According to these authors, "the observed uneven development represented uneven power and the resulting distribution of income and demand was a social phenomenon rather than a techni-cal one". The staple theory of economic growth was developed in historical perspective to explain the process of economic growth of countries (e.g., Canada), where export expansion was the primary stimulus to successful de-velopment. It may be considered as one brand of export-led models of eco-nomic growth. In general, i t has the essential ingredients of the other models or theories (e.g., vent-for-surplus, comparative costs speciali-zation, technological demonstration effects and consumption-effort demon-stration effects) which have been advanced. Like the classical comparative cost theory of international trade, the validity of the staple theory of economic growth has been seriously questioned, particularly as i t applies to presently underdeveloped countries (Watkins, 1963). Preconditions for the successful operation of the mechanisms involved are such that their fulfilment may be just fortuitous. Nurkse (1960) examined the trade and development experience of currently underdeveloped countries. He concluded that, for these countries, the trade-transmitted growth mechanism had not been so successful as i t was 25 for the New World in the 1.9th century. Failure of the mechanism was (accor-ding to Nurkse), due primarily to sluggish external demand caused by the nature of the commodities involved, development of substitutes, economy in the use of raw materials and import restrictions in importing countries, among others. Nurkse's conclusions have been questioned by Cairncross (1960). Favourable external demand is crucial for successful export-led economic growth. However, the results for a particular country may be frustrated by problems of resource skewness, a lack of organization and management talent and above a l l , the poli t i c a l environment. In conclusion, the impact of foreign trade on a country's economic growth is unlikely to depend entirely on purely technical factors. A crucial determinant is the ab i l i t y to pursue trade and allocation policies which en-sure continuing response and adaptation to changing resource and market s i t u -ations . 1.3 Nigeria's foreign trade development The economic history of Nigeria is essentially one of foreign trade development (Ekundare, 1973). Before the 19th century, the slave trade dominated the commerce of West Africa. McPhee (1971) has observed that: "It was the slave trade which made the importance of West Africa in the 17th and 18th centuries and caused to be highly priced, forts which would otherwise have been esteemed heavy l i a b i l i t i e s " . Dike (1956) has recorded Nigeria's involvement in the slave trade. On i t s impact on the local economy,01uwasanmi (1966) stated that: "... the slave trade not only violently shattered the stable economic basis on which settled l i f e had been 26 securely founded for centuries past; i t completely stopped the further growth and development of such l i f e " . The end of the slave trade in mid-nineteenth century coincided with the establishment of British colonial rule over Nigeria. Exports of palm o i l required for maintenance of British industrial machinery provided a substitute for slaves. Between 1860 and 1900 palm produce (including palm o i l and ker-nels) accounted for no less than 90% of the total annual export value (Geary, 1965). After 1900, cocoa, groundnuts, cotton, timber, hides and skins and tin ore became important export commodities. By 1930, cocoa, introduced into Nigeria from Fernado Po (Dike, 1956), supplanted palm produce as the leading export commodity. Favourable external demand stimulated a steady expansion of Nigeria's export commodities after 1900. Thus, the value of exports rose from $4.9 million in 1900 to $37.0 million in 1929. The annual growth rates of commo-dity exports were 7% and 5.5% for value and volume, respectively, whereas ex-port production amounted to between 5% and 7% of the Gross Domestic Product (Helleiner, 1966). The period 1929-1946 witnessed a break in the course of Nigeria's foreign trade and economic development. As a result of the Great Depression and the subsequent world war, world prices of most of Nigeria's export commo-dities slumped severely. For example, the total value of exports f e l l from $49.8 million in 1929 to $24.6 million, or by 50%, in 1931 (all values in cur-rent dollars). Between 1929 and 1934 recorded decreases in export prices were on average, 53% for cotton, 78% for rubber, 67% for cocoa, 73% for palm o i l , and 58% for groundnuts. The decline of export earnings ranged between 39% for groundnuts and 90% for cotton (Helleiner, 1966). A major development during 27 this period (1929 - 1946) was the establishment of statutory export mono-polies for major export commodities. Cocoa was the f i r s t to be subject to statutory control under the Cocoa Control of the Ministry of Food (in the United Kingdom). In 1942, statutory control was extended to include cocoa and vegetable o i l s and seeds in a l l the British colonies in West Africa under the West African Produce Control Board (Bauer, 1954). This Board was sub-sequently dissolved and i t s functions taken over by national Marketing Boards in the respective West African countries. • ' In the face of severely slumping world prices, the establishment of bulk purchasing arrangements through statutory monopolies was considered necessary to stabilize producer incomes and avert dislocation of the local economies with possible serious social and po l i t i c a l consequences (Bauer, 1954; Ekundare, 1973). This was particularly true of cocoa, although rising external demand was the probable reason for bringing vegetable o i l s and seeds under control. However, i t is significant that the Marketing Boards arrange-ment was retained in Nigeria (and in other West African countries) after the c r i s i s of slack external demand was over. That they became more an instru-ment of fiscal policy than a means of stabilizing producer prices and incomes, and the consequences for growth and development, has evoked considerable con-troversy (Bauer, 1966; Hawkins, 1958; Ogunsheye, 1965; Helleiner, 1964; 1966). The period immediately after World War II witnessed a revival of Nigeria's foreign trade as commodity exports expanded again to meet the back-log of demand in a Europe undergoing reconstruction and as a result of stock-piling against the Korean War. Data on Nigeria's foreign merchandise trade in the period 1950 to 1970 are presented in Table 1. The value of domestic 28 Table 1. Nigeria's Foreign Trade, 1950 - 1970 (Values .= U.S. $ million) EXPORTS IMPORTS BALANCE YEAR Domestic Re- TOTAL Exports Exports 1950 247.8 4.9 252.7 173.2 + 79.5 1951 326.5 9.7 336.2 236.8 + 99.4 1952 350.4 12.3 362.7 317.2 + 45.7 1953 338.5 9.4 347.9 303.2 + 44.7 1954 409.5 9.2 418.7 319.4 + 99.3 1955 363.5 7.6 371.1 381.1 - 10.0 1956 370.3 6.5 376.8 427.8 - 51.0 1957 347.7 9.4 357.1 426.9 - 69.8 1958 371.8 7.7 379.5 465.6 - 86.1 1959 449.4 8.4 457.8 499.5 - 41.7 1960 463.7 11.5 475.2 604.5 - 129.3 1961 476.2 9.9 486.1 423.1 - 137.0 1962 459.2 12.7 471.9 569.3 - 97.4 1963 517.6 13.5 531.1 580.9 - 49.8 1964 589.3 11.7 601.0 711.9 - 110.9 1965 737.1 14.0 751.1 771.1 - 20.0 1966 780.4 15.1 795.4 719.6 + 75.8 1967 666.7 10.4 677.1 625.9 + 51.2 1968 578.2 12.8 591.0 539.2 + 51.8 1969 881.0 9.9 890.9 696.3 + 194.6 1970 1227.9 11.6 1239.5 1059.0 + 180.5 SOURCE: 1. Helleiner, G.K., 1966. op.cit. 2. Federal Office of Stat i s t i c s , Annual abstract of s t a t i s -t i c s , 1964 and 1971. Lagos. exports rose from U.S. $248.0 million in 1950 to U.S. $464.0 million in 1960, or by 87%. It rose further to about U.S. $1.2 b i l l i o n in 1970, or by 165%. The value of imports, on the other hand, increased from U.S. $173.2 million in 1950 to U.S. $605.0 million in 1960, or by 249%. The increase in the value of imports between 1960 and 1970 was 66%. The ratio of the value of annual exports to GDP was, on average, 29 19.6% between 1950 and 1953; 16% between 1957 and 1960; 15.8% between 1963 and. 1966-, and 17.2% between 1967 and 1970. The corresponding figures for im-ports were 15.6%, 19.8%, 16.4% and 14.8%, respectively. The annual growth rate (compound) for exports during 1950 to 1970 was 8.3%; and for imports, 9.5%. The ratio of value of total merchandise trade of Nigeria to GDP over the period 1950 to 1970 averaged 34%. Data in Table 1. also indicate that, whereas Nigeria's exports generally fluctuated, imports rose steadily through-out, except during the c i v i l war (1967 - 1970), when both exports and imports f e l l . i n 1967 and 1968. Results of the growth patterns,of exports and imports during 1950 to 1970, are indicated in Table 1. The balance of trade was continuously positive from 1950 to 1954, negative from 1955 to 1965 and positive again for the remainder of the period. The very favourable external demand in Europe for Nigeria's commo-dity exports resulted in expansion of exports and large earnings between 1950 and 1954. Imports into the country also increased during this period but at a slower rate than exports. Consequently, Nigeria was able to build up a sizeable amount of external reserves. By 1953, the reserves amounted to U.S. $578 million (Helleiner, 1966). No country in Latin America had the same level of external reserves.in that year, while South Africa's reserves were only two-thirds of Nigeria's (Diejomaoh, 1965). According to the IBRD (1954) "the assets were considerably greater than the investments of expatriate companies in Nigeria; actually, they exceed the total of these investments and the Nigerian public debt, so that Nigeria is for the moment (1953) a net creditor". By 1955, Nigeria's external reserves were sufficient to purchase nearly two years' imports. Assets of the Marketing Boards alone were worth 30 nearly 6% months' imports (Helleiner, 1966). After 1955, Nigeria experienced for a decade, a persistent adverse balance in her foreign merchandise trade due to the declining demand and poor prices for her export commodities in world markets (Table 1 ). Im-ports, on the other hand, continued to rise rapidly as a result of govern-ment's intensified development effort. Previously accumulated reserves were drawn down heavily to meet the rising import b i l l and government expenditure. The burden on the external reserves was particularly aggravated by the re-quirements of the national development program (First National Development Plan, 1962 - 68), and the disappointing inflow of foreign aid and capital. By 1967, Nigeria's external reserves were down to $224 million, or less than 2 the equivalent of four months' imports. The revival and expansion of the country's export earnings have been due, almost entirely, to the development of petroleum exports. Between 1960 and 1970 earnings from petroleum exports increased more than tenfold, to surpass the $1 b i l l i o n mark annually. Ex-pansion of petroleum export earnings has been due partly to increase in volume production and, partly to the exceptionally favourable world prices, though the latter has been the more important factor. Since 1966, not only has the adverse balance of trade trend been reversed but Nigeria's balance of payments position improved substantially for the f i r s t time since 1955. 1.3.1 Commodity composition of Nigeria's foreign trade Different commodities have constituted the leading export from The equivalent of three months' imports is generally regarded as the safe minimum level of external reserves to maintain v i a b i l i t y of a country's currency and cr e d i b i l i t y in international economic transac-tions. 31 N i g e r i a o v e r t h e l a s t c e n t u r y . In T a b l e 2 i s shown t he c o m p o s i t i o n o f t h e c o u n t r y ' s commodity e x p o r t f o r s e l e c t e d y e a r s . The v a l u e s o f t he m a j o r commodity e x p o r t s d u r i n g 1958 t o 1973 a r e shown i n A p p e n d i x 1. B e f o r e 1900, pa lm p r oduce was t h e l e a d i n g e x p o r t . By 1915 t he m a j o r e x p o r t com-m o d i t i e s i n c l u d e d c o c o a , g r o u n d n u t s , c o t t o n , r u b b e r , and t i m b e r , i n a d d i -t i o n t o pa lm p r o d u c e . A f t e r 1950 cocoa and g roundnu t s r e p l a c e d pa lm p r oduce as t he l e a d i n g e x p o r t s . S i n c e 1951 , t h e dominance o f p e t r o l e u m e x p o r t s i s c l e a r l y e s t a b l i s h e d w i t h t he s h a r e o f t h i s commodity i n ' t o t a l annua l e x p o r t v a l u e r i s i n g f r o m 15.2% i n 1964 t o 83.4% i n 1973. I t s h o u l d be s t r e s s e d t h a t t h e low and d e c l i n i n g s h a r e o f n o n - p e t r o l e u m e x p o r t s a f t e r 1961 does n o t i m p l y a n e c e s s a r i l y s t a t i c o r d e c l i n i n g e x p o r t v o l ume . I n d e e d , f o r some c o m m o d i t i e s , s i g n i f i c a n t i n c r e a s e s i n e x p o r t volume have been a c h i e v e d b u t t h e i r p e r f o r m a n c e appea r s d w a r f e d e i t h e r by t h e e f f e c t s o f u n f a v o u r a b l e w o r l d p r i c e s o r t h e v a s t e x p a n s i o n i n p e t r o l e u m e x p o r t s . M o r e o v e r , some o f t h e n o n - p e t r o l e u m e x p o r t c o m m o d i t i e s ( e s p e c i a l l y pa lm o i l , g r o u n d n u t s and t i m b e r ) have been i n c r e a s i n g l y d i v e r t e d t o home c o n s u m p t i o n as a r e s u l t o f t he i n c r e a s e o f p o p u l a t i o n and economic g r o w t h . What emerges f r om t h e d a t a o f T a b l e 2 i s t h a t N i g e r i a ' s e x p o r t t r a d e i s r e a s o n a b l y b r o a d l y - b a s e d bu t dom ina ted by p r i m a r y a g r i c u l t u r a l p r o d u c t s and c r u d e m a t e r i a l s . The c o n t r a s t between t h e e x p o r t s and i m p o r t s s t r u c t u r e i s r e v e a l e d i n T a b l e 3. F ood , m i n e r a l s and o t h e r raw m a t e r i a l s a c c o u n t e d f o r 98% o f t o t a l e x p o r t v a l u e i n 1955, 92% i n 1963 and 95% i n 1970. In c o n t r a s t , m a n u f a c t u r e s , m a c h i n e r y and t r a n s p o r t e q u i p m e n t , a c c o u n -t e d f o r 74%, 70% and 73% o f i m p o r t s i n t h e r e s p e c t i v e y e a r s . The c o u n t r y ' s f o r e i g n t r a d e was t h e r e f o r e c h a r a c t e r i z e d by e x p o r t s o f p r i m a r y p r o d u c t s and m i n e r a l s , w h e r e a s he r i m p o r t s c o m p r i s e d m a i n l y o f m a n u f a c t u r e d and 32 Table 2. Commodity Composition of Nigerian Exports for Selected Years by Value Commodi ty YEARS 1913 1929 1948 1954 1964 1970 1973 Percentage of Values Cocoa 2.5 13.1 20.8 26.8 19.1 15.2 5.9 Palm Kernels 42.5 24.2 17.4 15.6 10.0 2.5 0.8 Palm Oil 29.0 21.4 10.8 9.2 5.1 0.1 0.4 Groundnuts 2.8 14.0 18.9 20.4 16.3 5.0 2.0 Groundnut Oil - - - 2.6 3.9 2.7 1.0 Groundnut Cake - - - - 2.2 1.3 0.8 Timber 1.7 1.7 3.1 3.0 4.2 0.9 0.6 Tin Ore and Metal 8.9 13.0 11.8 3.5 5.9 3.8 0.7 Cotton 2.5 3.0 1.1 2.0 2.9 1.5 0.2 Rubber 1,4 0.9 2.0 2.0 5.8 2.0 0.9 Hides and Skins 3.0 5.3 9.6 2.3 2.2 0.7 0.6 Others* 5.7 3.4 4.5 12.6 7.2 6.6 2.7 Total Non-petrol eum 100.0 100.0 100.0 100.0 84.8 42.3 16.5 Petroleum _ _ _ _ 15.2 57.7 83.4 Total Exports 100.0 100.0 100.0 100.0 100.0 100.0 100.0 * Includes "Other Food and Drink. Other Raw materials and Manufactures" SOURCE: 1. Federal Office, of Statistics, Nigeria trade reports -1913, 1929, 1948 and 1954. Lagos. 2. , Annual abstract of s t a t i s t i c s , 1964 and 1971, Lagos. 3. _ , Review of external trade, Nigeria, 1973. Lagos. capital goods. This pattern of trade is characteristic of most underdeve-loped countries and is due partly to the low level of domestic manufacturing activity. On the other hand , economic growth has resulted in rising im-ports of manufactured consumer goods and capital goods needed to prosecute industrialization programmes. It is expected that imports of consumer goods should decline over time as domestic manufacturing activity expands. But 33 Table 3. Structure of Nigeria's Foreign Trade: Composition of Exports and Imports by S.I.T.C. Categories for Selected Years Percentages SITC T + Code I t e m EXPORTS IMPORTS 0 Food 1 Beverages & Tobacco 2 Crude Materials (Inedible) 3 - 4 Minerals, Fuels Lubricants etc. 5 Chemicals 6 Manufactured Goods (Classified by Material) 7 Machinery and Trans-port Equipment 8 Misc. Manufactured Articles 9 Miscellanous Items Total 1955 1963 1970 23.5 20.5 19.1 61.7 52.4 14.0 12.7 19.7 61.9 0.2 0.1 0.9 5.7 4.5 6.'9 2.0 CL5 1955 1963 1970 9.5 10.6 7.7 3.7 1.4 0.5 1.3 1.5 2.2 4.8 7.5 3.0 5.2 6.9 11.8 44.1 35.7 30.0 20.5 24.4 37.6 9.0 10.3 5.2 1.9 1.7 2.0 100.0 100.0 100.0 100.0 100.0 100.0 SOURCE: 1. Helleiner, G.K. 1966. op.cit. (for 1955). 2. Federal Office of Statistics, Annual abstract of st a t i s t i c s 1964, 1967 and 1971. Lagos (for 1963 and 1970). NOTE: .. = Negligible (less than 0.1%): - = NIL. the latter will depend on the trends of agricultural production, prices,and population growth, a l l of which determine the level of effective domestic demand. 1.3.2 Direction of trade The direction of Nigeria's foreign trade has generally followed the pattern established under colonial rule. The United Kingdom, which exercised 34 colonial power over the country for one hundred years, is her most important trading partner. In Table 4. is shown the direction of trade for selected years. Although the U.K remains an important market for Nigeria's exports and source of imports, her share has been f a l l i n g steadily. The E.E.C. countries and the U.S.A. have increased in importance particularly since the end of the second World War. Thus the U.K. accounted for 72% of Nigeria's commodity exports in 1954, 30% in 1968 and only 18.7% in 1973. Her shares of imports in the years were 45.9%, 31% and 27%, respectively. In contrast, the share of E.E.C. countries in Nigeria's exports rose from 13.6% in 1954 to 32.9% in 1973. Imports share increase was from 17.8% in 1954 to 32.6% in 1973. The share of the United States has stayed, on average,at 10% for imports but rose from 10% in 1954 to 24.2% in 1973 in respect of exports. Trade between Nigeria and the Communist Bloc countries, as well as with other African countries, has been generally insignificant. The direction of Nigeria's foreign trade has been largely the result of p o l i t i c a l factors and special commercial arrangements reflecting the country's past colonial status. Exports were not always directed to the most profitable markets, nor were imports obtained from the cheapest sources. As Ugoh (1964) stated, economic factors were secondary in Nigeria's foreign trade development. Her economy was reserved (under colonial rule) as a cap-tive market for manufactured exports from the imperial centre, while her ex-ports were controlled under statutory arrangements both to ensure raw material supplies to the centre and/or deny i t to the enemy in times of war Or other emergency. Since pol i t i c a l independence (1960), there has been a gradual diversification of export markets and sources of imports as local o f f i c i a l s gained control of the foreign trade arrangements. 35 Table 4. Direction of Nigeria's Foreign Trade, 1950 - 1973 Countries YEARS United Kingdom Ghana India Other Commonwealth Total Commonwealth W. Germany France Netherlands Italy Belgi um-Luxembourg Total E.E.C. Countries * U.S.A. Japan Canada Other Countries Total Non-Commonweal th Total All Countries Exports 1954 1961 1968 . 1973 Imports 1954 1961 1968 1973 Percentage of Values 72.0 44.8 30.1 18.7 0.7 0.2 0.7 0.3 0.7 3.2 11.9 72.3 46.2 33.5 31.3 45.9 38.3 31.0 27.0 0.3 0.6 n.d. 6.5 3.1 0.9 n.d. 4.3 4.4 4.0 52.4 46.0 36.9 31.0 3.1 7.8 8.7 3.6 1.6 5.7 5.6 12.6 6.6 12.9 13.1 13.2 2.3 4.8 6.3 2.7 3.0 2.9 1.0 13.6 34.2 36.5 32.9 9.3 7.4 11.0 14.8 1.5 2.6 3.7 7.0 3.8 4.8 4.0 4.0 3.2 3.5 7.2 4.1 n.d. 1.6 1.7 2.7 17.8 19.9 27.6 32.6 10.7 11.2 7.7 24.2 2.0 1.8 4.6 2.7 3.4 6.3 17.8 7.0 27.7 53.8 66.5 68.7 4.8 5.3 11.6 10.3 8.3 13.6 3.7 9.2 0.8 0.5 n.d. 16.6 14.4 19.7 16.7 47.6 54.0 63.1 69.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 SOURCE: Federal Office of Statistics, Annual abstract of s t a t i s t i c s , 1964 and 1971. Lagos, Nigeria. NOTE: n.d. = no details = insignificant (less than 0.1%) * Excludes United Kingdom, Ireland and Denmark. A number of conclusions emerge from the foregoing analysis of Nigeria's foreign trade. F i r s t , exports and imports have been generally increasing both in volume and value, with imports growing at a slightly higher rate. Second, exports comprised, almost entirely, of primary agricultural commodities and 36 minerals, whereas manufactures dominated the imports. Third, both exports and imports showed a high degree of geographic concentration due primarily to p o l i t i c a l relationships and trade preferences. There has, however, been a tendency towards greater diversification of both export markets and sources of imports. Finally, the share of capital goods in imports has been rising steadily. How has the Nigerian economy performed under these trade conditions and what impact had foreign trade on the performance? These aspects will now be examined. 1.4 Performance of the Nigerian economy Adequate and reliable statistics for evaluating performance of the Nigerian economy are not available (Aboyade, 1966; Helleiner, 1966). A l -though national accounts st a t i s t i c s data are available from 1950, they lack consistency both in the st a t i s t i c a l bases and method of presentation (Stolper, 1966). Moreover, in a developing country, such as Nigeria, where a large proportion of national production is comprised of subsistence output, and is not exchanged through the market system, estimates of Gross Domestic Product are likely to be no more than crude guesses (Oluwasanmi, 1966). Caution should, therefore, be exercised in the interpretation and use of the published data as a basis for pronouncements on the performance of the economy. 1.4.1 Gross domestic product In Table 5 is shown Nigeria's Gross Domestic Product (at current fac-tor cost) in selected years. The value of GDP rose fivefold from U.S. $1.4 b i l l i o n in 1950 to U.S. $6.6 b i l l i o n in 1970/71. In absolute terms, Nigeria's 37 Table 5. Gross Domestic Product, of Nigeria at Factor Cost (Current Values) 1950 - 1970 Economic Activity 1950 1958/59 1963/64 1967/68* 1970/71 (U.S. $ million) 1. Agriculture, forestry and fishing 1000.2 1764.0 2345.0 2194.6 3287.2 2. Petroleum 0.6 1.7. 46.2 61.0 708.4 3. Other Mining 14.8 19.3 32.2 35.2 50.4 4. Manufacturing & Crafts 51.8 113.4 220.9 316.2 523.6 5. Ele c t r i c i t y & Water Supply 1.7 7.6 21.6 20.2 30.8 6. Building & Construction 22.7 84.8 •171.9 183.4 285.6 7. Distribution n.a. 304.1 534.8 535.9 725.2 8. Transport & Communi-cations •69.2 94.4 198.5 165.5 229.6 9. General Government 30.2 70.8 111.4 134.9 392.0 10. Education n.a. 61.0 115.6 128.8 159.6 11. Health n.a. 10.9 25.5 27.2 42.0 12. Other Services 242.8 45.6 87.0 106.7 134.4 Gross Domestic Product (Factor Cost) 1433.9 2577.7 3910.8 3909.6 6568.8 Gross National Product (Market Prices) 1560.2 2755.2 4129.2 4110.7 6664.0 SOURCE: 1. 1950: Helleiner, G.K. 1966. op.cit. 2. 1958/59 - 1970/71: IBRD, Nigeria: Options for longterm development. Report of World Bank Mission to Nigeria. Johns Hopkins Press, Baltimore. 1974. p.209. * Excludes the three Eastern States. GDP in 1970/71 was the third largest in Africa, next to that of South Africa and Algeria. In 1966, Nigeria's GDP of U.S. $4.0 b i l l i o n was, approximately, twice that of Ghana (U.S. $2.1 b i l l i o n ) , and five times that of the Ivory Coast (U.S. $0.8 b i l l i o n ) . It was, however, only 11% of India's, 14% of Argentina's and 4.8% of the United Kingdom's (U.N., 1968). The increase in Nigeria's GDP between 1950/51 and 1970/71 represented an annual compound rate of growth of about 6.5%. If one assumes that the rate of population growth was, on average, 2.5% per annum, growth rate of GDP over the period, in real 38 terms, was in the order of 4.0% per annum. The above estimate compares with the results of some recent studies which have appraised growth performance of the Nigerian economy (Lewis, 1967; Berry and Liedholm, 1970; IBRD, 1974). For example, on the basis of his estimates for the period 1957 - 1963, Lewis (1967) concluded that: "... measured against the U.N. demand for an annual GDP growth rate of 5% for underdeveloped countries during 1961 - 70, the 5.5% rate achieved by Nigeria can be con-sidered not only satisfactory, but actually puts her near the top of the growth league". Growth of GDP above, is not an adequate measure of the level of economic de-velopment. It is necessary to consider changes in per capita income, capital formation, industrial production and structural transformation, indicators of "intensive growth" (Caves, 1975) which is a more meaningful index of economic performance. In Table 6 is shown the performance of the Nigerian economy in terms of the structural transformation and sectoral growth rates between 1958/59 and 1970/71. The share of agriculture in GDP declined sharply but, by 1970/ 71, s t i l l stood at the relatively high level of 50%. The share of mining rose sharply from less than 1% in 1958/59 to nearly 12% by 1970/71, due p r i -marily to the expansion of petroleum production. A near doubling of manu-facturing output is also recorded. With 8% of GDP in 1970/71, the sector is s t i l l extremely small in size. In terms of sectoral growth rates, mining was the fastest growing, followed by manufacturing. Agriculture was the slowest growing sector. The rate of growth of the agricultural sector actually de-clined steadily since 1958. Rates of growth of the other sectors do not reveal a particular trend over the period. From the changes in sectoral shares of GDP and their growth rates, can the Nigerian economy be said to 39 Table 6. Gross Domestic Product of Nigeria: Sectoral Shares and Growth Rates for Selected Years Sector Share in GDP 1958/59 1962/53 1966/67 Average Annual Growth Rate (Real terms) 1970/71 1958/59 1962/63 1966/67 to to to . 