Factors that affect Location of Industries

Understanding Industrial Location

Industrial location means where a factory or company decides to set up its operations. This decision affects how much the business will spend on production and how much profit it will make. Companies choose locations that reduce costs and increase efficiency.

In Nigeria, most industries cluster in Lagos, Port Harcourt, Kano, and Aba because these cities have better infrastructure than rural areas. Understanding location factors helps explain why some regions develop faster than others.

Proximity to Raw Materials

Industries that use heavy or bulky raw materials locate near their sources. This reduces transportation costs and prevents materials from spoiling during long trips.

Nigerian examples:

• Cement factories like Dangote Cement in Obajana, Kogi State, locate near limestone deposits. Transporting tons of limestone from far away would cost too much
• Oil refineries in Port Harcourt and Warri are near the Niger Delta oil fields. Pipelines carry crude oil directly to refineries
• Palm oil mills operate in southern states like Edo, Delta, and Cross River where oil palm trees grow naturally
• Cocoa processing plants in Ondo and Osun states are close to cocoa farms

However, some industries don’t need to be near raw materials. A bread bakery can locate anywhere because flour is light and doesn’t spoil quickly during transport.

Availability of Power Supply

Modern industries need reliable electricity to run machines, lights, and computers. Power cuts slow production and increase costs when factories must use generators.

Nigeria’s power supply is unreliable, with frequent outages. This forces industries to:

• Generate their own electricity using diesel or gas generators, which is expensive
• Locate near independent power plants
• Choose locations with better power infrastructure like Lagos and Abuja

Manufacturing companies spend up to 40% of their costs on power generation because they can’t rely on the national grid. Industries that use lots of electricity (aluminum smelting, steel production) struggle in Nigeria because of power problems.

Some industrial estates like Ota Industrial Estate in Ogun State and Calabar Free Trade Zone have more reliable power, attracting factories.

Access to Labor Supply

Industries need workers with the right skills. Companies locate where they can find enough qualified people at reasonable wages.

Types of labor needs:

• Unskilled labor: Available everywhere. Textile factories and food processing plants don’t struggle to find basic workers
• Skilled labor: Requires training. Car assembly plants need mechanics and technicians, which are more common in cities
• Professional workers: Engineers, managers, and accountants concentrate in major cities like Lagos, Abuja, and Port Harcourt

Technology companies prefer Lagos because universities like UNILAG, UI, and private tech schools produce computer science graduates. Manufacturing companies in Nnewi benefit from the area’s tradition of technical skills and apprenticeship.

Rural areas struggle to attract industries partly because educated workers don’t want to live far from city amenities like good schools, hospitals, and entertainment.

Transportation and Communication Networks

Good roads, railways, and ports help industries receive raw materials and deliver finished products. Poor transport increases costs and delays deliveries.

Nigerian transport challenges:

• Road transport: Many roads are in poor condition with potholes. Companies spend heavily on vehicle maintenance and fuel. FRSC reports show that bad roads slow movement of goods between states
• Rail transport: Nigeria’s railway system is underdeveloped. The Lagos-Ibadan and Abuja-Kaduna rail lines are helping, but most areas lack rail access
• Seaports: Lagos ports (Apapa and Tin Can) handle most imports. Congestion causes delays. Industries needing imported machinery prefer to locate near Lagos
• Airports: Important for industries that export fresh products (like flowers or fish) or receive urgent spare parts
• Internet connectivity: Modern industries need fast internet for communication and cloud services. Fiber optic cables serve major cities better than rural areas

Companies like Coca-Cola and Nestle have multiple factories across Nigeria to reduce the cost of distributing products over long distances on bad roads.

Proximity to Market

Industries that make goods that spoil quickly or are expensive to transport locate near their customers.

Market-oriented industries in Nigeria:

• Bakeries: Bread spoils within days, so bakeries operate in every city and town
• Bottling companies: Water and soft drinks are heavy to transport. Nigerian Bottling Company has plants in multiple states
• Furniture factories: Bulky furniture costs a lot to ship, so furniture makers serve local markets
• Printing presses: Newspapers and magazines need fast delivery, so printers locate in cities where readers live

Lagos, with over 20 million people, attracts many industries because it’s Nigeria’s largest market. Companies can sell more products there than in smaller cities.

Government Policies and Incentives

Government can attract industries through tax breaks, subsidies, and special zones.

Nigerian examples:

• Free Trade Zones: Calabar, Lagos, and Kano have zones where companies pay lower taxes and face fewer import restrictions
• Pioneer status: New industries in priority sectors (like agriculture processing) get tax holidays for 3-5 years
• Local content policy: Oil and gas companies must use Nigerian workers and services, creating support industries in the Niger Delta
• State incentives: Some states offer free land to attract factories. Ogun State has successfully attracted many industries through this policy

However, inconsistent policies discourage investment. When governments change rules frequently, companies hesitate to commit to expensive factory construction.

