Nurturing an industrial cluster in Nigeria

The Panteka Market is a dynamic industrial cluster in Yola, in north-eastern Nigeria, write Daniel Barkley, Abdulhameed Mahmood and Nuruddeen Nyako.

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Hundreds of craftsmen, artisans, welders and blacksmiths work in the area to turn Yola’s discarded metal and alloys into everything from deep freezers to automobile spare parts.

Clustering is the phenomenon whereby firms from the same industry gather together in close proximity. Economists explain clustering as a means for small companies to enjoy some of the economies of scale usually reserved for large ones. By sticking together, firms are able to benefit from such things as the neighbourhood’s pool of expertise and skilled workers; its easy access to components and raw materials; and its information channels (both formal ones, and informal ones like everyday gossip in neighbourhood bars).

Clustering of similar kinds of enterprises is especially important in north-eastern Nigeria where poor infrastructure and weak information systems often constrain market transactions to face-to-face encounters.

The Panteka Market cluster could enjoy increasing returns from new capital and scale up production but the absence of reliable electricity to power modern machine tools limits the ability to expand capacity and improve productivity. For example, many of the ornate gate designs on display at some of Yola’s upmarket homes are made by pouring liquefied metal into earthen molds, a technology developed hundreds of years ago.

The issues faced by Panteka firms are formidable and compelling. Clustering facilitates industrialization but does not guarantee it. Without the implementation of a comprehensive strategy that resolves Panteka’s market failures, its firms are likely to remain in their current pre-industrial stage.

Normally, when private markets fail, some form of government subsidy or tax relief is applied to remedy the problem. However, so far, none of the Panteka enterprises have received any government assistance that could facilitate technological upgrading, expand market access or improve basic infrastructure.

Economics On The Move, a California-based nongovernmental organization, is partnering with the Panteka Market Association to accelerate the transformation of Panteka firms by expanding demand through advertising, and improving quality and increasing productivity by introducing modern machinery.

• Daniel Barkley is an Economics Instructor at the University of Colorado’s International College of Beijing, China. Nuruddeen Nyako is a Research Associate at Economics On The Move, a California-based non-governmental organization. Abdulhameed Mahood author and IT student at the American University of Nigeria.

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