1962/63 1966/67 1970/71c (Percentages) 1. Agriculture 68.4 61.5 54.4 50.0 4.6 2.0 0.8 2. Mining* 0.8 2.1 5.0 11.6 27.0 44.0 26.5 3. Manufacturing 4.4 5.8 7.3 8.0 13.9 10.5 9.7 4. Power, trans-port and con-struction 7.3 9.6 9.8 8.3 12.1 5.5 3.8 5. Services 19.1 21.0 23.5 22.1 6.8 7.0 6.2 6. All Sectors 100.0 100.0 100.0 100.0 6.4 5.5 5.5 SOURCE: IBRD, 1974. op.cit. p.12 * Includes petroleum a IBRD estimate have performed satisfactorily? The answer provided by Lewis (1967) may be instructive: "There are not many underdeveloped countries whose agricul-ture is not only keeping pace with domestic demand for food but also increasing exportable output by 5% per annum as well; nor many where the growth rate of manufacturing (large and small together) exceeds 10.3% per annum. Indeed, taking these sectors together, Nigeria is doing as well as Japan, which is generally considered the fastest growing country in the world". 1.4.2 Gross capital formation Gross capital formation is an important indicator of an economy's growth over time and provides a rough guide to i t s productive capacity (Aboyade, 1966). In Table 7 are shown estimates of gross capital formation 40 Table 7. Gross Capital Formation in Nigeria Year Value * Share of GDP ($ mi 11 ion) (%) 1950 - 53 126.6 7.6 1957 - 60 320.5 12.7 1953 - 66 594.0 14.0 1967 - 70 828.5 16.8 SOURCE: : 1. Helleiner, G.K., 1966. op.cit. 2. Federal Office of Statistics, Annual abstract of s t a t i s t i c s , 1967 and 1971. Lagos. * Annual average for each period. in Nigeria between 1950 and 1970. The clear indication is one of rapid growth, as shown by a rise in its share of GDP from 7.6% in 1950 - 53 to 17% by 1967 -70. It is probable, however, that actual gross capital formation in Nigeria, during the period exceeded the estimates shown in Table 7. For example, Oluwasanmi (1966), observed that estimates of GDP in Nigeria are clearly underestimates because of "omission of peasant investment a c t i v i t i e s " . Over the period 1950 - 70, gross capital formation in Nigeria increased sixfold. The average annual growth rate exceeded 10%. This rate of growth was about twice that of real- GDP and exceeded that of commodity exports. 1.4.3 Industrial output Another important indicator of an economy's growth over time is i n -dustrial output (Sutcliffe, 1971). Table 8 gives the index of industrial production in Nigeria between 1964 and 1972. Total industrial output increas-ed fourfold in the period and manufacturing output more than doubled. Elec-t r i c i t y production went up by 83%. These achievements are impressive by any 41 Table 8. Index of Industrial Production, Nigeria: 1964 - 1972 (1965 = 100) Year Total Industrial Output Manufacturing Output Mining El e c t r i c i t y Weight 108.0 512.6 435.8 51.6 1964 73.6 92.7 49.6 87.1 1965 100.0 100.0 100.0 100.0 1966 126.4 111.7 145.4 111.9 1967 112.5 114.2 112.4 97.1 1968 87.0 114.0 54.3 94.1 1969 161.5 150.2 181.5 104.9 1970 244.5 167.4 349.3 125.6 1971 321.4 180.5 506.4 158.7 1972 374.4 210.8 589.4 183.7 SOURCE: Central Planning Office, Economic and s t a t i s t i c a l review, 1972. Lagos, Nigeria 1973. standards. It should be noted, however, that petroleum is included in i n -dustrial output. Expansion of manufacturing output reflects the vigorous industrialization and import substitution policies pursued by Nigeria since achieving pol i t i c a l independence. A wide range of industries have been es-tablished,including textiles, beer, cement, aluminum sheets, footwear, paper conversion and food processing,to supply the domestic market. The apparently high rate of growth of industrial production can be attributed to the rela-tively small size of the sector,and the large domestic market which offers considerable scope for expansion for some time to come. 1.4.4 Per capita income Finally, how has the economy performed in terms of per capita income levels and changes? The answer to this question is rendered d i f f i c u l t by the lack of reliable estimates of the population of Nigeria. Censuses taken 42 Table 9. Gross National Product Per Capita in Nigeria and Selected Countries Year Nigeria Ghana Brazil Tanzania Malaysia U.K. Canada (in U.S. $ at current market prices) 1960 69 182 196 52 251 1276 1870 1963 76 211 254 64 257 1483 1928 1967 69 233 266 82 294 1848 2609 1968 77 221 286 85 303 1720 2810 1969 83 238 296 88 : 309 1825 3068 1970 103 236 341 93 369 1993 3214 1974 250 287 760 127 554 3120 5372 SOURCE: 1. U.N. Yearbook of national accounts s t a t i s t i c s , 1971. United Nations, New York, 1972. 2. Agency for International Development, Gross national product estimates, 1974. Compiled from,Bureau of Economic Analysis, U.S. Department of Commerce, 1974. U.S. aid to foreign countries, 1974. Washington, D.C. in Nigeria have always been hotly disputed as too high, and have differed 3 from estimates by independent authorities by as much as 20%. Estimates of national product per capita in Nigeria and selected countries are shown in Table 9. Between 1960 and 1974, national product per capita in Nigeria increased by 262.3%, representing an annual compound rate of growth of 9.6%. Between 1970 and 1974, i t more than doubled. Among the countries shown in Table 9, Nigeria's national product per capita in 1974 ex-ceeded only that of Tanzania,was 87% of Ghana's and only 45% of Malaysia's. When compared to the advanced industrial countries (U.K. and Canada), the See, for example, Olusanya, P.O., 1966. Implications of population growth in Nigeria; Some lessons from the Mauritian experience. Nigerian Journal of Economics and Social Studies, 8; 311-329. 43 ratio ranged from about 5% (in relation to Canada) to 8% (in relation to the U.K.). It is concluded from the foregoing that, the level of development of the Nigerian economy is s t i l l very low, even when compared to those of other developing countries of comparative size. The validity of this con-clusion depends on the accuracy of both the population and GDP s t a t i s t i c s . For example,, the U.N. statistics of population of Nigeria have been con-sistently lower than the national census estimates, so that estimates of GDP per capita,based on the latter would be s t i l l lower than those con-tained in Table 9. However, the possible decrease may be compensated, to some extent, by more accurate estimates of GDP to include subsistence food and crafts production. In Table 10 are shown the estimates of average annual growth rates of total GDP and GDP per capita between 1951 and 1974. The rate of growth of GDP per capita was consistently lower than that of total GDP, with the exception of the 1970 - 74 period. The growth rate of total GDP increased steadily, whereas, that of GDP per capita tended to fluctuate. It should also be noted that between 1951 and 1956, when Nigeria experienced a major export boom, the growth rate of GDP per capita was actually negative. On the whole, the growth rate of GDP per capita since 1958 compares favourably with that achieved by even the industrialized countries. The very high rates of growth of both total and per capita GDP since 1967 is largely at-tributable to the influence of petroleum production. The relatively low level of per capita national product in Nigeria is the result of the combined effects of growth of output and population, with the latter probably the major factor (Olusanya, 1966). In any event, 44 Table 10. Average Annual Growth Rate of Total and Per Capita GOP in Nigeria Year Total GDP Per Capita GDP (Percent Per Annum) 1951 - 56 4.1. - 0.3 1958-60 4.4 2.5 1960 - 66 4.5 2.0 1967 - 70* .\ 18.4 15.5 1970 - 74 22.1 24.8 SOURCE: U.N., Yearbook of national accounts s t a t i s t i c s , 1957, 1968 and 1973. (Vols. 111). A.I.D., 1974. op.cit. * Excludes the three Eastern States. i t is clear that Nigeria is s t i l l to reach the threshold of what Leibenstein (1963) called "the minimum c r i t i c a l effort" required for sustained, modern economic growth. This calls for a combination of measures to control the currently high population growth rate and to attain a sufficiently high in-crease in income through structural transformation of the economy. The pre-sent analysis postulates a close relationship between the latter and develop-ment in foreign trade. 1.5 Impact of foreign trade on the Nigerian economy Caves (1960) has pointed to the dangers of attributing a country's economic growth to a single factor. This may be due to the factor's over-whelming influence at some point in the country's economic history. On the other hand, there may be a failure to recognize other simultaneously oper-ating factors. It'is sufficient to note here that no satisfactory and com-prehensive theory of economic growth is as yet available (Nautiyal, 1967). 45 The emphasis given, in this study, to foreign trade in the Nigerian context derives from the widely advanced thesis that, for the underdeveloped eco-nomy, foreign trade is the crucial element in the development process. The impact of foreign trade on Nigerian economic growth may be analyzed using Caves and Jones's (1973) simple framework,embracing the impact of trade on factor u t i l i z a t i o n , factor supply and the inducement of indirect or linkage effects. 1.5.1 Factor utilization Before the middle of the 19th century, what is now Nigeria, was es-sentially a peasant economy in which production was organized along tradi-tional lines of division of labour. Output consisted, almost entirely, of foodstuffs and simple handicrafts directed to subsistence needs. The dis-tribution of this output was based on customary rights of the members of the society. Under these conditions, i t is l i k e l y that the share of some individuals in output often exceeded their marginal products. A large pro-portion of the labour force was under-employed or unemployed. In addition, given the relatively low population density, land was in abundant supply. The economic conditions prevailing before the onset of foreign economic con-tacts were thus characterized by abundant land and under-employment of labour. When the demand for palm o i l in industrializing Europe opened up the country to legitimate trade, Nigerian peasant producers took the oppor-tunity to earn additional incomes for the acquisition of luxury imports such as guns, beads, textiles, tobacco and knives. They responded by sacrificing leisure to increase the labour supply needed to expand export crop production. Labour was the major input in palm o i l production, since palms grew wild in West Africa and only an increase of effort in collection was needed to i n -crease output (McPhee, 1971; Ekundare, 1973). When, at the turn of the cen tury, cocoa, groundnuts (peanuts), rubber and cotton became major export com modities, the increase in factor input involved,not only labour, but land as well. This was particularly the case in respect of cocoa and groundnut pro-duction. In Western Nigeria, the centre of cocoa production, acreage under cocoa rose from 200,000 acres in 1929 to 1 million acres in 1954 ( G a l l e t t i , Baldwin and Dina, 1956). Between 1911 and 1937, about 1 million acres were put under groundnut production in Northern Nigeria. A summary of the impact of this early phase of the legitimate trade of Nigeria is provided by Helleiner (1966) in the following terms: "The story of Nigerian export growth during this early period (and, for that matter, until the middle of the 1950's) was in most areas that of the increasing of land and labor inputs operating with fixed proportions or constant returns to scale. Productivity per man was thereby increased; Output in-creased because the terms at which leisure could be traded for material goods altered; The Nigerian peasant pro-ducer responded by increasing his labor (and land) inputs so as to raise his output". Ugoh (1964) has argued that this improvement in the terms of trade had, on balance, beneficial effects on Nigerian economic development. Since export production was in the hands of Nigerians, i t is l i k e l y that domestic incomes increased significantly and consumer welfare improved as he now had command of a larger and more varied bundle of consumption goods. Statistics of domestic incomes in Nigeria are not available, though incomes are known to have fluctuated in sympathy with conditions of export demand (Helleiner, 1966). Moreover, export production had its social consequences in terms of the disruption of traditional activities and customary ways of l i f e (Ekundar 47 1973). Finally, i t is noted that in spite of the probable increase in pro-ductivity and incomes, the basic structure of the economy, resting on sub-sistence production, remained unchanged. In other words, the situation was more what Meier (1968) called a "once-for-all rather than a continuing i n -crease in productivity", representing a movement along the production possi-b i l i t i e s curve as opposed to an outward shift of the whole curve (Caves and Jones, 1973). 1.5.2 Factor supply Evidence on increasing external factor supplies in response to export expansion in Nigeria is rather scanty. Before 1950, the major form of exter-nal factor supply to the export sector took the form of European traders who acted as intermediaries in collecting produce from peasant producers to be prepared for export. By f a c i l i t a t i n g the evacuation of export produce (for which peasant producers lacked the necessary storage f a c i l i t i e s ) the a c t i v i -ties of the foreign companies probably had a positive effect in stimulating export production. It has been alleged, however, that the European companies, who operated market-sharing arrangements, and maintained high profit margins, collected a high proportion of the income from export earnings at the expense of the indigenous population. This view has been c r i t i c i z e d by Bauer (1954) in unequivocal terms: "The wealth of the traders has not been taken or extorted from the Africans but has been created by their trading a c t i v i t i e s . It was not previously in existence and a v a i l -able for appropriation by either Africans or by expatriates; this wealth emerged in the course of, and as a result of trading operations and the economic development following in their train. Wealth has been brought into being by the application of effort and s k i l l and by the accumulation and 48 use of capital. These activities have played a major role in the economic development and growth Of West Africa and they have been of great economic benefit to the African population". In the post-war period, the foreign private companies have been re-placed by statutory monopolies (Marketing Boards) in the marketing of export produce in Nigeria. In turn, the activities of the Marketing Boards have been c r i t i c i z e d as a form of "compulsory" taxation and as having depressing effects on producer incomes (Hawkins, 1958; Bauer, 1954; 1955; Ogunsheye, 1965). If exports did not have significant positive effects on individual incomes and private savings in Nigeria because of the marketing organization, the impact on public capital formation and revenues was less in doubt. F i r s t l y , customs revenues (export taxes and import duties) have always constituted the most important source of government capital formation. This fact is clearly shown in Table 11 for selected years between 1900 and 1970. Over this period contribution of customs revenue to total government revenue was never lower than 36% and actually reached 75% in 1955/56. An examination of Table 11 (Col.' 6), also reveals that the trend of net public capital formation tended to follow closely the developments in export markets, with years of export booms showing a surplus of revenue over expenditure and years of depressed markets showing a d e f i c i t . In spite of rapidly rising expenditure in the years after 1965, export taxes and royalties, especially from petroleum have maintained the steady rise of government revenues and surpluses. Petroleum export taxes and royalties alone are expected to provide up to two-thirds of total govern-ment revenue in the seventies (Schatzl, 1973). Secondly, the expansion of exports enabled the government to build Table.11. Nigerian Central Government Finance, 1900 - 1970 Gross Customs Customs Gross Overal1 Years Revenue Revenue Revenue Expendi ture Surplus (+) as % of or Gross Deficit (-) ($ million) ($ million) Revenue ($ million) ($ million) 1 2 3 4 5 6 1900 1.79 1.68 93.9 2.05 .26 1911 7.19 4.30 58.9 7.13 + .06 1925 - 26 23.15 10.11 43.7 18.43 + 4.72 1929 - 30 16.93 9.42 55.6 17.61 - 0.68 1935 - 36 16.79 8.15 48.5 16.12 + 0.67 1941 - 42 22.33 8.64 38.7 19.67 + 2.66 1949 - 50 86.14 48.15 55.9 79.11 + 7.03 1951 - 52 140.92 89.89 63.8 122.28 + 18.64 1952 - 53 142.54 95.05 66.7 123.49 + 19.05 1953 - 54 165.92 117.89 71.0 154.00 + 11.92 1955 - 56 167.86 125.31 74.7 154.08 + 13.78 1957 - 58 201.76 144.75 71.7 214.76 - 13.00 1959 - 60 251.51 176.56 70.2 320.82 - 69.31 1960 - 61 323.12 210.69 65.2 379.46 - 56.34 1961 - 62 336.87 214.78 63.8 371.85 - 34.98 1962 - 63 336.09 223.63 66.5 360.75 - 24.66 1963 - 64 349.54 245.17 70.1 368.88 - 19.34 1965 - 66 510.50 336.27 65.9 411.60 + 98.90 1966 - 67 513.32 331.08 64.5 433.38 + 79.94 1967 - 68* 438.02 271.72 62.0 368.65 + 69.37 1968 - 69* 472.09 303.64 64.3 477.85 - 5.76 1969 - 70* 653.86 416.57 63.7 1005.46 - 351.60 SOURCE: 1. 1900 - 1963/64, Adapted from Helleiner, G.K. , 1966. op.cit. pp.557-58. 2. 1965/66 - 1969/70. Federal office of S t a t i s t i c s , Annual abstract of s t a t i s t i c s , 1971. Lagos, Nigeria. a Excludes royalties and profit taxes paid by mineral producing companies. * Excludes the Eastern States. 50 up foreign exchange reserves required for imports of capital and consumer goods. The periods from 1951 to 1954, and since 1965, saw the rapid build up of such reserves. However, Diejomaoh (1965) has stressed the fact that the substantial reserves built up in the earlier period were held in low-yielding securities in London and not put to use in development projects in Nigeria. Although the reserves were subsequently drawn down heavily to finance development after 1960 as current export earnings dipped, their earlier use would have had a greater impact on the economy. As will be seen, the immobilization of Nigeria's foreign exchange reserves before 1960 was simply one aspect of colonial development policy for the country. Thirdly, the activities of the Marketing Boards leading to a substantial build up of funds which were later turned over to government for development purposes, was really no more than a variant of the mechanism for transferring the surplus from the agricultural sector to industrial develop-ment. This fi s c a l role of the Marketing Boards and i t s effects on Nigerian economic development have been discussed by Helleiner (1966), who reached the basic conclusion that i t was beneficial and probably necessary. The impact of export expansion on factor supplies in Nigeria was less in form of direct foreign investment and/or labour inflow and more indirectly through increasing public revenues and capital formation. Whether government revenues from export taxes, royalties, and marketing boards sur-pluses would have been better utilized through private savings and investment is a debatable issue. It is sufficient to note that such revenues enabled . the government both to finance vital transportation networks and infra-struc-ture and to assume a leading role in promoting national economic develop-ment by direct encouragement of industrialization. 51 1.5.3 Linkages and spread effects Two features of the Nigerian export sector stand out in consider-ing the linkage and spread effects. F i r s t , a l l the leading export commodi-ties were either agricultural primary commodities or minerals. Second, un-like in many other developing countries, export production was in the hands of Nigerians. The fact that after nearly 100 years of exporting, the basic structure of the economy,(dominance of subsistence agriculture), remains unchanged is sufficient evidence that linkages and spread effects from the export sector have been minimal. This hypothesis may be examined with ref-erence to the above two features. In general, i t is accepted, by economists, that agricultural p r i -mary products tend to have weak linkages with the rest of the economy. Hirschman (1958) described this characteristic in the following terms: "Agriculture in general and subsistence agriculture in particular, are of course characterized by the scarcity of linkage effects. By definition, a l l primary product-ion should exclude any substantial degree of backward linkage although the introduction of modern methods does bring with i t considerable outside purchases of seeds, f e r t i l i z e r s , insecticides and other current inputs, not to speak of machines and vehicles. We may say that the more primitive the agricultural and mining a c t i v i t i e s , the more truly primary they are. Forward linkage effects are also weak in agri-culture and mining. A large proportion of agricultural output is destined directly for consumption or export; another important part is subjected to some processing in industries that can be characterized as s a t e l l i t e in as much as the value-added by them to the agricultural output (milling of wheat, rice and coffee etc.) is small relative to the value of the product i t s e l f . Only a com-paratively small fraction of total agricultural output of underdeveloped countries receives elaborate processing, which usually takes place abroad". 52 Thus, the issue i s , to what extent were modern production methods introduced or could have been introduced in the export sector in Nigeria? The f i r s t part of this question may be answered by reference to the obser-vations of many writers that production methods of the major export com-modities of Nigeria (except petroleum) have remained backward and primitive. According to Helleiner (1966), "beyond offering the peasant farmers a vent for their potential surplus production, the foreigner did next to nothing to alter the technological backwardness of the country", But could the trade contact have done this by i t s e l f ? True, efforts were made to induce peasants to adopt higher yielding crop varieties, better seeds, f e r t i l i z e r s and other yield-improving inputs. Financial incentives and supervision assistance were also provided by government,especially to cocoa producers. As Udo (1967) has noted, however, the results achieved by these innovations were not comparable with those from commercial plantations in other countries. The technological backwardness of the Nigerian export sector was due partly to the scale of the producing units and av a i l a b i l i t y of inputs and partly, to the attitudes of peasant producers. Production of export crops was carried on by peasant families (with occasional reliance on hired labour). The maximum size of holdings that families could effectively cultivate hardly exceeded 3 to 6 acres. Units of such size were generally uneconomic for the intensive application of modern yield-improving techniques. Pos s i b i l i t i e s for increasing the size of holdings were limited by problems of land tenure (Adegboye, 1967). In a few cases, large-size holdings (exceeding 500 acres) were cultivated by individual farmers producing cocoa (Berry, 1970). The productivity of such farmers was, however, kept down by lack of access to inputs, especially in the form of credit. They were unable to provide col-53 laterals required by lending institutions. . Distribution of government financial assistance was not always based on economic efficiency. Secondly, peasant farmers tended to have a high risk aversion to investment in long gestation ventures such as cocoa and palm production, in view of the current income (from other activities)foregone and the expectation of future fluctu-ations of export income. They,therefore,tended to divide their time and resources between export production and subsistence activities to ensure stable incomes in the years of poor export markets. To the extent that export crop production was never completely com-mercialized in Nigeria, the opportunities for adopting modern techniques with substantial linkage effects were constrained. As Watkins (1963) has observed: "The limitations of the staple theory emerge most clearly when we consider the case where export production is super-imposed on a pre-existing subsistence economy. For the staple economy, the export sector can be an engine of growth; for the subsistence economy, the consensus appears to be that, the export sector will have either limited or adverse effects on the economy. The linkage effects are lik e l y to be slight regardless of the character of the ex-port good, because of the internal structure of the under-developed country, including the existence of non-competing groups in the domestic and foreign sectors". The final demand linkage of the Nigerian export sector was also li k e l y to be very small. This was due, not merely, to leakages arising from income transfers abroad by foreign factors which, as has been seen, was not dominant (except in the case of petroleum). A substantial propor-tion of incomes accruing to domestic factors appears to have been spent partly on investment in expanding export crop production and, more impor-tantly, in the construction of new buildings, in marriages and, other social 54 ceremonies. For example, Adeyoju (1969) has observed the high positive correlation between export booms and building activity in Western Nigeria. In some cases, export incomes to domestic factors were simply boarded. Most of Nigeria's export commodities, with the exception of palm produce, were not consumed domestically in significant quantities. A large part of the demand generated by export income was, therefore, directed to imports of 1uxury goods. From the foregoing, f t is clear that, due to the technical, organi-zational and institutional facts of export crop production in Nigeria, there was a general failure of the "multiplier - accelerator mechanism" of export-led economic growth, as described by Watkins (1963). P o l i t i c a l factors also acted to constrain the f u l l impact of foreign trade on Nigerian economic development. Colonial policy aimed primarily to develop or secure the country's resources for the benefit of the mother country (Ekundare, 1973). To this end, the policy on exports was to direct these predominantly to the mother country as raw materials for her industry. At the same time British colonial policy discouraged domestic industrialization (Eicher, 1970) and, by means of discriminatory t a r i f f s against imports from other sources, Nigeria was reserved as a market for her manufactured exports. As Leubu-scher (1953) has observed: "... an analysis of Nigerian conditions leads to one con-clusion: that multilateral trade, as free as possible from discrimination and a r t i f i c i a l impediments, is the organization of world trade that best serves Nigeria's interests". Since achievement of pol i t i c a l independence (in 1960), Nigeria's p o l i t i c a l leaders have embarked upon changing the prevailing situation by diversify-55 ing export markets and sources of imports,as well as promoting a vigorous program of import-substitution-domestic manufacturing, albeit behind a high wall of t a r i f f barriers. The failure of the Nigerian economy to achieve modern economic growth, in spite of a substantial foreign trade sector,.has been demonstrated in Section 1.5. It will be accepted that the analyses presented supported the hypothesis that foreign trade has not succeeded as an engine of growth in the Nigerian case. The basic reasons are to be found both in the nature and conditions of production,as well as the p o l i t i c a l fact of colonial rule. The analysis assumed external demand to be given, even though this was some-times an important factor (via fluctuations in export earnings). The policy implications involve many aspects. Some economists, especially in under-developed countries, see the solution in terms of import-substitution in-dustrialization (Aboyade, 1971). This approach has i t s problems with regard to the efficiency of resource allocation,' consumer welfare and the supply of input factors (Meier, 1958). Others have suggested increased effort, diver-sif i c a t i o n of exports and upgrading products with a view to export of manu-factures along profitable lines (de Vries, 1957). There is not necessarily a schism between the two approaches given appropriate international trade relations and necessary adjustments in the operation of comparative cost advantage doctrine. The crux of the matter is to what product Tines should a country devote the use of i t s available resources in order to sustain eco-nomic development and promote the welfare of i t s inhabitants. Based on this premise, the role of forestry and wood products exports in a country's eco-nomic development is appraised in the next section. 