Availability of Capital

Starting an industry requires money for land, buildings, machines, and initial operating costs. Companies locate where they can access loans and investment.

Lagos dominates because:

• Major banks have headquarters there with easier loan access
• Stock exchange allows companies to raise funds from investors
• Venture capital firms that fund new businesses concentrate in Lagos and Abuja
• International investors prefer Lagos because of its financial infrastructure

High interest rates (often 20-30%) make it expensive to borrow money for industrial projects. This limits industrial growth, especially for small Nigerian entrepreneurs.

Climate and Environmental Conditions

Some industries need specific weather conditions or avoid certain climates.

Examples:

• Textile industries prefer dry climates because humidity affects cotton processing. This partly explains why Kano had many textile mills
• Steel plants need lots of water for cooling. They locate near rivers like the Ajaokuta Steel Company near River Niger
• Agriculture processing (like fish smoking or yam storage) works better in cooler areas to prevent spoilage
• Solar panel industries would benefit from northern Nigeria’s intense sunlight

Environmental regulations also matter. Communities now resist polluting industries. Gas flaring and oil spills in the Niger Delta show how industries can damage the environment.

Water Supply

Many industries need large amounts of water for processing, cooling, or cleaning.

Water-dependent industries:

• Breweries and bottling plants need clean water as their main ingredient. Nigerian Breweries factories locate where underground water is abundant
• Paper mills use water in pulp processing
• Chemical industries need water for reactions and cooling
• Textile dyeing requires lots of water

Industries locate near rivers or areas with good underground water. However, they must treat wastewater before releasing it to avoid polluting water sources.

Land Availability and Cost

Large industries need big plots for factories, warehouses, and parking. Land is cheaper outside major cities but those areas often lack infrastructure.

Many industries compromise by locating in industrial estates on city outskirts where land is more affordable but infrastructure exists. Examples include Ota Industrial Estate (Ogun), Ikeja Industrial Estate (Lagos), and Trans-Amadi Industrial Layout (Port Harcourt).

Land disputes in Nigeria also discourage investment. Companies fear starting construction only to face ownership challenges from communities or families.

Comparison of Location Factors by Industry Type

Industrial Concentration in Nigeria

Most Nigerian industries cluster in a few locations:

• Lagos: Over 60% of Nigeria’s industries. Has best infrastructure, largest market, main ports, and financial services
• Kano: Textile industries, food processing, leather tanning. Serves northern market and benefits from proximity to cotton-growing areas
• Port Harcourt: Oil and gas industries, petrochemicals. Located in the oil-producing region
• Aba: Small-scale manufacturing, garments, shoes, bags. Strong entrepreneurial culture and skilled craftsmen
• Ogun State: Attracted many industries relocating from Lagos due to cheaper land but still close enough to access Lagos port and market

This concentration creates regional inequality. States without industries remain poor while industrial states develop faster.

Practice Questions

Multiple Choice Questions

1. Which factor is MOST important for locating a cement factory?
   • a) Skilled labor supply
   • b) Proximity to market
   • c) Proximity to limestone deposits ✓
   • d) Government policies
2. Dangote Cement Company located in Obajana primarily because of:
   • a) Large market in Kogi State
   • b) Availability of limestone nearby ✓
   • c) Good road networks
   • d) Tax incentives from government
3. Which industry is MOST likely to locate near its market?
   • a) Iron ore mining
   • b) Crude oil refining
   • c) Fresh bread bakery ✓
   • d) Limestone quarrying
4. The concentration of over 60% of Nigerian industries in Lagos is mainly due to:
   • a) Abundant raw materials in Lagos
   • b) Better infrastructure and largest market ✓
   • c) Cheapest land prices in Nigeria
   • d) Most reliable power supply

Essay Questions

1. Explain five factors that influence the location of industries in Nigeria. (10 marks)

   Examiner’s tip: Name each factor, define it briefly, and explain how it affects where industries locate. Use Nigerian examples. Award 2 marks per well-explained factor.

2. Describe four problems that affect industrial location in Nigeria and suggest one solution for each. (12 marks)

   Examiner’s tip: State the problem (poor roads), explain its effect (increases transport costs), give example (Lagos-Kano road), suggest solution (rehabilitate highways). Award 3 marks per complete answer.

3. Why do most industries in Nigeria concentrate in Lagos and Port Harcourt? State three effects of this concentration. (9 marks)

   Examiner’s tip: First explain reasons for concentration (3 marks), then give three effects like regional inequality, congestion, or migration (6 marks total).

Related Topics

• Classification of manufacturing industries
• Industrial development in West Africa
• Problems of industrialization in Nigeria
• Transportation and communication in Nigeria
• Natural resources and economic development