Basic industry explained

If you are involved in the harnessing of raw materials that are either consumed or processed, then it is likely that you work in the basic industry of your country. In this article, we explain what this term means and its importance and disadvantages. 

1. What's the basic industry?

A basic industry is a category of industry that focuses on the extraction of raw materials from the soil, land, sea, and air. This industry harnesses products that are from the act of God or created by God himself. 

Individuals engaged in digging of sand from the shores of the Lagos Lagoon and the Atlantic Ocean at Lagos Island in Nigeria are an example. The farmer who grows crops for either personal consumption or commercial purposes is involved in the basic industry. More so, those involved in the extraction of crude oil from the land and deep waters in the Niger Delta region of Nigeria are included.

The basic industry provides job opportunities for individuals and contributes to the economic growth of a country. However, it can cause environmental degradation if the companies involved neglect them. In Nigeria, the basic industry remains an important part of economic growth. The oil and gas industry continues to contribute immensely to the Nigerian economy, although the country is continuing to work on diversification of the economy to other industries. 

2. Benefits of the basic industry 

2.1 Job opportunities

The industry provides job opportunities to mainly unskilled laborers and partly skilled individuals. From agriculture to mining and crude oil, the basic industry is known to provide jobs to people. It has also improved the standard of living of people in a country.

2.2 Economic growth

They contribute to the economic growth of a country. The total output produced by the industry in a particular period can be added to the Gross Domestic Product (GDP). 

2.3 Support other industries

Basic industry provides the raw materials used by other industries including the intermediate goods industry. For example, the recent issues regarding Dangote refinery and the Nigeria National Petroleum Company (NNPC) related to not providing crude oil to the refinery. However, the issue was resolved after the President ordered NNPC to provide the Brent crude to the company.

2.4 Revenue to the Government

Basic industries provide revenue to the government in different ways. Nigeria relied mostly on crude oil as its main source of revenue. They also earn royalties from companies operating in the downstream sector of the oil and gas industry. 

2.5 Provide a stable economy

If a country can provide all its materials by itself and at a cheaper cost, the economy will be relatively stable. For example, if Nigeria can farm rice and basic food at a lower production cost, it will result in stability in food prices, thereby impacting positively on the country's inflation. 

3. Limitations of the basic industry

3.1 Environmental issues

Companies involved in this industry might cause environmental degradation in the area where they extract raw materials. Oil companies have caused environmental degradation in the areas they extract crude oil in the Niger Delta region of Nigeria. Also, in the northern part of Nigeria, we have heard of lead poison caused by the extraction of lead from the soil.

3.2 Huge capital requirement

Producing raw materials on a large scale is capital-intensive. For example, in the agriculture industry, to farm basic crops like cassava on a large scale involves gigantic machines such as tractors and diggers. And this automotive machinery is expensive.

3.3 Resources are geographically based

There is competition for resources in the land, sea, and air. Although they are created by God, they are not evenly distributed. Some countries have more of a particular raw material than others. Also, some geographical territories have better-quality raw materials than others. For example, Nigeria's Brent crude is known to be one of the best in the world.