56 1.6 The role of forestry in economic development Focus on the role of forestry in economic development is relatively recent in origin. It has gained impetus from the writings and studies con-ducted under the auspices of the Food and Agriculture Organization (FAO) of the United Nations. The FAO study "European Timber Trends and Prospects", (FAO, 1953) represented the i n i t i a l major effort in this direction. It was subsequently followed by other similar studies conducted in cooperation with the regional Economic Commissions, for Latin America (FAO, 1961), Asia and the Far East (FAO, 1963) and Africa (FAO, 1967). The FAO study "Wood: World Trends and Prospects" (1966), provides an assessment of the forest economy on a world-wide basis, while a look at i t s future potentialities is contained in the "Provisional Indicative World Plan For Agricultural Development" (1969). Besides the FAO, or in cooperation-with i t , a number of other in-ternational organizations have .undertaken the systematic examination of the possibilities of forestry sector in economic development, especially in the underdeveloped regions of the world. These organizations include the United Nations Conference on Trade and Development (UNCTAD, 1964), United Nations Industrial Development Organization (UNIDO, 1966), International Union of Forestry Research Organizations (IUFRO, 1968), International Labour Organi-zation (ILO, 1965) and International Bank for Reconstruction and Development (IBRD, 1964), among others. Besides specific country studies of the forestry sector and investment p o s s i b i l i t i e s , these organizations have contributed significantly to "making the case for forestry" through conferences, specia-lized publications and/or direct assistance (financial and technical) to 57 various developing countries. Simultaneously, forest economists have turned their attention from the microeconomic problems of forestry to the macro aspects, involving the interrelationships between forestry and the general economy (Zivnuska, 1965(a); Gregory, 1972). Section 1.6 summarizes the role of forestry in economic development, indicates the determinants of that role and examines the mechanisms by which the influence of the sector is transmitted through the rest of the economy. From early times, forests have been closely associated with man's existence and welfare; as a source of food and shelter; as a refuge against the enemy, for farmland and urban development; and as a source of several other goods and services considered in many places as essential for survival (Sartorius and Henle, 1968). Over the centuries, forests have sometimes been seen as an obstacle to progress (Zivnuska, 1959). Man's increasing awareness of the value of forests is exemplified by the development of forest management in 18th century Europe (Brasnett, 1953). Diminishing resources and the threat of a timber famine, hastened the organization of forests for permanent production of the essential goods and services. Thus began the concept of sustained yield management which dominated forestry thinking for more than a century (Haley, 1966). The historical development of the con-cept of sustained yield management of forests has been discussed by Haley (1966), Thompson (1966), Davis (1966), Waggener (1966), Osmaston (1968) and Zivnuska (1974). The conditions, of uncertainty of wood supplies, absence of substitutes, poor transportation and communication f a c i l i t i e s , and frequent warfare between communities, which characterized the environment of early sustained yield management, do not equally hold in most countries today. Yet, 58 King (1958) has noted that most developing countries s t i l l adopt the con-cept as sacrosant, and the core of their forest policies. Westoby (1962) has provided a detailed analysis of the role of forestry in economic development. According to this.author, forestry and forest industries represent considerable opportunities for accelerating economic growth of those countries well-endowed with forest resources. He argued that in the underdeveloped country, the forest sector can exert a "propulsive" influence on the general industrialization process and, therefore,should be highly ranked in national development programs. There is a recognition of the need for government intervention in economic af-fairs in the underdeveloped country and this can have significant conse-quences for forestry development. The evaluation of the costs and benefits of forestry investment projects should be consistent with the general aims of national development plans. The c r i t e r i a employed for evaluation of public investment decisions may often diverge from those relevant for p r i -vate investment decisions. In Westoby's (1962) view: "while the solution will depend on the structural con-ditions and the physical endowments ( i . e . , the data), of the economy concerned, the main element of choice is p o l i t i c a l , since the definition of the general ends of the plan is mostly the result of a po l i t i c a l deci-sion". Westoby's (1962; 1969) thesis concerning the potentially "prop-ulsive" role of forestry in the general economy seems to rest on three main propositions relating to the physical and spatial characteristics of forests, the range of, and nature of demand for, forest products, and the indirect or linkage effects of the sector. 59 1.6.1 Characteristics of forestry and forest industries The classical economists recognized three main factors of product-ion, namely, land, labour and capital. Capital is man-made or produced means of production. It can be bought outright and i t s ownership freely transferred through ordinary market transactions (Buttrick, 1948). Labour represents the human element in the production process. Unlike capital, however, only the services of labour can be purchased. Land, on the other hand, is defined as the "original and indestructable powers of the s o i l " including both the surface and subsurface resources bestowed as a g i f t of nature (Ricardo, 1848). Land may thus be interpreted in terms of natural resources or natural endowments (Leslie, 1971). Modern economists now re-cognize the impracticability of distinguishing finely between capital and land on one hand or between capital and labour on the other (Barlowe,1964). Previously inproductive land may be made productive through man-made im-provements which must be treated as capital. Also, increased productivity through labour s k i l l s can only be achieved through capital investment in education and training. Thus the term "human capital" has come to be treated by some economists as a separate and distinct factor of production (Higgins, 1959). Within the classical differentiation of production factors, forests may be treated as part of land and as natural resources. Leslie (1971), however, observed that this definition of forests "is not entirely satis-factory, since a significant proportion of the world's forests are man-made and thus are capital". Nautiyal (1967) further emphasized that: "Time, capital and labour are needed to recreate the forest 60 resource. Forests and indeed a l l natural resources are thus much like man-made capital, and should be included under capital in the trichotomy. It does not matter greatly that the time required to recreate forests is far longer than that required to recreate other kinds of capi t a l " . From the viewpoint of using forests as means to promote economic development, the fundamental characteristic is its renewable nature. Worrell (1959) elaborated this point in the following terms: "For forestry can be permanent. Its basis is a renew-able resource - the forest growing on the land. Forests can be managed as a continuous crop, with harvests of the various products and services coming annually or periodically. And the productive capacity of forests can be maintained indefinitely This means that the paper and lumber and other forest industries need not exhaust their source of raw material as the metal i n -dustries eventually w i l l . The whole structure of forest-product industries can be a permanent part of our econo-my". The renewable nature of forests gives the resource significant potentials for economic development. It carries the implicit assumption, however, that society will need forest products in perpetuity or that other non-forest products will not be required sufficiently badly so as to replace forest pro-ducts and diminish their importance. This point has been argued by Haley (1966) in his critique of the sustained yield concept. In addition, although forest growth can sustain i t s e l f as a natural process, maintenance of an i n -creasing output of its products in appropriate qualities may involve substan-t i a l expenditure of capital and labour input which may weigh heavily in soci-ety's evaluation of the benefits. The evaluation of forestry's significance for society's economic im-provement also brings out the other special features of forestry which have 61 been clearly listed by Duerr (1949, 1960). F i r s t , is the extreme length of the production period forestry involves compared to that in most other forms of economic activity. This is especially the case in timber production for-estry where rotations range between 5 and 200 years. However, the introduct-ion of quick-growing species, such as Gmelina for such uses as poles or pulp-wood in many parts of the tropics,has considerably shortened the rotation to" between 5 and 10 years. Second, the producing plant and the product are virtually insepar-able in forestry. As Duerr (1960) put i t : "One characteristic, then of forest capital is that, the timber product is also the timber-growing machine,; but ultimately the machine is the product. This is more than just an interesting academic point. It is a basic feature of forestry, the consequences of which pervade forest man-agement". Zivnuska (1949b) has pointed to the serious management problems which arise due to the above two features of forestry, that is how to match wood sup-plies with changing demand so as to avoid a glut or excess capacity in times of shrinking demand,and an acute shortage in times of rapidly rising demand. The inseparability of the plant and product also creates problems of conser-ving the forest capital in order to maintain future productivity. However, the versatile nature of the forest capital and product gives considerable scope for f l e x i b i l i t y since the inventory can be run down easily during rising demand. When demand is low, the cost of holding the inventory is not too high, since trees can be l e f t standing for f a i r l y long periods without serious deterioration. A third feature of forestry is that, unlike agricultural products, forest products do not go to final consumers but are,instead,mainly inter-62 mediate goods used by other producers to produce final consumer goods. The demand for forest products i s , therefore, a derived demand (Worrell, 1959). The behaviour of derived demand elas t i c i t y is not only more complex but has been less studied than that of final consumer goods. Finally, a large pro-portion of the benefits from forestry have values which are not determined by the normal market system. The extra-market values of forests include recreation, soil erosion control, amelioration of climate and amenity. The importance of non-market determined values of forests will depend on the physiographic and climatic conditions of a country, as well as on its stage of economic development. Worrell (1970) has suggested that as a country approached high levels of economic development the non-market determined values may gain in prominence and become major competitors for forest land. In a developing country, such as Nigeria, the importance of forestry is judged, largely, by its capability to produce wood products (Enabor, 1971). The characteristics of forestry and forest industries have signi-ficant implications for national development policy and planning. According to Leslie (1971), "social benefits and social costs become important con-siderations in the relationship between human activities and the use of for-est resources". With reference to developing countries, the characteristics of the forestry sector may be cited as jus t i f i c a t i o n for "government inter-vention" (Westoby, 1962), in order to harmonize forest development and national development goals (Nautiyal and Smith, 1968). 1.6.2 Range and trend of demand for forest products Forest products may be classified under three broad categories -wood and wood-based products; wild l i f e and non-arboreus plants, and non-63 market valued services (Buttrick, 1948). In a developing country, such as Nigeria, wood is an essential commodity required for both domestic and i n -dustrial uses. Wildlife has considerable importance not only as a source of meat and protein,but also for the role of w i l d l i f e in maintaining the ecological balance. Hunting as a way of l i f e also has great social value to Nigerians (Ajayi, 1972). Finally, from time immemorial, herbs and medi-cinal plants obtained from forests have provided Nigerians with the means to combat endemic diseases and to maintain general health care. As indica-ted earlier on, however, the extra-market values of forests are s t i l l of relatively lesser importance in Nigeria, except in the northern savanna region of the country where creation of shelterbelts to combat desiccation of the soil and ameliorate the climate are major forestry a c t i v i t i e s (Adeyoju, 1975). For the purposes of this thesis, attention will be confined to wood and wood-based products. Buttrick (1948) has given a l i s t of the wood and wood-based.pro-ducts' of forest. Duerr (1966b) classified wood products according to the various stages of use, or extent of their processing as characterized by the degree to which the tree stem is broken down or sub-divided in the process of making i t ready for the final use. The following stages were differen-tiated by Duerr (1966b): a) Roundwood - including log cabins, corduroy roads and poles. b) Chunks - including firewood, the hewn crosstie, and other round timber. c) Thick slices (or lumber). d) Thin slices (or veneer and plywood). e) Particles, featuring paper, paperboard and composition board. 64 f) Molecules, featuring the nascent siIvichemical industry. Essentially, these products exhibit increasing states of fabrication which lead to greater uniformity in quality of output and, at the same time, lends i t to greater variability and adaptation to end-uses. The increasing degree of processing of the product also permits greater u t i l i z a t i o n of the raw material and encourages development of secondary or by-products based on the waste released by earlier processes. Duerr (1966b) argued that a positive correlation exists between the level of economic development of a country and the proportion of wood products consumed in processed forms. In his words: "It follows then, that society's economic growth forces i t into successively higher stages of wood use. The pro-ducts appropriate to the earlier stages become inferior goods, and take diminishing percentages of the total raw-material". Thus,the proportion of wood products consumed per head in a country in pro-cessed form is a rough indication of i t s level of economic development. Con-versely, economic growth of a country necessarily induces significant changes in composition of its wood products consumption. Westoby (1962) produced a flow chart (see Appendix 2) showing the various uses and interrelationships between wood products in an economy. He showed that in the context of economic development, i t is not only the increasing range and degree of manufacturing of wood products consumed that should be considered; equally important is the horizontal relationship between products of the forest industries. Thus, lumber wi l l replace round-wood in most uses as economic growth gets under way, only to be replaced later by wood-based panel products. At high levels of economic growth, re-65 constituted wood products begin to encroach into and supplant structural wood products in many traditional markets. This intra-competition between wood products may even be more important than competition from non-wood substitutes in planning forestry and forest industries development (Westoby, 1962). An incisive i l l u s t r a t i o n of the dynamic nature of the demand for wood products is further provided by Westoby's (1962) analysis (see Table 12). F i r s t , he compared the levels of consumption of the various wood pro-ducts in developed countries with that for the less developed countries. Although the less developed countries in the comparison year (1958) con-tained 53% of the world's population, the absolute amount of wood products consumption in the developed countries exceeded their's by a ratio of 8:1 for sawnwood, 13:1 for wood-based panels and 11:1 for paper and board. The disparity becomes more striking when the comparison is put on a per capita basis. Thus,sawnwood consumption in the developed countries per capita was 17 times greater, wood-based panels, 28 times and paper and board 23 times greater than in the less developed countries. Not only was consumption of wood products concentrated in the advanced countries (Europe and North America) but the trend of production showed its concentration in the same region. Subsequent studies (FAO, 1966; 1970; C l i f f , 1974; Westoby, 1965; O'Leary, 1968) suggest that this trend is likely to continue into the fore-seeable future. According to O'Leary (1968): "For a boy born today in the United States, his life-time usage of paper will be well over 17 tons even i f the steady increase in per capita consumption stopped where i t is today. In India and Asia where l i f e expectancies are only about two-thirds as great and per capita consumption only a few pounds per year, the life-time consumption for a child born today is about 100 pounds". 66 Table 12. Apparent Consumption of Wood Products (1957-59 Average) Unit A Developed Countries B Underdeveloped Countries Ratio A:B Population (1958) Million 923 1956 0.47 Apparent Consumption Total Sawnwood (including sleepers) million m (sawn) 286.7 35.0 8 Wood-based Panel Products million m3 (r. equiv) 38.3 3.0 13 Paper and Board million metric tons 58.1 5.3 11 Apparent Consumption per 1000 capita Sawnwood m3 (sawn) 310.0 18.0 17 Wood-based Panel Products m3 (round) 41.7 1.5 28 Paper and Board metric tons ' 63.0 2.7 23 SOURCE: Westoby, J.C. 1962. "Forest industries in the attack on economic underdevelopment". Unasylva, 16_(4): 172. The above statement may not necessarily be taken as a prophecy, since a future low per capita wood consumption may be-less indicative of livi n g standards i f wood were replaced in many uses by substitutes. Nor do they sug-gest a static condition of consumption in currently less-developed countries. As Westoby (1962) has observed,the disparities indicate potential developments in future, in wood consumption trends in presently less-developed countries. In the short-run, they suggest significant opportunities for international trade in wood and wood-based products. He showed that income e l a s t i c i t y of 67 demand r anged f r o m m o d e r a t e l y h i g h f o r sawnwood and wood-based p a n e l s t o v e r y h i g h f o r p a p e r and p a p e r b o a r d . T h u s , f o r pape r and p a p e r b o a r d i t i s as h i g h as 2.5 t o 3 a t income l e v e l s a r ound $100 pe r c a p i t a ; 1.5 t o 2.5 a t i ncome l e v e l s o f $200 t o $400 p e r c a p i t a , and a t income l e v e l s a b o u t $500 t o $1000 p e r c a p i t a , i t i s s t i l l g r e a t e r t han one . The v e r y h i g h p o s i t i v e c o r r e l a t i o n between income and p a p e r and b o a r d c o n s u m p t i o n l e v e l s has been f i r m l y e s t a b l i s h e d i n a s t u d y by t h e FA0 ( 1 9 6 1 ) . Where f o r e s t s p r o v i d e t he m a j o r i n p u t s f o r pape r and b o a r d p r o -d u c t i o n , t h e i r c o n t r i b u t i o n t o economic deve l opmen t i n low income c o u n t r i e s c o u l d t h u s be g r e a t . W i t h t h e o t h e r wood p r o d u c t s , howeve r , t h e b e h a v i o u r o f income e l a s t i c i t y o f demand i s l e s s c l e a r . T h i s i s b e c a u s e , a s G r e g o r y (1965) o b s e r v e d , n o t o n l y income but p r i c e s o f s u b s t i t u t e s , a n d wood a v a i l a b i 1 i t y , b e c o m e i m p o r t a n t o p e r a t i v e f a c t o r s . The c o n c l u s i o n t h a t may be drawn f r o m t h e t r e n d o f wood demand a s p e c t o f W e s t o b y ' s a n a l y s i s i s t h a t a c o n t i n u i n g i n c r e a s e i n w o r l d c o n -s u m p t i o n o f wood p r o d u c t s s h o u l d be e x p e c t e d , even a f t e r a l l o w a n c e i s made f o r t e c h n o l o g i c a l d e v e l o p m e n t s l e a d i n g t o c r e a t i o n o f s u b s t i t u t e p r o d u c t s . The p r e s e n t c o n c e n t r a t i o n o f wood c o n s u m p t i o n i n t h e d e v e l o p e d c o u n t r i e s means, i n t h e s h o r t - r u n , o p p o r t u n i t i e s f o r w e l l - e n d o w e d d e v e l o p i n g c o u n t r i e s t o c a p i t a l i z e t h e i r f o r e s t r e s o u r c e s t h r o u g h i n t e r n a t i o n a l t r a d e i n wood p r o d u c t s . In t h e l o n g - r u n , howeve r , t h e l e s s - d e v e l o p e d c o u n t r i e s w i l l have t o a p p l y t h e i r f o r e s t r e s o u r c e s t o m e e t i n g t h e i r own r i s i n g wood c o n s u m p t i o n r e q u i r e m e n t s . The deve l opmen t o f f o r e s t r e s o u r c e s s h o u l d t hu s be seen as a n e c e s s a r y s t e p i n t h e r e a l i z a t i o n o f t h e i r own d e v e l o p m e n t g o a l s . 1.6.3 L i n k a g e s , e x t e r n a l e f f e c t s and i n t e r d e p e n d e n c e s o f t he f o r e s t r y s e c t o r . 68 The most important contribution of Westoby's (1962) paper is his discussion of linkages, external effects and interdependencies of the for-estry sector. The following statement summarizes the essence of his argu-ment: "In the light of this interdependence of the industrial and agricultural sectors in the development process, for-estry and forest industry activities take on particular significance. At one end they reach back into the rural economy; at the other, they penetrate into many branches of the industrial sector. The flexible range of forest industries, with their considerable variation in require-ments of capital, s k i l l , raw materials and other product-ion factors means that most developing countries, provided they haved a suitable raw material base, are in a position to develop one or more of these industries on an economic scale.. However, these industries can exercise a propulsive influence on the general economy, frequently permitting the establishment of secondary and conversion industries. At the same time, the forestry activities associated with the establishment of these industries, exercise a benefi-cial influence on the rural sector, relieving under - and unemployment in the countryside, and in general diversi-fying the rural economy. For these and many other reasons (including their high import saving effect and the fact that they valorize indigenous renewable resources), forest and forest industry development has a rightful claim to high priority in the development plans of many underdeve-loped countries". It must be admitted that such an impressive case for forestry de-velopment has never been previously made by any writer on the subject. To support his argument Westoby (1962) using Hirschman's (1958) original format produced a table (Table 13) for four countries to show the degree of in-directness of the forestry sector. The data of Table 13 are coefficients calculated from input-output tables and provide a measure of backward (ratio of value of purchased inputs to total production) and forward (ratio of the value of intermediate demand to that of total demand for i t s products) link-ages associated with the sector. He then compared these ratios with the 69 Table 13. Indices of Interdependence of Forest Industries Ratio of value of purchased inputs to value of total production -Ratio of demand to value of intermediate value of total demand Country Average a l l Industries Wood &• Wood Products Paper & Paper Products Average a l l Industries Wood & Wood Products Paper & Paper Products Japan 48.7 68.2 62.8 46.1 29.5 80.2 Italy 43.8 71.6 53.8 41.1 43.1 75.3 U.S.A. 42.6 42.1 56.6 41.9 40.4 79.2 Norway 36.4 51.5 55.7 30.4 29.1 42.5 SOURCE: Westoby, J.C., 1962. op.cit. p .171. average for the whole economy to determine the "strength of linkages" (Hirsch-man, 1958) of the forestry sector with the rest of the economy. From the re-sults i t is concluded that wood and wood products have poor backward and strong forward linkages, whereas, paper and paperboard products have moderate back-ward but very strong forward linkages. A given level of investment in the paper products industry would thus stimulate economic growth more than an equal amount of investment in the wood and wood-products industries. These con-clusions are, in general, consistent with Hirschman's (1958) findings. Nautiyal (1967) gave a number of valid reasons why one should exercise caution in interpreting the coefficients calculated by Westoby (1962). In my view, the strongest of these is that the data referred to developed countries and, therefore, a danger exists in extrapolating them for less developed countries. This is unacceptable, since i t is implicitly assumed that account-ing procedures and availability of a l l inputs in forestry and other sectors 70 of the economy are identical in both sets of countries. Westoby's (1962) data were not meant, essentially, for intercountry comparisons but rather for interindustry comparison. In that case, coefficients calculated for other industries, including agriculture, would have proved valuable. The role of forestry in economic development has, also been ex-amined by a number of other forest econmists. Zivnuska (1966) discussed the integration of forest development and national development plans. He presented a model of economic growth in which increasing aggregate produc-t i v i t y is maintained through the simultaneous development of the agricul-tural and industrial sectors of the economy. The model was abstracted from that developed by Ranis and Fei (1961) and, Fei and Ranis (1963). Assuming that the country concerned possessed a suitable endowment of forest resources, the main issue is the appropriate rate of development and the flow of capital into this sector of the economy. Zivnuska (1966), drew a parallel between forest development and the process of general economic growth in a labour surplus underdeveloped eco-nomy. At the early stages, forestry activities exhibit a low capital to labour ratio and demand very simple s k i l l s . Since these activities are typically located in rural areas, the excess labour released from agricul-ture can be more easily absorbed by the sector than in highly urbanized and mechanized operations. At the same time, forestry operations economize on the most scarce factor, capital. Infrastructural development required to increase agricultural productivity w i l l , in turn, service the forestry sector. The expansion of forestry a c t i v i t i e s , also, means release of frozen capital in form of natural resources into a more liquid form which can be directed to various sectors of the economy as needed. Finally, 71 r e d u c t i o n i n i m p o r t r e q u i r e m e n t s as d o m e s t i c p r o d u c t i o n o f f o r e s t p r o d u c t s i n c r e a s e s , w i l l h e l p improve the c o u n t r y ' s b a l a n c e o f payments and c o n s e r v e h e r d o m e s t i c c a p i t a l r e s o u r c e s . He c o n c l u d e d t h a t : "... the f o r e s t i n d u s t r i e s s e c t o r o f the economy r e -p r e s e n t s an i n t e r m e d i a t e s t a g e between the a g r i c u l t u r a l s e c t o r and the g e n e r a l i n d u s t r i a l s e c t o r . Thus d e v e l o p -ment o f the s e c t o r can o f t e n be a h i g h l y u s e f u l a p p r o a c h t o f a c i l i t a t i n g the s t r u c t u r a l s h i f t s i n t h e economy which must be a c h i e v e d i n overcoming the problems o f underdevelopment". The same a u t h o r demonstrated t h a t the s i g n i f i c a n t f e a t u r e o f f o r e s t development i s the d i v e r s i t y o f the p r o c e s s . Through i n c r e a s i n g d i v e r s i f i -c a t i o n and e f f i c i e n c y o f p r o d u c t i o n from s i m p l e t o more s o p h i s t i c a t e d p r o -d u c t s , t h e r e i s a s t e a d y b u i l d up o f c a p i t a l r e s o u r c e s , l a b o u r s k i l l s , a n d a p p r o p r i a t e t e c h n o l o g y , w h i c h a r e the c r i t i c a l i n p u t s r e q u i r e d f o r the s u c c e s s -f u l development e f f o r t . There i s a d i f f i c u l t problem i n o b t a i n i n g t h e i n i t i a l i n p u t s which l e a d t o the t a k e - o f f s t a g e i n development. However, once f o r -e s t development g e t s under way, the p r o c e s s can g e n e r a t e i t s own c a p i t a l r e q u i r e m e n t s f o r c o n t i n u i n g e x p a n s i o n . In t h i s c o n t e x t , t h e t r a d i t i o n a l c o n c e p t s o f s u s t a i n e d y i e l d can i n g e n e r a l be seen as p o s s i b l y i n c o m p a t i b l e w i t h the c o n d i t i o n s o f r a p i d growth and change. Z i v n u s k a (1966) a l s o d i s c u s s e d the j u s t i f i c a t i o n f o r f o r e s t d e v e l o p -ment under c o n d i t i o n s o f f o r e s t s c a r c i t y . He noted t h e problems t h a t w i l l a r i s e i n view o f the n e c e s s i t y to t i e up s c a r c e c a p i t a l f o r an u n u s u a l l y l o n g p e r i o d , even i f an a c c e p t a b l e r a t e o f r e t u r n i s e v e n t u a l l y f o r t h c o m i n g . S t i l l , t h e r e may be some c o n d i t i o n s under which such development w i l l n e v e r t h e l e s s be j u s t i f i e d . A p a r t from a c o n s i d e r a t i o n o f a v a i l a b l e a l t e r n a t i v e s f o r i n -vestment, the d i r e c t i o n o f f o r e s t development must be c a r e f u l l y t h o u g h t o u t 72 in view of economies of scale, capital intensity and market requirements, which diff e r significantly between different processes in the forest in-dustry. Zivnuska (1966) seems to accept a l l the other points already made by Westoby (1962) regarding earning of foreign exchange, saving of imports, technological advantage and linkage effects. The major problem he recog-nized is that of integrating forest development with national development plans, so as to convince national policy makers to make the necessary capital allocations to the forestry sector. In his discussion of the role of forest industries in industrial development in tropical Latin America, Lewis (1966) noted that wood-based industries are primarily established with a profit motive. The role of forest industries in opening new lands, constructing railway systems, in -troducing basic machinery, providing a source of income, and aiding deve-lopment of labour s k i l l s , as well as converting capital presently invested in timber into capital available for investment in other industries, may only be secondary to profit-motivated forest industry operations. To ensure the proper balance between the output of social benefits and private returns, he advocated government control through appropriate planning. In discussing the Mediterranean and Near East regions, Chapman (1966) emphasized the need for forest planners to plan forest development on the basis of trends of wood demand. Forest development should be planned with the financial and economic implications carefully considered in "deciding which program pays off best or which policy saves most in imports and foreign exchange". Other papers on the subject with reference to particular countries have been con-tributed by Arrellano (1966), Lansigan (1966), Lamprecht (1966) and Hernan-dez (1966). 73 There is general agreement, at least among forest economists, that forestry and forest industries can contribute significantly to economic growth. The problems arise with the conditions of a given country with re-gard to available resources, the po l i t i c a l will too effectively u t i l i z e them, and appreciation of the sector's potential. Nautiyal (1967) has, how-ever, stressed that "nothing can be presumed unique about forestry". As one of the sectors of an economy, decisions regarding forest development must be predicated on its actual and potential p r o f i t a b i l i t y when compared to the alternatives available. For purposes of investment policy in the less- .. developed country, i t may be argued, the analysis of the contribution of the forestry sector to economic development will involve not only the rate of return or economic linkages, but also such key issues as employment gen-eration, rural stabilization, contribution to local incomes and capital formation, as well as impact on the resource base. These issues may be con-sidered of central concern in the less-developed country where "forest ex-ploitation" as opposed to "forest development" with a view to serving export markets has been prevalent. To the extent that the wood products export trade has dominated forestry activities in Nigeria, these considerations weigh heavily in efforts to mobilize the forest resources for economic deve-lopment. 1.7 Summary The role of international trade in economic growth has received the attention of economists, politicians and businessmen for a long time. Accord-ing to the classical theory, international trade benefits a country by per-mitting a more efficient allocation of i t s resources,and improved domestic 74 welfare resulting from a more diversified bundle of consumption goods. As a corollary, world welfare would be improved i f each country engaged in pro-duction and trade along lines of its comparative cost advantage. It is also assumed, in international trade theory, that secondary but significant gains would accrue to a country, from specialization, in the form of economies of scale and technological change, which constitute the bases of an on-going development process. Models of export-led economic growth have been developed in the context of particular countries to explain their successful develop-ment experience. In this study, su i t a b i l i t y of export-led models of economic growth for currently underdeveloped countries is c r i t i c a l l y appraised. In the post World War II period, widespread controversy has developed among economists about the effects of international trade on the economic growth of the underdeveloped countries. Many seem to share the view that, for these countries, foreign trade has hindered rather than f a c i l i t a t e d deve-lopment. Explanations which have been given for the failure of foreign trade to act as an "engine of growth" in the currently underdeveloped countries in-clude: 1) The nature of the export commodities. 2) Sluggish overseas demand. 3) Development of substitute products. 4) Economy in the use of raw materials in importing countries. 5) Restricted access to export markets due to t a r i f f and non-t a r i f f barriers. 6) The structure of pol i t i c a l power relationships. Available evidence on the impact of foreign trade on the economic growth of 75 less-developed countries is inconclusive. However, in view of the import-'s ance which they attach to foreign trade for their development efforts, in-ternational trade has come to occupy a dominant position in their economic policies. It would appear that the real issue is not whether foreign trade is beneficial but rather how i t can be made so, given the urgency of the economic problems which confront the poor countries of the contemporary world. Analysis in this study has showed that Nigeria's economic growth performance in the postwar period has been generally good. A substantial part of that performance can be attributed to the influence of foreign trade. It was argued that both internal and external factors operated to blunt the bull impact of foreign trade on the economy. In the circumstance, i t is advocated that future policy should concentrate on maximizing gains from profitable foreign trade opportunities, while diversification of the economy is being fostered. Forestry and forest industries can play a potentially important role in the achievement of rapid economic growth of underdeveloped countries. Unfortunately, the sector remains the least understood and most ignored in many of these countries. More intensive studies, and the adoption of dy-namic policies, can enhance the future contributions of the sector to the economy and improve i t s ranking in the priorities of national economic develop-ment. It is argued that the export trade in wood products is one aspect of such studies demanding urgent attention. CHAPTER TWO DEVELOPMENT OF THE NIGERIAN WOOD PRODUCTS EXPORT TRADE 2 . 1 Introduction The rise of the Nigerian wood products export trade antedates or-ganized forestry in the country. The trade comprises, almost entirely, of sawlogs, veneer logs, sawnwood, veneer, and plywood. Minor quantities of charcoal, industrial roundwood (poles and pitprops), sleepers (crossties), blockboard, and manufactured wood, are also exported. Development of the trade has been influenced by the growth of external demand for wood, the rise of a domestic timber industry, and increased local awareness of the value of forests, backed by the efforts of the forest administration. The present study covers exports of sawlogs and veneer logs, sawnwood, veneer, 77 and plywood.A These products are, entirely, of tropical hardwoods which derive from a narrow belt of lowland rain forest stretching across the southern coast belt of the country (see map in Appendix 9). Appraisal of development of the Nigerian wood products trade is undertaken in this chapter, in order to provide a basis for an understand-ing and ju s t i f i c a t i o n of policies towards the trade, which are subsequent-ly recommended in the study. The Nigerian wood products export trade is directly influenced by development in international trade in wood products. The trends, patterns and prospects of the latter, with special reference to tropical hardwoods, are examined and analyzed in Section 2.2. The major problems in the expansion of tropical hardwood exports are indicated. The policy implications for tropical hardwood producing countries are set out. Growth of the Nigerian wood products export trade is examined in four phases: 1) The period before 1900. 2) The period, 1900 - 1929. 3) The period, 1930 - 1949. 4) The period since 1950. In Section 2.3.5, the trade patterns are evaluated for the impact on the forest resource and general economy. Possible explanations of the observed This restriction of coverage has been deliberately made in view of the rea l i t i e s of the current situation in Nigeria, whereby other wood-based products such as particle board, fibreboard, pulp, paper and paperboard, have not been developed to an extent to make exports possible. It is not implied that Nigeria should not, or could not, develop exports of such products in the future. 78 patterns are advanced. Development factors in the trade are discussed in Section 2.4. 2.2 International tropical hardwood trade Tropical hardwoods represent a dynamic and rapidly growing compo-nent of the world trade in wood and wood-based products. World annual con-sumption of tropical hardwoods increased from 38.6 million m (r) in 1955 to 71.3 million m3(r) in 1968, or by 4.8% per annum2 (Takeuchi, 1974). It rose further to 115.7 million m 3(r) in 1973 or by 62% (FAO, 1974). The . bulk of the consumption took place in the industrially advanced countries of Western Europe, North America, and Japan. Trends of world wood consump-tion show i t s heavy concentration in the industrially advanced countries. For example, the developing countries account for about four-fifths of world consumption of fuelwood, whereas, the share of the developed countries in industrial wood products consumption is about 86% for sawnwood, 92% of wood-based panel products and 90% for pulp, paper and paperboard (FAO, 1971). Differences in the pattern and level of wood products consumption between developed and less developed countries are partly a reflection of differential levels of economic development and partly, a consequence of the locational patterns of world forest industries. Thus, although the de-veloped countries contain only one-half of the world's forest area, they account for 80% of the world's annual wood removals!, and, on average, 85% of 2 3 All growth rates are compound. Primarily the United States of America. 79 the world output of sawnwood, wood-based panels, pulp, paper and paperboard (FAO, 1975). Like production and consumption, world trade in wood and wood-based products i s , also, largely among the developed countries, which ac-counted for 82% of the total value in 1960 (FAO, 1964).4 However, the de-veloping countries' share has increased rapidly since 1960, and as wi l l be shown, the growth rate of their exports have generally surpassed that of the world trade in forest products. Development of the international tropical hardwood trade has been influenced by both supply and demand factors (Pringle, 1969). F i r s t l y , the tropical hardwood trade i s , for a l l practical purposes, synonymous with the . wood products exports of developing countries. In these countries shortage of foreign exchange constitutes a major constraint on economic development. For countries well-endowed with forest resources, wood products export earn-ings could contribute significantly to the effective prosecution of indust-ria l i z a t i o n programs (Rola, 1974). Between 1950 and 1960, developing coun-tries' exports of wood products increased from U.S. $0.21 b i l l i o n to U.S. $0.5 billion,or by about 150% (FAO, 1964). It rose further to U.S. $1.6 b i l l i o n , i n 1970 or by 300% (FAO, 1971). Accelerated exploitation of forest resources has become an important means of providing urgently needed foreign exchange in many tropical developing countries. Secondly, there has been a rapid increase in world demand and con-sumption of wood products. Recent appraisals of world wood balance (FAO, 1969; Pringle, 1973) suggest that substantial wood deficits are li k e l y to Includes trade between centrally planned countries and, between them and other developed countries. occur by the end of this century, particularly in Europe and Japan, and to some extent, in the U.S.A. Increasing reliance will be placed on tropical hardwoods to meet the deficits. Several studies have, therefore, forecast a bright future for tropical wood products exports. It is important, how-ever, to recognize the many problems which confront the trade in a constant ly changing and dynamic world economy. These must be resolved i f the f u l l potential of tropical forest resources is to be realized. 2.2.1 Growth of the international tropical hardwood trade In Table 14 is shown wood products exports of the world and the developing countries in 1963 and 1973. Over the decade, world wood and wood-based exports rose from $6.7 b i l l i o n in 1963 to $21.8 in 1973, repre-senting an annual growth rate of 12.5%. The value of world exports of a l l commodities, over the same period, grew at an annual rate of 8.5%. Value of wood products exports from developing countries increased rapidly from U.S. $655 mi 11 ion in 1963 to U.S. $3.4 b i l l i o n in 1973, or more than fivefold The value increase represented an annual growth rate of 17.1%, higher than that for world exports of forest products and of a l l commodities. The 17.1% annual growth rate of value of tropical hardwood exports during 1963 to 1973 is more than twice the 7.5% achieved by exports of a l l commodities from developing countries over the same period. The growth and relative importance of tropical hardwoods in world trade of logs, sawnwood, veneer and plywood between 1963 and 1973, are shown in Table 15. Total volume of exports of these products from the 3 3 tropics rose from 19.0 millionm to 59.7 million m , or by about 300%, to 81 Table 14. World and Developing Countries' Exports of Wood Products, 1963 and 1973 •WORLD EXPORTS Commodity 1963 1973 VOL. 3 VAL. VOL. 3 VAL. million m $ million million m $ million Roundwood, 46". 5 817.2 115.4 3847.0 of which Saw & Veneer Logs 26.5 589.5 82.3 3293.8 Sawnwood 46.7 1785.3 71.9 5466.6 Wood-based Panels 4.5 520.8 14.0 2425.9 Wood pulp* 11.4 1337.9 18.5 3053.9 Paper & Paperboard* 13.7 2228.1 27.6 6969.9 Total - 6689.3 - 21763.3 DEVELOPING COUNTRIES' EXPORTS Roundwood, 16.9 399.9 52.4 1868.8 of which Saw & Veneer Logs 16.6 395.7 50.3 1841.9 Sawnwood 3.1 161.3 8.0 654.5 of which Tropical Sawnwood 1.9 108.5 5.8 473.5 Wood-based Panels 0.6 59.6 3.8 669.0 Wood pulp* 0.13 14.5 0.5 69.5 Paper & Paperboard* 0.01 19.3 0.6 161.0 Total - 654.6 - 3422.8 SOURCE: FAO; Yearbook of Forest Products Statistics, 1964 and 1973 (Review). Rome. * Metric tons. record an annual growth rate of 12.1%. World exports of the same products, on the other hand, increased 216%, representing an annual growth rate of approximately 8%. The share of exports of tropical sawlogs and veneer logs, sawnwood, veneer, and plywood combined, in world exports of these commodities, jumped from 25% in 1963 to 36.5% in 1973, in volume terms. 82 Table 15. Growth and Relative Importance of Tropical Hardwood Trade \ , , 3 Volume of Exports (million m ) Estimated growth rate, 1963 1973 1963-1973 (% per annum) Commodity A B A B A B 1. Sawlogs & Veneer logs 26.7 16.5 82.3 50.3 11.9 11.8 2. Sawnwood 46.7 1.9 73.5 5.8 4.6 11.8 3. Veneer & Plywood 2.4 0.6 7.9 3.6 12.7 19.6 Total 75.8 19.0 163.7 59.7 8.0 12.1 SOURCE: FAO, 1974. Yearbook of Forest Products S t a t i s t i c s , 1962 -1973 Review. Rome. , 1975. State of food and agriculture, 1974. Rome. Note: A = World Exports; B = Developing Countries' Exports. A comparison of the individual commodities reveals a significant variation in their growth and relative importance over the period under con-sideration. Thus, tropical sawlogs and veneer.logs export growth was approxi-mately equal to that of world exports. Their share of the total volume of world sawlogs and veneer logs exports, however, declined slightly from 62% in 1963 to 61% in 1973. Tropical sawnwood export volume increased by nearly 300% to record an annual growth rate of 11.8%, whereas, world exports in-creased by only 57%, representing an annual growth rate of 4.6%. The share of tropical hardwood sawnwood in total'world sawnwood exports remained very Tow, even though i t increased appreciably from 4% in 1963 to 7.9% in 1973. The most spectacular expansion of tropical hardwood exports, be-tween 1963 and 1973, was in respect of wood-based panels (veneer and plywood). Total volume of exports of this commodity class increased sixfold from only 83 0.6 million m in 1963 to 3.6 million m in 1973, indicating a phenomenal annual growth rate of 19.6% over the decade. By comparison, volume of world exports of veneer and plywood grew, approximately, 13% per annum. The share of tropical hardwoods in the volume of world exports of veneer and plywood jumped from 25% in 1963 to 46% in 1973. It may be concluded, from the foregoing, that tropical hardwoods constituted a dynamic and rapidly expanding sector of world wood trade in the period since 1960. This conclusion i s , of course, subject to s t a t i s t i c a l errors of recording and reporting of trade data which may vary significantly between countries, and are incomplete for others. Moreover, there is a sub-stantial trade in the form of re-exports of tropical hardwoods by importing countries in Western Europe and North America, not accounted for by data in Table 15. Finally, world trade in pulpwood, pulp, paper and paperboard has not been taken into account in the comparisons, because the contribution from tropical countries is negligible. Inclusion of the latter items would drastically qualify the conclusion which emerges from the above analysis. In spite of the significant expansion of tropical hardwood exports since 1960, a pertinent question which has been raised is whether the tropi-cal developing countries are u t i l i z i n g their valuable forest resources in the most rational manner (Westoby, 1975). It will be instructive, therefore, to examine the patterns of the tropical hardwood trade. 2.2.2 International tropical hardwood trade patterns 2.2.2.1 Composi tion In Table 16 is shown the composition of tropical hardwood exports .84 Table 16. Composition of Tropical Hardwood Exports, 1961 - 1974 Year Logs Sawnwood Veneer & Plywood VOL. , Share VOL.,, Share VOL.3 Share (mill.m 6) % (mill.ni ) % (mill .m ) % 1961 11.6 82.8 1.9 13.6 0.50 3.6 1962 13.2 85.7 1.8 11.7 0.39 2.6 1963 .. .16.5 87.0 , 1.9 10.0 0.55 3.0 1964 18.4 85.3 : 2.5 11.6 0.67 3.1 1965 19.6 85.6 2.5 10.9 0.78 3.5 1966 22.0 86.0 2.6 10.1 0.96 3.9 1967 23.3 86.2 2.7 9.9 1.03 3.9 1968 28.2 85.2 3.3 9.9. 1.61 4.9 1969 33.0 86.0 3.6 9.4 1.73 4.6 1970 36.7 86.2 3.9 9.2 1.99 4.6 1971 38.6 86.4 3.7 8.3 . 2.38 5.3 1972 40.9 84.4 4.6 9.5 2.98 6.1 1973 50.3 84.2 5.8 9.7 3.62 6.1 1974 45.0 85.4 4.6 8.7 3.10 5.9 Average 28.4 85.5 3.2 10.2 1.59 4.3 SOURCE: FAO, Yearbook of Forest Products Statistics, 1973 (Review) Rome, 1974. FAO, State of Food and Agriculture, 1974. Rome, 1975. during 1961 to 1974. Sawlogs and veneer logs accounted for an average of 86% of the total volume over the period. The average shares for sawnwood and veneer and plywood were 10% and 4% respectively. Not only do logs domi-nate tropical hardwood exports, but their share in the total volume has been increasing. The share of sawnwood in the volume of tropical hardwood exports declined steadily between 1961 and 1974, whereas, that of veneer and plywood increased appreciably. The declining share of sawn wood is explained, partly by the fact that demand in the major markets has generally slowed down in recent years (FAO, 1975), and partly, by the strong competition from wood-based panels and non-wood substitute products such as plastics, steel and 85 glass (Runeberg, 1969; Clark, 1971). Increasing domestic demand in the tropical wood producing countries has been another factor. Increasing exports of tropical veneer and plywood, on the other hand, reflects the rapidly diminishing ava i l a b i l i t y of suitable timbers and the slow growth of production, in relation to demand, in the major importing countries, par-ticularly the U.S.A. (Hair, 1970). The predominance of sawlogs and veneer logs in tropical hardwood exports may, to some extent, be attributed to the urgent need for foreign exchange and the absence of a sizeable domestic wood processing industry in the wood exporting countries. However, more important obstacles to a s h i f t towards processed wood exports are the relationships between main markets and sources of exports, and trade policies of importing countries. These aspects are c l a r i f i e d in the discussion of the direction of trade. 2.2.2.2 Direction of tropical hardwood trade In Tables 17 to 19 are shown the direction of trade of the major products in tropical hardwood trade. The Asian region dominates exports of tropical hardwood sawlogs and veneer logs. Volume of logs exports from the 3 3 region in 1973 was 41.0 million m out of the total of 50.4 million m , or 3 81.3%. Africa accounted for 8.2. million m ,or 16.3%. The remaining 1.2 3 million m was shared equally between Latin America and developing Oceania countries, each with 1.2%. The exports of tropical hardwood sawnwood, and veneer and plywood, also originate predominantly from the Asian region. In 1973, i t accounted for 70.6% of total tropical hardwood exports and 89% of the veneer and plywood. Africa and Latin America had equal shares,of 14.4%, 86 Table 17. Di rection of Trade in Tropical Hardwoods (LOGS), 1973 MAJOR IMPORTERS Exporters W.Europe In-transit-pro-cessor countries r Other Countries Total Shares % (million m3) Africa 6.7 0.2 1.3 8.2 16.3 Ghana Ni geria Ivory Coast Gabon Others 0.7 0.2 3.0 1.2 1.6 0.05 - 0.04 6! io 0.35 0.10 0.46 0.50 0.00 1.0 0.3 3.5 1.7 1.7 Asia 1.1 10.1 25.4 4.40 41.0 81.3 PhiTippines Mai aysi a Indonesia Others 0.3 0.1 0.6 0.1 1.4 6.1 3.6 8.4 5.0 10.7 0.1 0.2 0.80 3.60 7.8 12.9 19.9 0.4 Latin America* 0.4 - 0.20 0.6 1.2 Brazi1 Others 0.3 0.1 0.10 0.10 0.4 0.2 Oceania ... 0.4 0.20 0.6 1.2 Total 8.2 10.1 26.0 6.1 50.4 Shares % 16.3 20.0 51.6 12.1 100.0 SOURCE: FAO, Yearbook of forest products s t a t i s t i c s , 1973 1974. (Review). Rome, * Includes tropical Central American countries. 87 Table 18. Direction of Trade in Tropical Hardwoods (Sawnwood), 1973 MAJOR IMPORTERS Exporters N. U.S. America Canada W. U.K. Europe Other Europe Japan Singapore Others Total Shares % : (000 ir.3) Africa 52 3 246 316 - 239 856 14.4 Ghana Nigeria Ivory Coast Others 17 5 26 4 3 133 26 61 26 42 6 142 126 - -48 2 9 180 240 39 238 339 Asia 337 39 485 1481 403 816 641 4202 70.6 Malaysia Philippines Singapore Others 129 102 22 84 8 5 12 14 295 8 104 78 1044 49 193 195 138 113 17 135 805 11 207 150 7 277 2626 427 355 794 Latin America 514 48 35 45_ I - 212 855 14.4 Brazil Others 309 205 27 21 21 14 26 19 1 _ 38 174 422 433 Oceania 3_ - - 5 2 - 2_7 37 0.6 Total 906 90 766 1847 406 816. 1119 5950 Shares % 15.2 1.5 12.9 31.0 6.8 13.7 18.8 100.0 SOURCE: FAO, Yearbook of forest products s t a t i s t i c s , 1973 (Review). Rome, 1974. 88 Table 19. Direction of Trade in Tropical Hardwoods (Veneer & Plywood), 1973 MAJOR IMPORTERS N . America W. Europe 1 a r , a „ n+ t ,^^ T „ + - , I Shares U.S.. Canada U.K. Others J a p a n 0 t h e r s T o t a l % (000 m3) 7.5 Africa 37 - 88 177 44 : 346 Ghana _ _ 33 3 - - 36 Nigeria 2 - 21 - - - 23 ,Ivory Coast 10 - 2 30 • - • 42 Gabon 1 16 47 - 64 Others 24 - 16 97 - 44 181 Asia 2295 206 441 155 790 248 4135 Philippines 486 6 13 _ 27 25 557 Malaysia 74 1 162 17 14 132 400 Korea Rep. 1049 33 10 4 344 - • • 1440 Taiwan 521 144 - 27 - 1 693 Singapore 26 14 153 52 15 12 272 Japan 134 8 19 28 - 5 194 Others 5 - . 84 27 390 73 579 L. America 75 - 27 24 3 - • 129 Brazil 50 _ 26 24 3 103 Others 25 - 1 - - 26 Oceania 6 — mm 1 22 29 Total 2413 206 556 356 794 .314 4639 Shares % 52.0 4.4 12.0 7.7 17.1 6.8 89.1 2.8 0.6 100.0 SOURCE: FAO; Yearbook of forest products s t a t i s t i c s , 1973 (Review). Rome, 1974. 89 of the sawnwood but 7.5% and 2.8%, respectively, of the veneer and plywood. Oceania exports of sawnwood and veneer arid plywood were in each case under 1% of the total in 1973. Data in Tables 17 to 19 also show the relative importance of markets for tropical hardwoods. In 1973, Japan took nearly 52% of the tropical hard-wood logs exports. Ninety-eight % of Japan's tropical hardwood log imports in 1973 came from South-East Asia. Western Europe's imports of tropical 3 •hardwood logs in 1973 amounted to 8.2 million m , or 16.3% of the total. This equalled Africa's total tropical hardwood logs in that year but the region's share in the West European imports stood at 82%. With respect to sawnwood, 3 Western Europe's imports in 1973 was 2.6 million m or 44% of the total. North America took 16.7%; Japan, 6.8%; Singapore, 13.7%, and other countries 18.8%. Finally, North America represents the leading market for tropical veneer and plywood exports with a share of 56.4% of the total in 1973. Western Europe accounted for 19.7%, Japan,' 17.1% and other countries 6.8%. The main flows of the international trade in tropical-hardwoods in 1973 is depicted by FIG.2. It shows the predominance of the Asian region in the trade of a l l the commodities considered. Africa is the second major source of tropical logs but shares the same place with Latin America for sawnwood exports. The Oceania region accounts for an insignificant proportion o f the trade. Japan is the major world importer of tropical hardwood logs, whereas North America dominates in imports of veneer and plywood. Western Europe is the major world importer of tropical hardwood sawnwood. However, .a.further examination of Tables 17 - 19 indicates a concentration of both sources and markets for tropical hardwood products. For example, in 1973, three coun-tries of South-East Asia, (Malaysia, Philippines and Indonesia) accounted FIG. 2. NORTH AMERICA SAWNWOOD: U.S; 91% PLYWOOD: U.S; 92% O In-transit pro-cessor exporters Logs — Sawnwood — • — Veneer & Plywood APPROXIMATE INTERNATIONAL TROPICAL HARDWOOD TRADE FLOWS, 1973. Note: 1. Proportion of regional imports or Exports shown within blocks. 2. Proportion of total regional exports shown against directional arrows. 3. Not drawn to scale. 91 for 99% of Asia's logs exports to the world and 97% of Japan's imports of tropical hardwood logs. Four West African countries, Ghana, Nigeria, Ivory Coast and Gabon, accounted for 76% of African logs exports to Western Europe and 62.9% of the latter's total imports of that commodity in 1973. Western Europe's imports of tropical hardwood sawnwood in 1973, came mainly from Malaysia, whose exports represented 68% of Asia's total exports and 51.2% of Western Europe's imports respectively. The Philippines was a major ex-porter of tropical hardwood sawnwood in 1973 but Japan and the U.S.A. were the main markets, taking 50% of the total. Latin America's trade flow in tropical hardwoods shows a similar concentration pattern with Brazil alone accounting for 80% and 49% of the volume of logs and sawnwood exports, respectively, in 1973. The principal markets for the region's exports were North America (mainly the U.S.) which took 58% of the logs and 66% of the sawnwood exported in 1973. A s i g n i f i -cant proportion of the region's tropical hardwood log and sawnwood exports also went to Western Europe in the same year. The export of tropical hardwood veneer and plywood is the most concentrated of a l l the commodities considered. Thus, in 1973, the Asian region accounted for 89% of the total volume exported. North America took 3 3 2.5 million m or 60%, with the U.S.A. alone accounting for 2.3 million m or 56%. Western Europe and Japan were the other major importers of tropical hardwood veneer and plywood, with shares of 17% and 19% respectively, in 1973. The wood products exports of tropical developing countries of Oceania have gone almost entirely to Australia and New Zealand. Finally, Africa's veneer and plywood exports derived mainly from the West African timber-producing countries (with over 47% of regional exports in 1973). Seventy-seven % of 92 Africa's exports of veneer and plywood went to Western Europe. 2.2.2.3 Role of in-transit wood processor countries Of special interest in the tropical hardwood trade is the role of the so-called in-transit processor exporting countries - Republic of South Korea, Republic of China (Taiwan), Singapore and, to a lesser extent, Hong-Kong (Takeuchi, 1974; FAO, 1975). The f i r s t two are situated in the tem-perate zone, while the latter two l i e in the tropics. A l l four have been classified as semi-industrial!'zed (Balassa, 1970). They also possess the common characteristic of being strongly export-oriented economies and lack-ing in domestic forest resources. These countries, in spite of an absence of local wood resources, have successfully built up a large export trade in wood products based on imports of tropical hardwood logs from the South-East Asian countries. In Table 20 are shown exports of hardwood plywood and imports of hardwood logs by South Korea and Taiwan during 1957 to 1969. Over the 3 thirteen year period, the two countries imported a total of 16.6 million m 3 of tropical hardwood logs and exported 4.5 million m hardwood veneer and 3 plywood, or 10.4 million m roundwood equivalent. In other words, only 37% of their total tropical hardwood logs imports went to domestic consump-tion. In 1973, the in-transit processor exporting countries imported Domestic consumption of tropical hardwood logs imports in these countries is probably considerably less than 6.5 million m3 after their exports of hardwood sawnwood and other products have been accounted for. Table 20. Exports of Hardwood Plywood and Imports of Hardwood Logs by Korea and Taiwan, 1957 - 1969 Unit 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 Republic of Korea: Log imports 1000 M 3 M 102 118. .0 173. .7 222. 6 316. ,8 481. .5 385. .4 251. ,0 603.0 1096. 6 1493. ,8 2435.8 2422. ,0 Plywood exports 1000 M 0. ,8 2. 4 14. 2 15. ,2 46. .7 151. .6 169.6 276. 6 311. .4 600. ,0 708. ,6 Taiwan: Logs: Gross im-ports Logs: Net imports 1000 1000 M3 IT 91. 90. .2 ,0 128. 127. 8 ,2 137. 106. .6 .2 161. 160. 1 8 168. 158. 0 2 276. 267. .0 ,7 446. 444. .5 ,5 562 561 625 624 691. 687 9 899. 895, ,7 .7 1090. 1088, .1 ,4 1193. 1190. ,3 ,0 Plywood exports 1000 M 2. ,0 14. 3 16. .4. 19. 7 51. 8 72. ,5 133. .4 208. ,4 222.2 260. 8 247. .7 396, .6 595. ,8 Korea & Taiwan: Log imports, gross 1000 M3 194 247 311 384 485 758 832 813 1228 1789 2394 3525. ,9 3615. 3 Plywood exports 1000 H 3 2 14 17 22 66 88 180 360 392 537 559 996. 6 1304. 4 Plywood exports 1000 M3 5 33 40 51 152 202 414 828 901 1236 1286 2292 3000. 0 SOURCE: Takeuchi, K., 1974. Tropical hardwood trade in the Asia-Pacific region. World bank staff occasional papers, No. 17. Johns Hopkins Press, Baltimore and London, p.76. CO co 94 10.1 million m of tropical hardwood logs representing 25% of Asia's hard-wood logs exports and 20% of the total hardwood logs exports in that year. Ninety-nine % of the imports came from Malaysia, the Philippines and Indo-nesia. In the same year, exports of hardwood plywood and veneer by in-3 transit wood processor countries amounted to 2.5 million m or 56% of the Asian exports of these commodities. In contrast, the main tropical hard-wood producing countries, (the Philippines and Malaysia), exported only 3 957,000 m of veneer and plywood, or 22% of the regional to t a l . The international tropical hardwood trade patterns show a predo-minance of sawlogs and veneer logs exports. Both the sources of, and mar-kets for the various products are highly concentrated. Original exports of the highly processed veneer and plywood account for a small proportion of the annual trade of that commodity. Various studies also showed that the tropical hardwood trade is heavily concentrated in a few woods (0ECD, 1969; FAO, 1973; 1967; Takeuchi, 1974). Finally, there is very limited trade in wood products between tropical developing countries, or between them and the centrally planned economies (i.e., the U.S.S.R. and communist Eastern Europe). These features of the trade provide the essential background for discussing the prospects for the trade, and the policies which both the exporting and importing countries might adopt for its improvement. 2.2.3 Prospects for the international tropical hardwood trade The past growth and development of the tropical hardwood trade was primarily stimulated by the growth of external demand. As domestic wood supplies, in suitable sizes, qualities and species, became inadequate to meet rapidly increasing consumption in the major world wood-using centres, trop-95 ical hardwoods were intensively exploited to f i l l the supply-consumption gap. Future prospects for the trade will continue to be influenced by trends of external demand. Even more important, however, will be the supply capacities of tropical hardwood forests in the face of rapidly increasing domestic de-mand for wood products, as well as the trade policies adopted by both export-ing and importing countries. Comprehensive studies of the evolution of production and consumption of wood products in various regions of the world now exist (FAO, 1969; 1971; U.S.D.A., 1973; C l i f f , 1973; Manning and Grinnell, 1971; Pringle, 1969; 1973). The FAO (1971) examined the trends for the major forest product groups in terms of the supply and demand relationships in tropical developing coun-tri e s , set against the prospective wood balances in the industrialized coun-tri e s , with projections for 1975 and 1985. The study suggested that, even by 1985, the industrialized countries of the world will s t i l l account for about 90% of world industrial wood consumption. But,given the very high e l a s t i c i -ties of demand for the main wood products (sawnwood, veneer, plywood, pulp, paper and paperboard), a rising proportion of world wood consumption will in future occur in the developing countries. By 1985, overall annual use of sawnwood is expected to rise by 145% and account for over one-third of the world's increased requirements of this product. Also, their share of world sawnwood production could rise from 22% in 1962 to around 33% by 1985. With respect to wood-panels, a rapidly expanding sector of world wood production and consumption, the FAO estimated a ninefold increase from 0.9 million metric tons in 1962 to 8.2 million metric tons by 1985, in consump-tion in developing countries. Their production of wood-based panels w i l l , however, considerably exceed domestic consumption requirements. For example, 96 the share of the developing countries in world plywood production is expected to rise from 5% in 1962 to 15% by 1985. The situation in respect of product-ion and consumption of pulp, paper and paperboard in the developing countries i s , however, the reverse. Substantial, but declining, deficits in their balances of these products will persist up to,and beyond 1985. The analysis of demand trends for wood in the industrialized coun-tries revealed that Western Europe and Japan will be the major wood d e f i c i t areas of the world up to 1985. These deficits are expected to continue rising after 1985. Substantial def i c i t s , and increasing import requirements for hardwoods in the future, have also been forecast for the U.S.A. up to 1985 (U.S.D.A., 1973; Hair, 1970). Areas of considerable wood surpluses, 5 such as Canada and, to some extent, the U.S.S.R., exist in the temperate zone, but their supplies to the wood-deficit regions will be primarily coni-ferous woods. The deficits in hardwood needs of the industrialized countries will not be met from internal regional sources, even assuming further i n -tensficiation of forest management, Consequently, a role is foreseen for the tropical developing countries to supply these products, given that their es-timated future productive capacities will exceed domestic consumption require-ments . The implications of these expectations are indicated by Table 21. The export a v a i l a b i l i t i e s estimated by the FAO show a very great expansion A more recent assessment of the forest resources of the U.S.S.R., indicates that this may not be an economic surplus region. See, Sutton, W.R.J., 1975. The forest resources of the U.S.S.R., their exploitation and their potential. Commonwealth Forestry Review, 54(2): 110-38. 97 Table 21. Annual Export Availability for Major Forest Products in Tropical Developing Countries in 1962, 1975 and 1985 (000 Units) Veneer & Fibreboard& Pulp & Pulp Region Logs Sawnwood Plywood ' Particleboard Products (m3) ( m3) ( m3) (m.t.) (m.t.) 1962 Africa 5030 680 170 - 58 Asia 5710 490 340 1 34 L.America 350 1400 40 4 98 Near East 10 50 3 -Total 11100 2620 550 5 190 1975 Africa 5200 1040 670 20 280 Asia 21500 2300 . 2000 20 40 L.America 300 1750 330 50 300 Near East - - - -Total 27000 5090 3000 90 620 1985 Africa 4700 1500 1250 50 940 Asia 32000 3200 3000 40 70 L.America 300 1880 910 150 990 Near East - - - -Total 37000 6580 5160 250 2000 SOURCE: F.A.O., 1969. Provisional indicative world plan for agricul-tural development. Vol. 1. Rome., p.317. in a l l the main wood products, especially in sawnwood, veneer and plywood. What these estimates imply, in value terms, is indicated by Table 22. The total value of main wood products.exports of tropical developing countries could rise from U.S. $555 million in 1962 to $1820 million by 1985. The value increase represents an annual growth rate of 5.5%, compared to a volume growth of 4.5% per annum. The higher growth rate of value of tropical hard-woods reflects partly, an increasing component in processed items and, partly Table 22. Estimated Value of Developing Countries Exports of Forest Products ($ Million) Other Logs raw materials Sawnwood Panels Pulp and Paper Total 1962* 1975 1985 1962* 1975 1985 1962* 1975 1985 1962 * 1975 1985 1962* 1975 1985 1962* 1975 1985 Afri ca 140 172 120 10 25 30 40 62 86 21 95 168 5 12 86 224 366 510 Asia 127 311 450 15 35 55 27 68 90 37 180 260 10 7 12 216 601 869 L. America 9 7 5 15 25 35 66 87 101 6 45 145 3 55 138 113 209 430 Near East - 1 1 - - - 2 3 4 - - 2 - - - 2 4 11 Total 276 491 576 40 85 120 135 220 281 64 320 575 18 74 236 555 1200 1820 SOURCE: F.A.O. 1969. Provisional indicative world plan for agricultural development. Vol. 1., Rome. p.322. CO OO 99 increases in product prices (Takeuchi, 1974). Pringle (1973), assessed the trade prospects for tropical hardwoods, up to the year 1990. Details of the estimates are contained in Appendix 4. The forecast indicates a threefold increase in volume of logs and sawnwood exports, respectively, between 1965 and 1990. Over the same period, volume of veneer and plywood exports will increase sixfold. Total volume of tropical hardwood logs, sawnwood, veneer and plywood exports, in roundwood equivalent 3 3 is expected to rise from 28.6 million m in 1965 to 99.5 million m in 1990, or by 248%. The forecast volume increase represents an annual growth rate of 5.2%. Pringle's (1973) study i s , essentially, a refinement and extension of previous FAO studies, including that discussed above. The estimates indicate a spectacular expansion of tropical hardwood exports by 1990 and, possibly, up to 2000. In spite of the considerable expected expansion of processed tropi-cal hardwood exports, there is no significant change in their structure. Logs account for 76% of the total volume of exports forecast for 1990. Appraisals of the prospects of tropical hardwood trade, although highly optimistic, suffer the drawbacks of too many assumptions about unre-solved obstacles hampering i t s development. Wood supply capacities in tropi-cal developing countries,in terms of total output and proportion in processed form,depends on several factors. F i r s t l y , is the efficiency of u t i l i z a t i o n , and prospects for exploitation of lesser-known woods. It has been estimated (Plumptre, 1974) that only 5 - 10% of the biomass of tropical forests is currently utilized,as logging and wood extraction continue to concentrate on a few choice timbers. Somberg (1973) showed that in the forests of the Amazon, in Latin America, the stocking of commercially useable species was very low. The same situation applies to most of the African forests (FAO, 1967). Sec-100 ondly, only a very small proportion of tropical natural forests have been brought under management and are accessible compared to temperate forests. The large areas of inaccessible forests can contribute to future wood supplies only i f necessary transport and infra-structure are developed. Thirdly, increased tropical wood processing confronts the problem of capital shortage, a dearth of local s k i l l s , inadequate managerial and tech-nical manpower, a l l of which reflect a state of generally low level of indu-s t r i a l i z a t i o n . Of course, some of these deficiencies can be rec t i f i e d by borrowing capital, manpower and knowhow from the industrialized countries. Ultimately, however, domestically generated production factors would be more reliable and preferable. On the demand side, i t should be recognized that tropical hardwoods have traditionally been treated,in industrialized countries,as supplementary to domestic supplies. They do not really enjoy the status of such tropical agricultural products as cocoa or coffee for which developing countries are monopolies. In addition, there is s t i l l limited knowledge among wood users in industrialized countries about the characteristics and end-use potentials of tropical hardwoods (Preston, 1972; Chudnoff, 1969; Stearns, 1969; Core, 1969). It is important that problems of product research and marketing must be solved to stabilize tropical hardwood consumption in the industrialized countries. Finally, assuming that the prospective supplies of tropical hard-woods will be forthcoming, the problem of access to foreign markets for pro-cessed wood must be overcome. It has been shown that the pattern of flows of the tropical hardwood trade is dictated primarily by p o l i t i c a l association and/or trade preference arrangements between the exporting and importing coun-tries (Farquhar, 1969). The existence of economic blocs, e.g. the E.E.C. and 101 Commonwealth Trading Area, which impose high t a r i f f s on imports from non-member countries represents the major factor restricting expansion of world wood trade. Data in Appendix 5 show duties and t a r i f f s on imports of wood pro-ducts in the industrialized countries in 1972. They indicate t a r i f f escalation on wood and wood-based products in almost a l l the industrialized countries. Because imports of logs and other roundwood are exempted from duty, the ef-fective rate of protection of processed wood products is actually higher than the indicated nominal rate (Takeuchi, 1974). For example, in Japan, the ef-fective rates of protection in the sawmilling and plywood manufacturing a c t i -vities are roughly 40% and 35% to 40%, respectively. A similar situation prevails in the U.S.A. Under the UNCTAD Scheme of Generalized Preferences (Kennedy Round), concluded in 1967, the developed countries made offers of duty-free access or t a r i f f reductions, in respect of manufactures and semi-manufactures, including wood products, of interest to developing countries. Consequently, exports of roundwood and sawnwood by tropical developing countries are now free of duties in almost a l l the industrialized countries (UNCTAD and GATT, 1973). It is significant, however, that some countries, (e.g., the U.S.A. and Canada), have, by 1974, not fully implemented their offers. In general, regulations which impose quotas, invoke escape clauses, or embody non-tariff barriers, have tended to reduce the impact of t a r i f f concessions on wood products imports into the industrialized countries. As the FAO (1969), has observed, restrictions on access to markets in industrialized countries may constitute the most serious obstacle to.expansion of the tropical hardwood trade in the future. 102 2.2.4. Policy implications In the tropical developing countries, there is increasing apprecia-tion of the value of forests and the potentially important contribution of wood products exports to national development and welfare. Many are i n i t i a -ting policies for restructuring wood products exports away from extreme de-pendence on logs and narrow markets. For example, the major timber-export-ing countries of Asia-Pacific region are phasing out of log exporting and moving toward manufacturing their own wood products (Sanvictores, 1975). Optimal development of the forestry and forest industries sector of most de-veloping countries i s , however, s t i l l hampered by economic,institutional,and social problems. To a great extent, these problems have their roots in the non-existence, or defective nature, of forest policies. Large areas of forests are being devastated or alienated to other land uses without careful planning. The situation is not helped by attitudes which regard forests, simply as a resource to be mined and the earnings invested elsewhere in the economy. The economic problems of tropical forest resources development are equally important. To ensure efficient u t i l i z a t i o n of their forests, tropi-cal developing countries need to assess the productive potential of the re-source, institute proper management, develop necessary infra-structure, and plan the type and location of industries to be established. Poorly stocked and heterogenous forests should be replaced by plantations of fast growing species (FAO, 1965; 1969). Wood-based industries should be carefully se-lected and located so as to maximize benefits from the economies of scale, and to f a c i l i t a t e servicing of both domestic and export markets. Also, the necessary manpower must be trained to man the forestry and forest industries 103 operations. In many tropical developing countries, especially in South-East Asia and West Africa, there is evidence of increasingly detailed planning of the forestry sector, including programs of afforestation and wood in-dustries development (World Wood, 1975). However, a l l these a c t i v i t i e s i n -volve heavy financial commitments, as is indicated by data in Table 23. It is unlikely that the individual developing countries can internally generate these financial requirements without jeopardizing overall development effort. In the circumstances, an international plan for tropical forest development seems to be called for (Leslie, 1966). Such a plan should involve not only bilateral governmental aid, but also t h e active participation of private in-dustry and wood marketing organizations with interest in the tropical forest resource. On the demand side, there is a need for intensive research into, and improved marketing of tropical hardwoods, to enhance knowledge of their properties and end-uses in the industrialized countries. The problem here, as Preston (1972) has put i t , is one of collation and dissemination of es-sential information. The government could also support export promotion programs for tropical hardwoods, acting through their appropriate agencies, institutes, and in cooperation with other governments, international agen-cies and trade associations (Yavorsky, 1973). The importance of improving market access for processed tropical hardwoods has been stressed. It would appear to be in the mutual interest of the developed and developing countries to pursue a decentralization of world wood industry which is consistent with an optimal international d i v i -sion of labour. This would mean the location of an increasing proportion 104 Table 23. Investment Requirements for Expansion of Forestry and Forest Industries Sector in Developing Countries Forestry & Logging Forest Industries Region 1962 -.1975 1975 - 1985 1962 - 1975 1975 - 1985 U.S. $ Million Africa 480 480 550 800 Asia 600 650 1550 2800 L. America 600 750 1700 3200 Near East 200 260 150 200 Total 1880 2140 3900 7000 SOURCE: F.A.O., 1969. op.cit. p.324. of world production capacity in the primary processed wood products (sawn-wood, veneer and plywood) in the tropical developing countries, while the industrialized countries shifted to the more advanced wood, pulp, and paper products. The desire to protect value-added and employment in domestic i n -dustries seems,at present,to discourage adoption of internationally optimal trade policies by the industrialized countries. It may be noted, though, that some developing countries have also adopted t a r i f f distortions in their wood products trade in an effort to develop domestic import-substituting i n -dustries, especially in the pulp and paper f i e l d . It is arguable whether the case for t a r i f f protection of primary wood processing industries in industria-lized countries is as strong as t a r i f f protection of key industries, such as pulp and paper,in the less-developed countries. Efforts to enhance trade prospects for their processed wood products are being intensified by tropical wood producers through demands for conces-sions under UNCTAD, as well as regional cooperation and trade agreements 105 between themselves. For example, the Philippines and Indonesia established the. Joint Philippine-Indonesian Commission on Economic and Technical Cooper-ation in 1969 which, among other things, would consider cooperation in wood products processing and trade. The Association of South-East Asian Nations (ASEAN), which includes five countries, has studied cooperation in wood pro-cessing and trade (Takeuchi, 1974). In Latin America, regional cooperation in wood products trade is being fostered through the Latin America Free Trade Association (LAFTA), the Central American Common Market Area (CACMA) and the Carribean Free Trade Area (CARIFTA) (Casasempere, 1970). Formation of the Economic Community of West African States (ECOWAS), in May, 1975, and of the African Wood Organization 6 (AWO), in July, 1975, could be the beginning of a coordinated and concerted approach to the problems of improving the inter-national tropical hardwood trade. Cooperation among tropical hardwood producers is an important, but only one, aspect of the many problems of the tropical hardwood trade which must be overcome. Its success cannot be assured, in view of the failure of previous commodity trade agreements involving agricultural products ex-ports from these countries (Pincus, 1966). Given the peculiar feature of forest products production (e.g., high capital requirements), and the unusually bright demand prospects, regional agreements and policies which seek to enhance or restrict the expansion of the tropical hardwood trade are obviously inferior substitutes for a truly international approach which The member countries include Cameroon, the Central African Republic, Congo, Equatorial Guinea, Gabon, the Ivory Coast, Liberia, Madagascar, Tanzania and Zaire. The organization modelled on OPEC is to ensure better market control and price stabilization. It will also give mem-ber nations a common front when negotiating transportation costs. (CIDA Release, August, 1975). takes f u l l cognizance of the growing interdependence of the world economy. 2.3 Nigerian wood products export growth and patterns The growth and development of the Nigerian wood products export trade may, for convenience, be examined in four phases; the period before 1900, 1900 - 1929, 1930 - 1949, and the period since 1950. These sub-div-isions have been adopted in order to bring out the influence on the trade, of trends of external demand, the impact of development of the domestic industry, and the role of government. Throughout, i t will be shown that while external demand provided the main stimulus to the trade, the funda-mental factor has been the changing attitudes and relationships of govern-ment and the timber industry. It will also be argued that the success of any policies directed towards improvement of the trade depends largely on the nature of these attitudes and relationships. 2.3.1 The period before 1900 There are no reliable records of the beginnings of the Nigerian wood products export trade. Dike (1956), in his account of the transition to legitimate commerce in Nigeria, reported that by 1830 "timber, including camwood, barwood, redwood and bleeding wood, was next in value to ivory. Of these, camwood was the most lucrative at fe28 to k30 a ton"..7 In 1842, Dike, K.O., 1956. op.cit. pp.63-64; p.101. 107 exports of camwood and other dyewoods were worth between fel0,000 and £15,000 a ton. The timber trade, although increasing, was s t i l l unim-portant. In 1874 the Secretary of State for the Colonies issued a c i r -cular letter to the West African colonies drawing their attention to the importance of forestry. Commercial exploitation of Nigerian forests appears to have reached a significant scale by 1880. Thus, in 1887, the governor of Lagos, Sir C.A. Moloney,in his Sketch of the Forestry of  West Africa,warned of the consequences of excessive exploitation of the forests around Lagos. Geary (1965) stated that "the Nigerian timber trade sprang up in 8 1896 when 22 mahogany logs valued at' £275 were shipped from Lagos". The expansion of the trade is indicated by the fact that three years later, in 1899, 7,680 logs valued at £34,737 were exported. The government re-acted to the boom in the timber trade at this time by appointing a Mr. Hitchens as Inspector of Forests. His functions included the control of exploitation of timber and rubber,as well as conservation and replanting 9 of forests. The timber trade before 1900 was organized and controlled by European merchants without any .government intervention. Exploitation was concentrated along river banks and in the Delta area,where timber merchants obtained concession agreements with local chiefs. Timber was also being extracted from forests in Abeokuta, north of Lagos, as salvage fellings Geary, W.N.M., 1965. Nigeria under colonial rule. Frank Cass, London, p.58. Nigeria, 1971. Bulletin of the Nigerian forest departments, Vol. 31, No. 1. .Ibadan, Jan. 1971. p.2. 108 when the railway line from Lagos was being constructed (Ekundare, 1973). Exploitation, however, remained on limited scale due to d i f f i c u l t i e s of transportation and incessant h o s t i l i t i e s among neighbouring local communi-ties. -. Due to a lack of adequate s t a t i s t i c a l records, the extent of the Nigerian timber trade before 1900 cannot be accurately quantified. It may be said that by the end of the 19th century its importance had been recog-nized and,responsibility for i t s control for the benefit of the owning communities accepted by the government. 2.3.2 The period 1900 - 1929 In 1902, Mr. H.N. Thompson took over control of the new Forest Department. He was instrumental to the introduction of various legislative orders and regulations affecting timber exploitation and trade.*° Thus, the Forestry Proclamation No. 28 of 1901, was in force together with other Orders and Regulations framed under i t for the purpose of controlling timber and rubber exploitation. Regulation No. 14 of 1903 specified the procedure to be followed in acquiring concessions, provided for inquiries into the t i t l e s of the grantor of concessions, prescribed fees and royal-ties payable by grantees, raised f e l l i n g girth obligatory on licensees from 8 feet to 12 feet, 10 feet above ground,** and provided for the hammer-marking of stumps and logs of trees felled. Also, the size of concessions Nigeria, 1971. Bulletin of the Nigerian forest departments, op.cit.. p.5. Geary, W.N.M., 1965. op.cit. p.131. 109 and the extent of their water frontage were regulated, while provision was made against any one firm acquiring a monopoly of concessions. Finally, a l l timber cutting carried with i t the obligation, to plant, in the near-est available spot, a tree of the same species or,.in l i e u , a payment to 12 the Forest Departments who would themselves do the planting. Forest concessions were,however, not directly controlled by the Forest Department but were usually under a sort of supervision by the Dis-t r i c t Commissioner in whose d i s t r i c t they happened to be. The method of granting concessions also varied from d i s t r i c t to d i s t r i c t as the statement below il l u s t r a t e s : "The rules in Ondo District seem to be that the concess-ionaire pays fel per square mile for the area taken up and 10 shillings per tree royalty on a l l trees cut. In Badagry, nothing is paid for the concession and the royalty varies from 12 shillings to fel per tree according to the D i s t r i c t in Which i t is cut".! 3 Besides regulation of timber and rubber exploitation, the Forest Department also initiated studies of the vegetation and, in 1909, produced a small handbook t i t l e d "Notes on Nigerian Trees and Plants", which was most valu-able in publicizing the potential of Nigerian forests in export markets. The export of Nigerian timber maintained a rising trend after 1900, as indicated by data in Table 24. The value of timber exports increased from fe58,374 in 1900 to over E105,000, or by 81%,in 1913. The year 1901 was, however, a bad one for the trade due primarily to the slump of overseas 12 13 Geary, W.N.M., 1965. op.cit. p.133. Nigeria, Colonial reports, miscellaneous, 1906. p.21. 110 Table 24. Timber Exports from Nigeria, 1900 - 1913 Year Logs Value (No.) 0 0 1900 13320 58374 1901 4540 12216 1902 12049 33292 1903 15785 56167 1904 8767 59132 1905 13442 49557 1906 20274 68718 1907 17237 62834 1908 N.A. 77054 1909 N.A. 47086 1910 15198 60469 1911 N.A. 55576 1912 N.A. 78007 1913 N.A. 105440 SOURCE: 1. Geary, W.N.M., 1965. op.cit. pp.58 and 133. 2. Nigeria, Colonial reports, 1908 - 1912. 3. Forest Department, Annual report of the forest administration of Nigeria, 1913. demand after the boom in 1900. Logs had accumulated in Lagos and exploit-ation ceased in many concessions. The trade quickly picked up again. African mahogany timber was in high demand in England and America due to the short supplies from the West Indies. The size of concessions was increased in 1904 from 9 square miles to 100 square miles to encourage the industry (Adeyoju, 1966). But the trade slumped in that year because of transport d i f f i c u l t i e s and the very low rainfall which halted the floating.of logs to Lagos for ex-port. High wood prices in the domestic market gave an impetus to the trade in 1906 and 1907. By 1908 exports had reached a peak and declined in 1909 to their 1905 level. The long period of drought, depression in the trade and consequent low prices reduced the working of concessions and number of trees I l l felled.- 1" Towards the end of 1909, there was a recovery of timber prices. This stimulated a substantial increase of output and intensive working of concessions. In 1910, the number of licensed concessions worked in South-ern Nigeria was 36 compared to 26 in 1909. The value of timber exports ex-ceeded £60,000. More permits to f e l l trees were issued and new concessions granted. An all-time record value of timber exports at £105,440 was achiev-ed in 1913. A total of 18,214 logs valued at £99,596 were shipped from Sapele, Koko,Forcados and Warri. Also, "Iroko had at last established i t -se l f in the European market under the name of "African Teak" and commanded 15 a price of 3s 8d a cubic foot". From 1914,and during the period of h o s t i l i t i e s , the Nigerian timber trade suffered a severe set back and,generally, remained inactive. The vol-ume and value of mahogany log exports f e l l sharply. Tight money,shortage of shipping f a c i l i t i e s for exporting the produce to Europe, and prohibition, in 1916,of import of timber into the U.K. were the main contributory factors. Mahogany exports in 1918 amounted to only 9,016 logs valued at £68,480 16 (nominal). . Temporary r e l i e f to the trade was provided during the war by Admiralty contracts for the supply of mahogany for aeroplane construction but this was discontinued after 1919. The war period was,however, s i g n i f i -cant for the trade in drawing attention to domestic demand for wood,especially Nigeria, Colonial reports, miscellaneous, 1908. p.423. Nigeria, Colonial reports, miscellaneous, 1913. p.8. Forest Department, Nigeria, Annual report of the forest administration of Nigeria, 1919. p.8. 112 in public construction. To meet this demand the Forest Department organized direct government working of Aki11a and Oni forest reserves in Western Nigeria. Because the operation was uneconomic financially, i t was handed over to private industry in 1920.*^ The export trade in mangrove timber was another interesting development during the war but i t soon faded away be-cause of extraction d i f f i c u l t i e s and poor demand in the chief markets in the U.K. and South Africa. After the war, there was a decided recovery of the timber export trade, stimulated by both increased demand and a reduction of f e l l i n g fees and royalties. Though many concessions were being worked again, fellings had not reached a desired level "due to considerations of a commercial 18 nature". The improved state of the trade was reflected in the rate of fellings in Southern Nigeria, which stood at 15,349 trees in 1922 compared to 3,408 in 1920. Mahogany exports rose steadily to reach a peak in 1925 (see Table 25) but f e l l off again in 1926 due to "the general f a l l in prices in the European markets, and the fact that a considerable number of logs cut from trees felled were s t i l l lying in the forest and, in consequence,few permits were taken out this year" (Forest Department, Nigeria, 1922). The Nigerian timber export trade grew steadily over the period 1900 to 1929 but, was subject to frequent fluctuations caused by war, poor over-seas demand and domestic production d i f f i c u l t i e s . However, the trade was s t i l l small when compared to exports of cocoa, groundnuts and palm produce. Forest Department, Nigeria, Annual report of the forest administration of Nigeria, 1916. p.17. Forest Department, Nigeria, Annual report of the forest administration of Nigeria, 1920. p.17. 17 18 113 Table 25. Timber Exports from Nigeria, 1923 - 1928* Year Vol ume 000 f t Value feOOO 1923 1924 1925 1926 1927 1928 13582** 1571 2034 1338 1637 1754 201.7 275.9 307.3 213.9 294.7 307.0 SOURCE: Nigeria, Annual reports of the forest administration of Nigeria, 1923-28. * Data refer to mahogany logs exports only. ** Number of logs. Moreover, the timber exports comprised entirely of mahogany logs occasion-a l l y supplemented by iroko. This was in spite of the vigorious efforts of the Forest Department, in cooperation with timber firms, to introduce and popularise many new species in European markets beginning in 1905. It was claimed that the prospects for species other than mahogany in European mar-kets were poor because "given the price of about 3d per superficial foot and conditions of freight, the expense of handling the timber by human labour 19 is too great to admit of any profits being made from such species". Not until the 1930's did these efforts begin to yield positive results, with the introduction to the trade of an increased number of timbers and sawn-wood, leading to improved utilization of the forest, resource. 19 Nigeria, Colonial reports, miscellaneous, 1906. pp.27-28. 114 2.3.3 The period 1930 - 1949 The world-wide economic depression which began in 1929 severely set back Nigerian exports of timber,as well as of other commodities. Total 3 wood exports in 1930 was 1.1 million f t valued at k 194,8 53 compared 3 to 2 million f t in 1925 valued at E307,000. Mahogany log exports account-ed for 61% of the volume and 56% of the value, respectively. The position in the U.K. market was described as one of "unrelieved gloom" and only mahogany and sapelewood were being imported. The continental European markets were, in contrast, more active. Thus, "as late as December 31st (1930) a large consignment of sapele wood (200 logs) met with an excellent reception in Hamburg". By 1931, the trade had revived as a result of the "Buy British" movement in England and the f a l l in the value of the E sterling. British timber buyers began to look to the colonies for supplies of tropical hard-woods as substitutes for temperate hardwoods,and to supplement dwindling wood supplies from the West Indies. The hardwood trade of West Africa was actively encouraged and supported by the Empire Marketing Board, the For-est Products Research Laboratory at Princes Risborough, and the British hardwood import trade, as well as certain municipalities and semi-govern-ment departments. In Nigeria, the Forest Department stepped up efforts to introduce more timbers to export markets through large-scale experimentation and physical mechanical testing of local timbers at the Forest Products Research Laboratory at Princes Risborough. As a result of these tests, many new timbers such as agba, abura, idigbo, opepe and obeche, among others became established in the trade by 1938, with demand only being limited by 115 the question of available supplies. A most important development in the history of the Nigerian wood products export trade occurred in 1933 when Major F.M. Oliphant visited the country to investigate the commercial pos s i b i l i t i e s and development of the 20 forest resources. In his two reports, Major Oliphant concluded that,"the potential supply of timber in Nigeria was very encouraging and,that Nigeria was one of the most important sources of hardwood supplies to the United 21 Kingdom from within the British Empire". He cla s s i f i e d Nigerian timbers into the following seven main groups: A. Timbers Established on the Market: African and Sapele mahoganies, Obeche, African Walnut, Iroko. B. Timbers Exported but Demand Limited; Further Investigation  and/or Organization of Supplies and Marketing Required: Abura, Mansonia, Opepe, Agba, Ekki, Guarea, Idigbo, Ebony, African Padairk... C. Possible Export Timbers; Next for Investigation: Canarium, Okan, Afara, Antiaris, C e l t i s , A f z e l i a , Poga, Pycanthus, Odoko. D. Possible Export Timbers for Later Investigation and Development: a) General Dist r i c t s : Albizzia, Dahoma, Zebrano, Xylopia, Ayan. Oliphant, Major F.M., 1933. "Timbers of Nigeria" Draft circulated for addition and correction. Unpublished;and Oliphant, Major F.M., 1934. "Report on the commercial possibilities and development of the forests of Nigeria". Sessional paper No.7. Government Printer, Lagos, 61pp. 21 Pollard, J.F., 1955. A history of efforts to export timbers from Nigeria. Empire Forestry Review, 34_(3): 285-293. 116 b) Cross River Cameroons Area: Carapa, Mimusops spp., Stauditia, Irvingia, Okwen. E. Timbers Probably Limited to Domestic Use by Reason of Character  or Limited Supply: Danta, T a l i , Klainedoxa, Saccoglottis. F. Timbers Not Common Enough for General Exploitation: Local Use Only. G. Possible Timbers for Pulp and Paper Group A timbers have been referred to as "staples" in Nigeria and were regarded as the only exportable timbers before 1933. It may be noted, however, that a l l the timbers in Groups B and C are now established and re-gularly exported, either as logs or sawnwood. Some timbers in Group D are also finding export markets, at least for specific end uses, while others, such as danta in Group E and ceiba in Group G,have also featured in the ex-port trade in recent years. The continuing growth of the timber trade in the 1930's is reflected in Table 26. Not only did an increasing number of species begin to find markets, but export of sawnwood is reported separately in the trade s t a t i -stics for the f i r s t time in 1936, 2 2 involving 90,297 f t 3 valued at E7,850. Almost a l l the sawnwood export came from the new sawmill at Sapele. Also significant is the export of obeche, a timber hardly known in the trade be-3 fore 1930. In 1938, 767,407 f t of obeche logs were exported. This exceed-ed the volume of mahogany export,and accounted for 51% of the total volume Nigeria, Annual report of the forest administration of Nigeria, 1936. p.24. 117 Table 26. Timber Removals in Nigeria, 1932 - 1938 (No. of Trees)* For Export For Local Use Total Export as % of Total 1932 5774 5277 11051 52.2 1933 6215 3643 9858 63.0 1934 10835 4015 14850 73.0 1935 10354 4803 15157 68.3 1936 8730 5952 14682 59.5 1937 12423 9266 21689 . 57.3 1938 11210 4904 16114 69.6 SOURCE: Forest Department, Nigeria, Annual reports of the forest administration, 1932-38. * Includes only removals from the Western and Mid-Western States of Nigeria, both from inside and outside forest reserves. These two States account for over 95% of the annual volume of timber exports. of wood exports.^ The onset of the Second World War, in 1939, posed a threat to the timber trade as German and other East European markets were lo s t , while shortage of shipping space and buyer uncertainty affected shipments to the U.K. market. However, the war did not prove damaging to the trade for very long. As a result of the war, the U.K. was cut off from i t s North European sources of softwood supplies and from i t s European and Japanese supplies. The rich West African forests, which had the advantage of proximity over American sources, were turned to for alternative supplies. Tropical hard-woods, including many previously unheard of timbers,had to be used as sub-Nigeria, Annual report of the forest administration of Nigeria, 1938. p.26. 118 stitutes for softwoods. Pollard (1955) has stressed that war and sub-stitution were not the only factors in the great expansion of the number of timbers and quantity of wood products exported from Nigeria during this period. According to him, "The export, in 1938, of a greater quantity of obeche than of the mahoganies was an indication of a changing emphasis from the traditional mahoganies to lighter gen-eral purpose timbers such as abura, afara and agba and of the increasing demand for plywood. The war accelera-ted this change but did not i n i t i a t e it".24 The special advantage of the mahoganies, regarding shrinkage, had been eroded by new production techniques developed between the wars, in which plywood made of mahogany face veneers and backed by less expensive core woods, such as obeche, was being increasingly used in furniture manufacture in preference to solid wood. Thus, far from being a retarding influence, the Second World War provided unusual opportunities for the expansion of the Nigerian timber export trade. As Latham (1960) stated: "It is very doubtful i f the great expansion of West African timbers, which tend to displace U.S. hardwoods in Western Europe, would have taken place, or at any rate, so quickly without the occurrence of the Second World War and the consequent disturbances of markets and currencies Large consuming markets found themselves suddenly cut off from sources of supply to which they had been accustomed for several generations. Without this stimulant, i t is by no means certain that markets would have been found or, at any rate, so speedily for such a number of West African species in a comparatively short space of time".25 Pollard, J.F., 1955. op.cit. p.286. Latham, E.B., 1960. Development of markets for forest products: Needs and techniques . Unasylva, 14(4): 174-178. Reliable statistics of Nigerian wood exports during the war years are not available. However, most mills were operating at f u l l capacity to meet the greatly increased domestic demand for wood, especially by military. There was a slight depression of the trade in 1939 and 1942, but between 1943 and 1946 the average number of trees felled annually was about 70,000, a figure higher than that for any pre-war year. Unclassified (secondary) species accounted for nearly 15% of the volume of log exports in 1942, while agba had established i t s e l f in European markets as the most popular sawnwood timber. An interesting development during the war years was the great expansion of sawnwood exports from Nigeria. In 1944, 3 886,500 f t of sawnwood was exported, compared to an annual average of 3 about 200,000 f t before the war. This was due, not only, to expansion of the sawmilling industry but, also, the preference for sawnwood over logs imposed by the shortage of shipping f a c i l i t i e s . The influence of the unprecedented post-war boom in European timber markets on the growth of Nigerian wood products exports is indicated by data in Table 27. The total value of exports increased more than five-fold between 1945 and 1949. The volume of log exports increased 125% between 1945 and 1949, whereas the value of veneer and plywood exports, introduced only in 1947, rose sevenfold. Sawnwood exports grew steadily until 1947 and then dropped, as shipping problems eased and the trade in logs received greater emphasis once again.. The post-war demand for wood in Europe and North America was so high that practically a l l available timbers and grades were being imported. In Nigeria, the trade now offered such unusually high profits that there was a rush, by "various small con-tractors and a l l kinds of people who knew nothing about the timber trade, 120 Table 27. Timber Exports from Nigeria, 1945 - 1949 Logs Sawnwood Veneer & Plywood Total Vol. Val. Vol. Val. Vol. Val.' (all wood 000 m3 $000 000 m3 $000 000 m3 $000 Products) 1945 55.3 465.4 17.1 293.5 _ mm 758.9 1946 64.1 568.7 20.4 434.7 - - 1003.4 1947 76.0 1290.4 21.0 689.6 1.4 142.8 2122.8 1948 90.9 1750.0 14.8 436.8 9.5 938.0 3124.8 1949 118.9 2368.8 16.8 574.0 12.0 1002.4 3945.2 SOURCE: 1. Nigeria, Annual reports of the forest administration of Nigeria, 1945-1947 2. MacGregor, J.J., 1959. Some economic problems of for-estry in Western Nigeria, Oxford, 1959. pp.152-153 (Appendix FR 2(2)). to exploit the f o r e s t " . c o Dishonest practices, collusions among importers and exporters,as well as largescale theft of logs,became rampant. One timber firm in Sapele estimated its losses from log thefts at E200 per 27 month. Although there was changing preferences for different timbers in overseas markets, the number entering the trade by 1949 exceeded 20. It is recorded in 1947 that "the percentage of "other species" rose from 6.4% in 1945 - 46 to 17% of the total in the present year" and "the largest timber firm, the United Africa Company, now takes nearly thirty species in the high f o r e s t s " / 0 Rosevear, D.R., 1953. "Forestry". In the Nigerian Handbook. Govern-ment Printers, Lagos, 1953. p.196. Gordon, W.A., The law of forestry. H.M. Stationery o f f i c e , London, 1955. p.42. Forest Department, Nigeria, Annual report of the forest administration of Nigeria, 1946-47. p.14. 121 In summary, the period 1929 - 1949 represented a crucial develop-ment phase for the Nigerian timber export trade. The great expansion of the quantity and number of timbers exported was spurred by external demand. The domestic timber industry had similarly expanded to take advantage of the new opportunities and some restructuring took place to gradually i n -troduce processed products. Private industry (mainly foreign capital and manpower) played a major role in this expansion. But the i n i t i a t i v e had come primarily from the government and the forest department which actively promoted Nigerian timbers in overseas markets, and at home, established pilot sawmills to encourage private industry and demonstrate po s s i b i l i t i e s of more efficient utilization of the forest resource. 2.3.4 The period since 1950 In Table 28 are shown exports of wood products from Nigeria be-tween 1950 and 1973. The trends of total and individual product growth are illustrated in FIGS. 3 and 4, respectively. The general indication is that the total value and volume of exports rose steadily from 1950 until 1954 and thereafter declined. The growth of logs and sawnwood exports have also tended to fluctuate together, though the former has fluctuated more violently. Veneer and plywood exports maintained a steady, i f not a rising growth trend throughout the period. Years of growth spurts, such as 1951, 1960, 1964 and 1973,as well as years of depression, 1952, 1962 and 1965 -1971, in the trade can also be easily recognized from the data in Table 28. Between 1949 and 1950, the total value of wood products exports from Nigeria doubled to reach $7.8 million in the latter year. It doubled 122 Table 28. Nigerian Wood Products Exports, 1950 - 1973 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973* Logs VOL. VAL. Sawnwood Veneer & Plywood Total VOL. VAL. VOL. VAL. VOL. VAL. (VOL. = 000 M3; VAL. = $000) 261 477 218 334 290 410 300 367 434 547 629 576 459 529 596 462 440 261 246 256 211 250 158 335 6233 14218 6028 9024 7785 10438 7143 9313 11600 13656 16598 16437 12247 15246 17886 13868 12579 7118 7086 8341 5617 5157 5669 14504 15 27 26 32 36 42 49 53 62 63 59 62 66 77 86 81 74 53 59 67 45 33 53 39 627 1338 1420 1756 2033 2467 2764 2573 3385 3310 3111 3480 3643 3814 4292 4183 3640 2475 2873 3475 2940 2247 3062 2248 11.60 11.01 12.77 12.94 13.25 15.12 15.07 12.18 14.61 14.98 1-9.09 20.33 21.78 20.53 21.10 24.92 21.01 .14.87 16.54 20.22 26.16 21.00 22.40 21.00 975 1151 1464 1515 2456 2114 2593 2092 2548 2660 3072 3329 3629 2901 3074 3380 2985 2192 2089 2624 2790 2691 2583 2691 287.60 515.01 256.77 378.94 339.25 467.12 364.07 432.18 510.61 624.98 707.09 658.33 546.78 625.53 703.10 567.92 535.01 417.87 321.54 343.22 281.16 304.00 233.40 395.00 7835 16707 8912 12295 12274 15019 12500 13978 17533 19626 22781 23246 19519 21961 25252 21431 19204 11785 12043 14440 11347 10095 10607 19443 SOURCE: 1. Federal Office of Statistics, Nigeria Trade Reports, 1950-1960. Lagos, 2. ' , Nigeria Trade Summary, 1961-1972. Lagos. * Estimate, See FAO, 1974, Yearbook of Forest Products Stat i s t i c s , 1973 (Review) Rome. again between 1950 and 1951. Total exports in 1952 was $9.5 million, a decrease of nearly 47% compared to 1951. However both volume and value of the exports increased steadily from 1953 to reach an a l l time record of 707,000 m3 valued $24 million, in 1960. The trade registered another peak FIG. 3. TOTAL VOLUME AND VALUE OF NIGERIAN WOOD PRODUCTS EXPORTS, 1950 - 1973 124 GROWTH TRENDS OF N IGER IAN EXPORTS OF L O G S , SAWNWOOD AND VENEER AND PLYWOOD, 1960 - 1973 LOGS SAWNWOOD VENEER AND PLYWOOD cn to LO ai 4* cn 10 o i to cn co 10 cn LO U3 O l O -^ 1 to LO co 125 in 1964 when 703,000 mJ of logs, sawnwood, veneer and plywood^valtied at $26 million was exported. From 1965, both the volume and value of total exports have declined continuously, although signs of recovery were again apparent by 1973. Finally, a visual inspection of the data in Table 28 also shows that the growth and fluctuations of the wood products export i trade between 1950 and 1973 was primarily determined by the fortunes of log exports which weighed heavily in the total. In particular, a rapid decline of log exports is noticeable from 1965 with the volume exported in 1972 representing the lowest over the whole period. In view of the extreme fluctuations of the volume and value of the wood exports during 1950'to''1973, no estimates of the annual growth rates of the series have been made in the present study; such estimated growth rates in fact, conceal variations in the export levels achieved between the years compared. It is clear, that quantitatively, wood pro-ducts have,since 1965,become an insignificant item in Nigeria's total com-modity trade. Before discussing the factors which have affected the level of the wood exports, i t will be useful to examine their pattern. 2.3.5 Pattern of Nigerian wood exports 2.3.5.1 Product composition The composition of Nigerian wood products exports for selected years is shown in Table 29. The share of logs in the total volume of annual wood exports has been very high and, for these years, averaged 84%. Sawn-wood accounted on average for 11.5% and veneer and plywood made up the remaining 4.5%. What do these figures signify? Obviously, there have 126 Table 29. Composition of Nigerian Wood Products Exports, Selected Years (Percentages) Logs Sawnwood Veneer & Plywood Total 1950 90.6 5.2 4.2 100.0 1951 92.6 5.2 2.2 100.0 1955 87.8 8.9 3.3 100.0 1960 88.9 8.3 2.8 100.0 1964 85.0 12.2 2.8 100.0 1969 74.6 19.5 5.8 100.0 1972 67.8 22.7 9.5 100.0 1973 85.0 9.8 5.3 100.0 Average - 84.0 11.5 4.5 100.0 SOURCE: Calculated from Table 28. been fluctuations in the shares of the different products in total volume of annual wood exports, which, combined with the problems of accuracy of reported data, makes a more definite conclusion.rather d i f f i c u l t . But the point has been made (Okigbo, 1964, Ntima, 1967) that the pattern of Niger-ian wood products exports,which features 80% or more of the volume in logs, is unsatisfactory when compared to the situation in Ghana and Malaysia where sawnwood accounts for about 45% and 70%, respectively. On the other hand, the share of logs in the annual volume of wood exports by such major tropi-cal wood producing countries as Ivory Coast, Gabon, the Philippines and Indonesia, has in recent years averaged 80 - 90%. In fact, the commodity shares in Nigeria's wood products exports are, on average,about the same as that of the tropical developing countries as a whole. In other words, the factors underlying the pattern must be traced to the simultaneous working of both domestic conditions and the nature of export markets for wood pro-ducts . 127 Table 30. Unit Values of Forest Products and Proportion of Production Entering Into International Trade (1959 - 1961)* Commodi ty Unit Raw Material Value Index** (U.S.$ per m.t.) World Trade as Proportion of World Production Remarks Unprocessed Roundwood Fuelwood Poles Pitprops Pulpwood Hardwood logs U t i l i t y Grades Quality Grades Coniferous Logs Processed Wood Sawn Hardwood U t i l i t y Grades Quality Grades Sawn Softwood Plywood Particleboard Pulp & Paper Products Fibreboard Woodpulp Mechanical Chemical Paper & Paperboard Newsprint Fine Paper Paperboard 10 30 20 15 35 10 50 25 75 65 110 65 210 115 90 125 65 130 165 135 230 120 100 100 0.2 2.0 Great variation in quality. 100 100 100 6.0 8.0 100 0.9 11 195 6.0 215 265 140 140 310 165 330 180 190 240 110 13.0 10.0 9.0 16 19.0 16.0 7.0 20.0 16.0 54.0 7.0 5.0 Proportion in world trade has been stimula-ted by surplus capacity. Most production direct-ly convertible to news-print in integrated units, Usually t a r i f f - f r e e . Im-ports subsidized in some countries. High import t a r i f f in most countries. ** SOURCE; A l l data are approximate. Tons of raw material required to produce one ton of product x 100. This depends on processing wastage, moisture difference and additives FAO, 1965. Timber trends and prospects in Africa, Rome. 165 pp. 128 The concentration of the Nigerian wood products export trade on logs must be accepted as undesirable, and a determined effort should be made to raise the proportion of wood exported in processed form. The ad-vantage to be derived from domestic processing of wood before export, is indicated in Table 30. It is only through increased processing that more complete utilization of wood and the introduction of new timbers to the market, can be effected. Moreover, increased processing would contribute to domestic incomes via the higher value-added, (subject to repatriation of incomes by foreign factors), provide more employment opportunities and enhance development of indigenous entrepreneurship and s k i l l s . Finally, log exports suffer the advantage of bulkiness and very high freight costs per unit value, whereas sawnwood, veneer and plywood not only have a higher relative transportability (Duerr, 1960) but should receive a more favour-able consideration for shipping space, especially, i f adequately packed. If Nigeria wishes to maximize the benefits from wood products export trade, increased domestic processing is imperative. However, pro-duction of processed wood, though theoretically desirable, is not enough; markets must be found for the processed output. This latter depends on many factors such as economic growth and wood demand trends of importing countries, the character of woods exported, effectiveness of marketing pro-grams, and the existence, or otherwise, of trade barriers. 2.3.5.2 Species composition The species composition of the wood products exported may be taken as one measure of the success of the trade and the effectiveness of u t i l i -zation of the forest resources. In Table 31 is shown the "species" com-Table 31. Volume of Nigerian Wood Products Exports by Species, Selected Years (Percentages) LOGS "Species" 1951 1953 1957 1960 1963 1967 1972 Average Obeche 45, .5 50, .6 63. 7 63. 8 65, .1 59, .0 41. 2 57. 0 African Mahogany 12. .8 8, .9 2. 7 2. 2 5. .4 5, .8 1. 3 5. 6 Sapele Wood 2. .3 4, .8 4. 5 4. 0 3, .5 3. .9 2. 3 3. 6 :Abura 20. .8 20. .2 17. 8 11. 3 9. .2 6, .3 10. 3 13. 7 Agba 7. .0 6. .6 3. 4 4. 0 2. .8 7. ,0 9. 5 5. 8 Iroko 0. .8 2. .1 2. 2 1. 7 0. .8 0. .4 1. 1 1. 3 Guarea 0. ,8 0. .9 1. 9 0. 9 1. .2 0. ,6 3. 1 1. 3 Idigbo 0. .8 1. .8 0. 4 0. 6 0. ,5 0. ,2 0. 4 0. 7 African Walnut 1. .5 1. .2 1. 0 1. 1 1. ,4 0. ,2 2. 3 1. 2 Afara 1. 8 0. ,1 0. 1 1. 5 0. ,2 0. 6 0. 8 0. 7 Sub Total 94. .1 97. ,2 97. 6 91. 1 90. ,1 84. 0 82. 3 90. 9 Other Species Total 5. 9 2. 8 2. 4 8. 9 9. 9 16. 0 17.7 9. 1 100. 0 100. 0 100. 0 100. 0 100. 0 100. 0 100. 0 100. 0 SAWNWOOD Obeche 31, .9 33, .4 32, .7 34 .3 32, .9 29, .6 10, .2 29, .3 African Mahogany 11, .5 8, .4 6, .7 4, .1 3, .0 3, .5 0. .6 5, .4 Sapele Wood 5. .4 7, .0 4, .2 4, .8 3, .8 5. .0 0, .5 4, .4 Abura 0. .6 3, .0 3. .1 1, .9 1. .2 0. .8 0. .1 1, .5 Agba 25. .9 14. .7 17, .2 15, .6 15. .9 19. ,3 2, .3 15, .8 Iroko 2. ,7 3, .0 4, .1 3, .3 3. .1 6. ,1 1. .2 3, .4 Guarea 4. ,5 11. .0 8. .9 6. .6 8. .6 3. ,5 1. .2 6, .3 Idigbo 2. ,1 1. .0 2. .5 2. .1 1. .5 1. ,5 0. ,2 1. .6 African Walnut 5. ,5 3. ,8 3. .3 7. .0 5. .7 2. ,4 2. ,0 4. .2 Afara 0. ,4 0. ,4 0. ,3 0. ,2 4. ,6 0. 2 0. ,9 Sub Total 90. ,5 85. .7 83. .0 79. ,9 80. ,3 71. ,9 i s ! ^3 72. ,8 Other Species 9. 5 14. ,3 17. ,0 20. ,1 19. 7 28. 1 81. ,7 27. ,2 Total 100. 0 100. ,0 100. 0 100. ,0 100. 0 100. 0 100. 0 100. ,0 SOURCE: 1. Forest Department, Nigeria, Annual report of the forest administration of Nigeria, 1951-52. Table B. p.34. 2. Federal Office of Statistics, Nigeria trade report. Lagos, 1953 and 1957. Lagos. 3. Federal Office of Stat i s t i c s , Nigeria trade summary, 1960, 1963, 1967 and 1972. Lagos. 130 position of Nigeria's wood products exports for selected years. The data clearly indicate the high species concentration of the trade. One "species" (obeche) has accounted, on average, for over 55% of the annual volume of log exports. Two timbers, (obeche and abura) together, have accounted for roughly 70%, while the average share of the 10 leading ones is about 91%. A similarly high, though lower, degree of concentration of exports on a few timbers is also noticeable in respect of sawnwood. Two "species", obeche and agba, have on average, accounted for 45% of the annual export volume. Exports of mahogany in form of logs,and sawnwood,have declined steadily since 1950 due, partly to exhaustion of supplies and, partly, to the fact that an increasing proportion of this species has been diverted to domestic manufacturing of veneer and plywood. It is also of interest to note that whereas: agba forms a higher proportion of sawnwood than i t does of logs, the reverse is the case in respect of abura and guarea. The variation in both quantity and shares of timbers exported is primarily a reflection of the preferences in export markets. Frequently, choice of wood and product size specifications are determined by the im-porter. In Nigeria, the number of timbers in the wood products export trade has risen from only 5 in 1938 to more than 40 for logs and, 25 for sawnwood. It appears that at least 30 of these are lesser known. They enter the trade irregularly, and in very limited quantities. For many of these timbers, the problem is frequently not market conservatism but one of availability of supplies. A leading timber export firm in Nigeria indicated to me that regular orders were being received for so-called "secondary"species but these could not be supplied because they were either not available or were uneco-nomic to exploit. It has been suggested (Plumptre, 1974) that the problem 131 of ut i l i z a t i o n of tropical timbers may be resolved by grouping them separ-ately for decorative, u t i l i t y and structural purposes. In Nigeria, i t was estimated (Okigbo, 1964) that the high forests contain about 600 "species of which 100 have potential commercial value. Of these only about 40 are being exported. It was observed that about 75% of the number of timbers in the trade may be classed as "lesser-known" judging by the volume of their annual exports. Most tropical wood producing countries face the problem of finding market outlets for lesser-known, or lesser-used, timbers. But a comparison with Ghana or the Ivory Coast, reveals that Nigeria has made the least pro-gress, as far as export markets are concerned (MacGregor, 1959; Wellwood, 1966). Thus, in Ghana, lesser-known timbers have made up about 30% of annual wood export volumes-, in the Ivory Coast, they account for about 40%; whereas the comparable figure for Nigeria is about 5%. In general, the tropical hardwood trade has been conducted on the basis of species names rather than their known properties and performance. Assuming that adequate supplies are available, success of the lesser-known timbers in export mar-kets is going to require intensive research into wood properties and pro-motional campaigns. As an alternative, these timbers could be u t i l i z e d in more advanced wood products, such as in cores for plywoods, particle board and fibreboard, as well as in the manufacture of pulp and paper products. 2.3.5.3 Direction of trade Nigerian wood products are now sold in more than 40 countries. In 1920, they were being sold only in the United Kingdom and in Germany. 132 Table 32. Direction of Nigerian Wood Products Exports, Selected Years Destination 1961 1963 1965 1967 1969 1970 1972 (Percentages of Values) United Kingdom 43.0 41.7 45.3 44.0 47.7 48.3 42.1 Fed.Rep.of Germany 20.3 18.0 • 12.3 10.5 10.5 9.7 10.8 France 0.6 0.3 0.6 1.5. 0.4 0.4 Netherlands 15.9 17.7 17.7 15.3 9.6 6.1 8.1 Italy 11.2 12.0 12.1 13.6 14.8 16.9 14.9 Belgi urn-Luxembourg 1.5 1.7 1.9 2.0 2.3 0.9 Sweden 1.3 1.3 1.9 1.4 2.7 1.5 Norway 0.3 1-1 0.1 0.6 1.0 0.6 Finland • • , , . . 0.1 ,-. Denmark 1.7 1.5 1.4 1.9 3.1 4.5 3.2 Other Europe 1.3 2.5 4.5 2.9 2.4 4.8 U.S.A. 2.1 2.5 2.8 3.6 3.8 4.9 10.6 Canada - - - # # 0.2 - -Israel 0.3 0.3 0.2 0.2 - -Japan - 0.1 # . - -U.S.S.R. - - 0.3 0.9 0.3 -Ghana 0.4 ^ # Other Africa 0.6 0.9 0.7 0.5 0.4 0.5 0.2 Other Countries 4.2 0.2 0.1 0.1 0.2 0.1 1.8 Total 100.0 100.0 100.0 100.0 100.0 100.0 100,0 SOURCE: Federal Office of Statistics, Nigeria trade summary, 1961, 1963, 1965, 1967, 1969, 1970 and 1972. Lagos. Note: .. = negligible or less than 0.1%; - = NIL. The number of countries reached, increased to about 15 by 1940. D i v e r s i f i -cation of the export trade is of great importance in ensuring s t a b i l i t y of sales since poor market conditions in one area may be compensated by rising demand in another. In addition, i t f a c i l i t a t e s the spreading out of d i f f e r -ent timbers to take advantage of differential. market preferences. In Table 32 is shown the direction of Nigerian wood products exports for selected years. The most important single market is the United Kingdom which has consistently accounted for over 40% of the total annual value of the sawlogs, sawnwood, veneer and plywood exports. Other markets, in order of importance, are the Federal Republic of Germany, Italy, and the Netherlands. These four countries together account for about 75% of the value of annual exports. The two leading countries, the United Kingdom and the Federal Republic of Germany, have accounted on average for about 55% of the total. The two other major markets are the Netherlands, whose share has tended to decline, and Italy, where i t has increased. The data in Table 32 clearly show that Nigerian wood products exports, like those of other West African countries, have gone primarily to Western Europe. In the Nigerian case, Western Europe takes about 90% of the total annual exports by value. The U.S.A. represents a growing market, with i t s share rising from 2.1% in 1961 to 10.6% in 1972. In contrast, exports to other African countries and the Communist Bloc countries, have been i n s i g n i f i -cant. A further examination of the export patterns, in respect of in-dividual commodities, reveals the particular features of different markets Table 33 contains the data for logs and sawnwood. (Details of the volume and value of exports by destination are given in Appendix 8, Tables 1 -14) The United Kingdom and Federal Republic of Germany constitute the.major markets for logs with combined shares in total volume ranging from 60% to 70%. Together with the Netherlands and Italy, the four countries account for an average of 90% of the annual volume of wood exports from Nigeria. For sawnwood, the same pattern of high market concentration emerges. Indeed, market concentration is higher for sawnwood than for logs, with the average share of the United Kingdom at 71%. The. U.S.A. has emerged 134 Table 33. Direction of Nigerian Wood Products Exports, Selected Years Destination 1953 1957 1950 1963 1967 1972 Average (Percentages of Volumes) LOGS United Kingdom 83. .0 44. 6 30. 0 27. 9 22. .8 25. .6 39. 0 Fed.Rep.of Germany 5. .7 29. 9 31. 0 25. 4 17. .9 19. .7 21. 6 Netherlands 1. .7 12. 7 21. 7 24. 1 22. .9 5. .8 14. 8 Italy 2. .2 4. 9 11. 1 14. 4 19. .7 27. .4 13. 3 France # , . . 0. 3 0. 6 0. .8 2. .1 0. 7 Belgi um-Luxembourg 0. 1 0. 6 2. 0 2. .7 1. .9 1. 5 U.S.A. 0. !6 0. 2 0. 3 0. 1 0. .2 0. .5 0. 3 Spain 0. 5 5. .4 4. .9 1. 8 Norway 0. .1 0. 2 0. 8 0. 3 • « 0. .9 0. 6 Denmark 1. .0 2. 1 2. 5 1. 8 2. 1 5. .0 2. 5 Other Countries 5. .8 5. 3 1. 7 2. 9 2. ,7 6. .2 4. 1 Total 100. .0 100. 0 100. 0 100. 0 100. .0 100, .0 100. 0 SAWNWOOD United Kingdom 91. .9 86. 0 73. 0 66. 8 70. .3 39. .2 71. 2 Fed.Rep.of Germany 1. 5 3. 5 5. 5 1. .4 2. .2 2. 3 Netherlands 0. .2 5. 0 3. 4 4. 2 4. .7 3. .2 3. 5 Italy 0. 2 0. 3 1. 1 0. .8 1. .3 0. 6 France 0. 1 0. .2 0. .1 0. 1 Belgi um-Luxembourg . . 0. 3 1. 0 2. .0 0. .5 0. 6 U.S.A. 0, 'A 2. 7 13. 5 10. 8 13. .2 48. .2 14. 8 Spain . . . . 0. 3 2. .1 0. .5 0. 5 Norway 0. 3 0. 2 0. 3 0. .1 0. .3 0. 2 Denmark 0. .1 0. 3 0. .4 1, .8 0. 4 Other Countries 7. .4 4. 0 5. 6 9. 8 4. .8 2, .7 5. 7 Total 100, .0 100. 0 100. 0 100. 0 100. .0 100. .0 100. 0 SOURCE: 1. Federal Office of Statistics, Nigeria trade summary, 1960, 1963, 1967 and 1972. Lagos. 2. ..Nigeria trade reports, 1953, 1957 and 1960. Lagos. Note: Totals may not add up due to rounding errors or omission of negligible values. .. = negligible (less than 0.1%); - = NIL. Table 34. Direction of Nigerian Exports of Veneer and Plywood, Selected Years Destination 1961 . 1965 1970 1972 (Percentages of Values) United Kingdom 94.0 92.0 88.0 89.8 Fed. Rep. of Germany - .. Netherlands 2.0 6.0 3.0 0.4 Italy -U.S.A. - - - 6.0 Other Countries 4.0 2.0 9.0 3.8 Total 100.0 100.0 100.0 100.0 SOURCE: Federal Office of Statistics: Nigeria trade summary, Lagos, 1961, 1965, 1970 and 1972. Lagos. Note: .. = negligible (less than 0.1%); - = NIL. as the second most important market for Nigerian sawnwood, i t s share in the total annual export volume having risen from under 1% in 1953 to 48% in 1972. Other countries which have regularly imported significant quan-t i t i e s of Nigerian wood products in recent years include Spain, Poland, Denmark and Greece. Finally, i t should be noted that France, an import-ant European hardwood consumer, imports only very limited quantities of Nigerian logs and hardly any sawnwood, veneer,or plywood. Exports of veneer and plywood from Nigeria began in 1947 and have gone almost entirely to the United Kingdom as shown in Table 34. Exports of veneer and plywood to the Netherlands have fluctuated widely. There have been some exports of veneer to the U.S.A. since 1970. A high concentration of products, wood "species" and markets characterize the Nigerian wood products export trade. Western Europe continues to be the major market for a l l the classes of commodities Table 35. Commodity Distribution of' Nigerian Wood Products to the Five Leading Markets in 1961, 1965 and 1970 (Percentages of Volume) Destination 1961 1965 1970 A B C Total A B C Total A B C Total United Kingdom 41 26 33 100 38 30 32 100 23 35 42 100 Fed. Rep. of Germany 98 2 - 100 95 4.7 0.3 100 95 4.6 0.4 100 Netherlands 94 4 2 100 88 6 6 100 61 28 11 100 Italy 99 1 - 100 98 2 - 100 96 4 - 100 U.S.A. 5 95 - 100 18 82 - 100 2 98 - 100 SOURCE: Federal Office of Statistics, Nigeria trade summary, 1961, 1965, 1970. Lagos. A = Logs, B = Sawnwood, C = Veneer and Plywood. considered. Within Western Europe, however, there have been strong pre-ferences for particular products and/or wood species (see Table 35). Thus, over 95% of the exports to the Federal Republic of Germany is com-prised of logs. Over 90% of the logs exports are in two wood species, obeche. and African walnut. In contrast, 95% of the exports to the U.S.A. is sawnwood,primarily of mansonia and African walnut timbers. The United Kingdom is the most broadly-based market, with a more even distribution of i t s imports between logs, sawnwood and plywood. Almost a l l wood speci in the trade have been exported to the United Kingdom. 2.3.6. Possible explanations of Nigerian wood products export patterns The observed patterns of Nigeria's wood products exports may be attributed to a variety of factors. One, the product concentration of th 137 trade is,partly,an indication of the fact that the more processed pro-ducts (sawnwood, veneer and plywood) are more d i f f i c u l t to produce and market internationally than logs. Log exporters are able to avoid the necessity of investment in processing f a c i l i t i e s and producing to the more rigorous standards of international product specifications. Many wood products exporters in Nigeria do-not operate processing mills or, where they do, are unable to meet the importer's specifications due,either to poor equipment and manufacturing methods, or the low quality of available 29 wood supply. Concentration on log exports is,also, partly a reflection of trade policies in importing countries. As already indicated, most of the developed countries which import tropical hardwoods are primarily interested in logs for conversion in local mills. These policies.which aim to protect value-added and employment in domestic industries,have been implemented with the aid of t a r i f f escalation,whereby log imports are gen-erally allowed into the country but other wood products face increasing duties according to degree of processing. An additional factor in the Federal Republic of Germany has, however, been a lack of confidence in the exporter to produce to the required specifications (Farquhar, 1966). Two,'trade preferences have been a significant factor in directing Nigeria's wood products exports to the United Kingdom, where she had duty-free access to the market under the Commonwealth Ta r i f f Preference Scheme provided under the Ottawa Agreement of 1932. In contrast, exports of sawnwood, veneer and plywood faced varying levels of import duties in the Wellwood, R.W., 1966. Forest industries: Report to the government of Nigeria, 1966. 64pp. 138 original six EEC countries established under their Common External Tariff. Past p o l i t i c a l and economic relationships with the United Kingdom has also been an important factor. Three, geographic proximity to Western Europe has meant that Nigerian wood exporters should look f i r s t to that market for their sales. " Wood is a bulky commodity which attracts high freight rates in relation to unit value. Processing leads to weight loss and permits exports to more distant markets. Four, the pattern of Nigerian wood exports has been af-fected by limited knowledge of the markets by exporters. Most of the wood-exporting firms generally concentrated on markets,in their countries of origin,with which they were more familiar and usually had established com-mercial contacts. This is particularly true of the foreign-owned firms which exported their products mainly to their countries of origin. Thus, i t is more than coincidence that the largest wood exporting firm in Nigeria, was British owned and managed. Similarly, recent veneer exports to the U.S.A. has come from a veneer mill in Calabar with substantial U.S. finan-cia l interest. Diversification of markets requires knowledge and infor-mation to be available to producers. These can frequently be acquired only after intensive search and considerable expense (Hirsch, 1960). The major-ity of Nigerian wood exporters have neither the resources nor the expertise needed to acquire the essential knowledge and information about markets. Five, the concentration of the trade on a few timbers was previous-ly explained (p.131) in terms of buyer ignorance, user conservatism and consumer preferences in importing countries. Introduction of new timbers to export markets may involve considerable expense to overcome buyer un-certainty and consumer resistance. Wood products exporters in Nigeria in-139 terviewed by me have accepted the desirability of introducing lesser-known woods to the export trade but, stressed that i t s implementation is beyond the capabilities of individual producers. In addition, they argued that a start could be made by promoting the domestic use of such timbers in order to make available for export the more valuable ones which are currently wasted in inferior uses at home. The foregoing explanations of the observed patterns of Nigeria's wood products export trade are not necessarily exhaustive. For example, the institutional arrangements for wood marketing, corporate links be-tween wood-exporting firms and headquarters located in foreign countries, together with the complex accounting and transfer pricing practices, which the latter f a c i l i t a t e s , may be additional factors (Westoby, 1975). These may be relevant to the Nigerian situation but i t i s impossible to obtain reliable information for their assessment. 2.4 Factors in Nigeria's wood products export development Development of the Nigerian wood products export trade has been influenced by both external and internal factors. Howard (1928) summed up these factors as "vested interests", "apathy of the producer" and "blind prejudice of the buyer". The external factors include the general econo-mic conditions of importing countries, foreign-user knowledge of the pro-perties and uses of tropical timbers, trade barriers, competition from alternative wood suppliers and from non-wood substitute products,and con-sumer preferences. Among the internal factors are the diminishing resource base, capability of the timber industry, timber allocation and pricing 140 policies, freight, export taxes, domestic demand for wood,and the role of government. An understanding of the impact of these forces is essen-t i a l to the formulation of sound policies towards wood products exports in Nigeria. 2.4.1 External factors The export of any commodity is possible only where a demand for i t exists. The tropical hardwood export trade developed in response to rapidly increasing demand for wood in the high wood-consuming centres of Europe, North America and Japan. Early tropical hardwood exports were demanded for special uses because of their attractive decorative proper-ties. Over the years, however, the volume of trade in these woods has expanded rapidly as their application to many and diverse end uses has stabi1i zed. Several studies on the trends of demand for wood in the indust-rialized countries of Europe and North America have been carried out in recent years (FAO, 1955, 1966; 1974; Hair, 1969; U.S.D.A. 1973; UNCTAD and GATT, 1973). These studies will not be reviewed in detail here,but i t suffices to note that a l l have concluded that excellent oppor-tunities exist for expansion of tropical hardwood exports. In a study of the tropical sawnwood market in Western Europe, UNCTAD/GATT (1973) observed that the problem is not one of demand but the capacity of the tropical countries to bring forth the supplies. Hair (1969), in a study of hard-wood consumption trends in the U.S.A., forecast increasing imports from tropical sources up to the end of the present century. Thus, demand per se, 141 in importing countries cannot be regarded as a factor limiting the Nigerian wood products trade. However, wood demand in industrialized countries has been noted (Zivnuska, 1952) to move in sympathy with the cycle of building activity. This is reflected in booms and slumps in wood consumption, sep-arated by intervals of 10 to 15 years, which are inevitably transmitted to the trade in tropical hardwoods. If external demand per se,is not a limiting factor on the Nigerian timber trade, the problems of market acceptance, access, consumer preferences must s t i l l be overcome. Of these, market acceptance turns out to be the most important for Nigeria's wood products. Market acceptance extends be-yond the technical aspects of satisfactory performance to the economic ones of steady supplies in sufficient volume and at the right prices. In a des-cription of this problem in 1928, the Imperial Institute Advisory Committee on Timbers stated that: "The introduction of "new" timbers is not an easy task. Apart from useful technical qualities, a timber must be able to compete in price with an established timber of the same class, while supplies must be available regu-larly in quantity and offered in sound condition. If manufactured, i t is essential for the timber to be true to size and specification. For various reasons i t is often d i f f i c u l t to comply with a l l these requirements... Again architects and other timber users hesitate to take risks with woods of which they have no experience and hence trade receives no demands for new woods which other-wise they might be stimulated to supply. Further the pre-dilection of the workman for a relatively small number of well-tried timbers is no small factor in the situation -such a position is not satisfactory and can best be im-proved by demonstration to the parties interested that excellent new timbers or timbers used less extensively than their merits warrant are available from Empire sources and can be recommended for a variety of purposes".30 Imperial Institute, London, 1928. Descriptive l i s t of some Empire timbers recommended by the Imperial Institute Advisory Committee on timbers. Imperial Institute, London. 77pp. 142 In the Nigerian case, failure to sustain supplies of many timbers already in the trade has generally hindered introduction of new ones. The influence of trade barriers on the Nigerian wood products exports trade can be described, at worst, as slight. All the wood products enter the United Kingdom free of duty. The logs and sawnwood exports to the other major markets in Western Europe and North America are exempted from duties. With the entry of the United Kingdom into the EEC in 1 9 7 3 , and their implementation of the Kennedy Round t a r i f f concessions, duties on veneer and plywood will be, eventually, eliminated. Nigeria's veneer and plywood exports are, however, s t i l l subject to import duties in the U.S.A., the worlds largest and fastest growing market for this commodity class. Removal of such duty barriers could increase the exports to this market, but s t i f f competition from Asian exporters and the very tight pro-duct specifications of American importers, appear to be the major hindrances to this trade. Consumer preferences and competition from other tropical hardwood suppliers have been important factors influencing the Nigerian wood export trade. Consumer preferences have been determined,not so much by price relationships of wood and non-wood products, but by changes in fashion and tastes. These preferences are reflected in consumer choices between hard-woods and softwoods, between different hardwoods, as well as between wood and non-wood products. It is consumer preference which has given Asian redwoods the competitive edge over most African timbers in Western European and North American markets. UNCTAD and GATT (1973) have observed that, for sawnwood, better organization, higher quality and a b i l i t y to produce to specifications, as well as faster delivery, have enabled Asian wood 143 exporters to capture an increasing share of the Western European market at the expense of African producers. The general feeling among Nigerian o f f i c i a l s has been that the timber industry has not been active in exploiting the widening overseas markets for wood products. The timber industry has insisted that i t is domestic production conditions and government policies which hinder the development of the trade. 2.4.2 Internal factors Successful export performance depends on recognition of available opportunities as well as the willingness and a b i l i t y to exploit them. (Slijper, 1972). It has been noted (p.138), that the majority of Nigerian wood products exporters either have limited knowledge of export market oppor-tunities, or do not possess the means to exploit them. Full exploitation of the available opportunities has been hindered by a number of other inter-nal factors. 2.4.2.1 Resource base A most important factor is the size and nature of the resource base. Forest reserves in Nigeria amount to only 10% of the country's total land area. Productive forest reserves constitute only 2% of the total land area. The timber industry is concentrated in the Western and Mid-Western States, whose productive high forest reserve area is approximately one million hectares, 55% of the total high forest area. For many years the wood export trade was based on timber exploitation outside forest reserves. Un-controlled exploitation and shifting agriculture have v i r t u a l l y eliminated UA a l l commercial timber from outside reserves. Since I960, the forest reserves of the Western and Mid-Western States have been increasingly brought under exploitation to meet rising wood demands for domestic consumption and for export. Given the extreme bias towards a few timbers and the inefficient . logging practices of the industry, the threat of exhaustion of supplies has become ever more imminent. In the event of a shortage of wood supplies, i t is expected that the export trade should be the f i r s t to suffer.' Substantial forest reserves s t i l l exist in the South-Eastern State, but inadequate infor-mation about i t s contents and po l i t i c a l problems have discouraged movement of the timber industry to this region. 2.4.2.2 Allocation and pricing of timber 0 A second, and related factor is the timber allocation and pricing policies. In Nigeria, this is the responsibility of the government which exercises monopoly power on behalf of the owning communities. In general, forest concessions have been allocated to firms on the basis of require-ments and a b i l i t y to pay the stipulated fees and royalties. However, Mabo-gunje et_al_. (1969) found that, in Western Nigeria, there were several cases of unauthorized and i l l e g a l forest allocations. Although the regu-lations for allocation of concessions require the concessionaire to own and operate processing f a c i l i t i e s , concessions were often granted to appli-cants without f a c i l i t i e s for exploitation and processing of timber. Such successful applicants usually resold their concessions to other firms for a commission. Consequently, wood costs to timber processing firms tended to be higher than they would otherwise have been, with adverse effects on the competitive a b i l i t y of wood exporters. In addition, local communities have frequently interfered with the choice of concession holders on the 145 basis of their identity rather than a b i l i t y . Timber pricing policies in Nigeria have been a major cause of disagreement between the government and the timber industry. In 1969, the President of the Nigeria Timber Association described the change in the timber pricing system in Western and Mid-Western Nigeria in 1968, as "unreasonable and a move calculated to k i l l the goose that lays the 31 golden eggs". The government has defended the change as necessary to induce more efficient utilization of the forests and to offset the in-creasing costs of silv i c u l t u r a l operations. The timber trade has based its case.on the fact.that,the governments in Ghana and the Ivory Coast charge lower fees for timber. Mervart (1968) and Nautiyal and Love (1971) have demonstrated that fees and royalties based on unit areas represent the optimal timber pricing policy under depleting resource conditions. In my view, the unit area system of assessing timber fees and royalties is theoretically sound on economic grounds but i t is essential that they be based on accurate information about the volume of standing timber and make adequate allowance for differential location and accessibility. Mac-Gregor (1959) suggested application of a "sliding scale" of fees and roy-alties for Nigerian timber, based on the market prices of wood. This is essentially, the "residual" approach to timber pricing, which takes f u l l See, for example, NTA, "Presidential Address". The annual general meetings of the Nigerian Timber Association, 1968, 1969 and 1970. Unpublished. Also, "Minutes of a Conference Held Between Repre-sentatives of the Forestry Division of the Western and Mid-Western Regional Governments, the University of Ibadan (Forestry Department) and the Nigerian Timber Association", held in Benin City, 1966; Ibadan, 1968; and Benin City, 1974. 146 account of industry production costs (Weintraub, 1958; Davis, 1966). In Nigeria, where industry production costs data are either unavailable or too unreliable, the residual or stumpage appraisal approach to deter-mination of timber prices does not appear as feasible at present. How-ever, i t is essential to establish equitable prices for timber, the most important input of the wood-based industries. To achieve this, in Nigeria, requires mutual confidence and cooperation between the government and the timber industry. 2.4.2.3 Export taxes Export taxes were f i r s t levied on Nigerian timber in 1951. The rates of duty varied between 5% and 10% ad valoreum for logs,and 2%% and 5% for sawnwood. It is of interest that the export duties were f i r s t im-posed on sawnwood,and later extended to log exports. Veneer and plywood exports have been exempt from taxes. Wood products exports have been affected by the general periodic changes in the t a r i f f structure designed to increase government revenue. In 1970, export taxes on logs and sawnwood were raised to 20% and 10% ad valoreum, respectively. The timber industry vehemently protested against the increases, especially in respect of sawnwood. The government may be j u s t i f i e d in raising taxes on commodity,exports for revenue purposes. It appears, however, the possibilites of employing such taxes to induce exports of processed wood products have not been f u l l y appreciated by policy makers in Nigeria. The potential increase in government revenue needs to be care-fu l l y weighed against the possible "losses" from wood exported in form of 147 logs, which might occur where the differential tax (between logs and pro-cessed wood exports) is not sufficiently great. Export tax concessions may,to a great extent,stimulate exports of processed wood products (Towler, 1975). 2.4.2.4 Freight Freight rates on Nigerian wood exports have been rising steeply and are among the highest in the world, accounting for up to 60% of the 32 delivered price. According to Mr. Brisbourne (1970); "The greater barrier to the development of the West African timber export trade is the level of freight rates charged by the shipping lines It is estimated that since the year 1959, the rates on export logs have increased by 98% and for sawn lumber (unbundled) by 112% and as the year (1968) ended we were notified of the intention of the conference lines to impose a fur-ther increase of 10% during the year 1969". The trade subsequently reacted by arranging shipments with East European shipping lines but i t s position has not been strengthened by the irregu-l a r i t y of this service, even though i t induced greater cooperation from the West African Conference Lines. Monopoly of the West African carrier service by the Conference Lines has not been.the sole cause of rising freight rates on timber exports. Nigerian port f a c i l i t i e s have been gen-erally inadequate, frequently congested, and ill-equipped to handle wood products exports. Moreover, wood cargo has been consistently discriminated Brisbourne, R., 1970. "Hard times for Nigerian timber", Timber Trades Journal, December 1970. p.21. 14c against in allocating shipping space in favour of the government-spon-33 sored marketing board produce. Thus, interminable delays, high handling and insurance costs (usually borne by the importer) have dis-couraged wood exports from Nigeria. 2 . 4 . 2 . 5 Capability of the timber industry Many of the problems of the Nigerian timber export trade refl e c t the deficiencies of the timber industry. . The industry has developed es-sentially without any planning and l i t t l e governmental control. Consequent-ly, there has been a proliferation of small, uneconomic plants which are poorly located and using out-dated equipment. Many mills have been set up without adequate thought of raw material supplies and employing inexperi-enced managers. A high proportion of the wood products exported comes from a few mills employing modern techniques and equipment. Given the op-timal conditions, and government cooperation, these firms should be able to produce to international product specifications and compete effectively in export markets. . . r The timber trade also features a large number of exporters whose volume of business is completely out of proportion to the damage they do to the country's reputation. Usually without wood processing f a c i l i t i e s or concessions, these speculators, who operate as part-time timber traders from their bedrooms, have perpetrated malpractices which destroy the im-porter's confidence in Nigerian wood products. To protect the industry and Minutes of Conference, 1966. op.cit. p.5. Nigeria's reputation in the overseas timber trade, the government encour-aged the formation of the Nigeria Timber Association in October, 1956. In a speech to representatives of the timber trade in 1954, the Minister of Commerce and Industries, remarked: " we are a l l of us aware that in the past five years, particularly in the timber boom, the reputation of Ni-gerian timbers has suffered through the malpractice of a few individuals. That is a matter of concern not only to the trade but also to the government of Nigeria. I feel that i f you form an association, you yourselves will be in a far better position to deal with such malpract-ices in future than any Government Department could be. With an association, in short, you would be in a much better position than you are now to safeguard the repu-tation of the Nigerian timber trade".34 The establishment of the Nigeria Timber Association has been valuable in helping to check malpractices in the trade but has not elimi-nated i t . The Association, in 1961, established a Voluntary Log Inspec-tion Service and applies its seal to inspected timber which can be iden-t i f i e d by the overseas importer as a mark of quality. It is not in any position to control activities of non-members. Some members have with-drawn because of the heavy burden of membership fees or stringent dis-cipline imposed on them,by association rules.for minor offences. In the last five years, membership of the Association has declined rapidly and many timber exporters interviewed expressed the view that i t has outlived it s usefulness. The weakening of the Nigerian Timber Association has revived Secretary's Report on the Progress and Activities of the Nigerian Timber Association. Lagos, 1968. p . l . 150 demands for the establishment of a Timber Export Marketing Board under government control. The usefulness of such a board depends on i t s func-tions and the extent of i t s powers. It is doubtful i f a Timber Export Marketing Board, to assume responsibility for the bulk purchase of Niger-ian timber for resale in export markets, is desirable or even necessary. The results of a similar experiment in Ghana in 1967 has clearly demon-strated the inherent d i f f i c u l t i e s of organizing the timber export trade 35 through a Marketing Board. Such a Board might be established on a similar pattern to the reformed Ghana Timber Marketing Advisory Board (Boateng, 1968),to provide advice and services to exporters. Similar agencies have been established in the Ivory Coast, the Philippines and Malaysia. In addition, the Timber Marketing Board could assist in the establishment of an appropriate timber grading system, provide wood season-ing and preservation f a c i l i t i e s to small-scale producers, arrange programs for the promotion of wood products in export markets,and operate a log depot for the sale or purchase of timber by local timber producers. It cannot be over emphasized that the present structure of the Nigerian timber industry is deficient for meeting the international standards of wood products specifications. It should be stressed that a timber industry successful in export markets would also serve the needs of domestic wood consumers more ef f i c i e n t l y . Any reform of the organi-zation of the timber export trade should, therefore, be implemented as 35 See, Republic of Ghana, 1968. Report of the commission appointed to enquire into the affairs of The Ghana Timber Marketing Board and the Ghana Timber Cooperative Union. State Publishing Corporation (Printing Division) Accra-Tema, Ghana. 150pp. 151 part of a program to improve the efficiency and capabilities of the timber industry. 2.5 Summary The development of the Nigerian timber export trade has been examined against the background of international trade in tropical wood products. International trade in tropical hardwoods has grown rapidly during the last 15 years, stimulated by the rapid increase of wood con-sumption and insufficiency of domestic supplies in the industrially ad-vanced countries. The continued expansion of the trade faces bright fu-ture prospects provided tropical wood producing countries can take the measures necessary to ensure that the required supplies are available at reasonable prices, and i f importing countries are willing to make necessary adjustments to barriers which restri c t access to their markets. An i n -ternational approach to solutions to the problems of the trade is suggest-ed. Nigeria's wood products trade emerged in the last decade of the 19th century with exports of mahogany logs to Europe. Efforts of the government, expansion of the timber industry,and favourable external demand stimulated the growth of the trade,especially after 1950. The trade at its height,accounted for about 5% of the annual value of domestic exports. The products exported include logs, sawnwood, veneer and plywood, involving about 40 timbers and sold in more than 30 countries. Following a period of sustained growth from 1950 to 1964, annual volume and value of wood pro-ducts exports declined continuously from 1965. The pattern of the exports 152 shows a high concentration of products (on logs), markets and species. The pattern of the trade was explained in terms of problems of marketing and market access, geography and transport costs, trade policies of im-porting countries.and the influence of trade preferences based on close economic and pol i t i c a l association with a former colonial power. The factors affecting the growth of the export trade were cate-gorized into external and internal influences. External factors were not considered to be as crucial as the internal factors. The latter include the inadequacy of the resource base, timber allocation and pricing p o l i -cies, export taxes on timber, and capability of the timber industry. In conclusion, i t is stressed that cooperation and assistance of government are essential to the progress of the timber export trade. However, the role of government should be dictated by the importance i t attaches to the exports of wood products in the context of developing the forest resources for the economic and social improvement of Nigerians. The role of forestry in the Nigerian economy is appraised in Chapter Three. 153 CHAPTER THREE FORESTRY AND THE NIGERIAN ECONOMY 3.1 Introduction It was indicated, in Chapter One, that there is nothing sacrosant about forestry. Forestry and forest industries constitute one of many com-peting sectors in an economy. Its importance should be judged by i t s re l a -tive efficiency in u t i l i z i n g scarce resources to promote national development and welfare. Many countries can, and have been able to, do without s i g n i f i -cant forest resource endowments, but this does not mean that a country can dispense totally with the products and services of forests. Sartorius and Henle (1968) have illustrated, with the examples of medieval Europe and con-temporary North Africa, how wanton destruction of forests by excessive har-vesting, overgrazing, and/or uncontrolled shifting agriculture, could lead to 154 "diminished population, a stagnant or regressing economy and eventual decline of p o l i t i c a l power". More recently, interest in forestry has focussed on i t s role as a potentially propulsive influence on the general economy (Westoby, 1969). The present chapter appraises the role of forestry in the Nigerian economy, using indicators such as contribution to GDP, foreign exchange earning, domestic incomes and employment, and value-added in manufacturing. The degree of interdependence between the sector and the rest of the economy is extremely d i f f i c u l t to determine for a number of reasons. F i r s t l y , there is the general problem of a lack of an ade