Nigeria’s manufacturing sector remains stuck in low-growth cycle after 26 years of democracy – CPPE

…Power, logistics, high interest rates continue to cripple Nigerian manufacturers

Nigeria’s manufacturing sector has remained largely trapped in a low-growth cycle despite 26 years of uninterrupted democratic governance, according to the Centre for the Promotion of Private Enterprise (CPPE), which says the country has yet to achieve the level of industrial transformation needed to drive broad-based economic prosperity.

In a Democracy Day assessment entitled “Manufacturing Under Democracy: A Story of Resilience Amid Structural Adversity,” Muda Yusuf, Chief Executive Officer of CPPE, said the sector’s contribution to the nation’s Gross Domestic Product (GDP) has hovered between nine and 10% for most of the democratic era, reflecting limited progress in industrial development despite numerous policy reforms and government initiatives.

Yusuf described industrialisation as the engine of economic transformation, noting that a strong manufacturing base is essential for creating quality jobs, enhancing value addition, improving export competitiveness and reducing vulnerability to external economic shocks.

“The sector’s contribution to GDP has hovered around 9–10 per cent for most of the period, underscoring the absence of a decisive industrial transformation despite successive policy pronouncements and reform initiatives.
Industrialisation is the engine room of economic transformation.

“It creates quality jobs, deepens value addition, strengthens export competitiveness and reduces vulnerability to external shocks. Yet, Nigeria’s democratic journey has delivered only modest industrial outcomes, leaving the economy heavily dependent on primary commodities and imports,” he said

According to him, Nigeria’s democratic journey has delivered only modest industrial outcomes, leaving the economy heavily dependent on primary commodities and imports.

He identified the collapse of the nation’s public refineries as one of the most visible examples of industrial decline during the democratic era.

The refineries, once considered strategic industrial assets, gradually deteriorated due to poor governance, policy failures, weak accountability mechanisms and entrenched rent-seeking practices.

“The refineries became symbols of institutional dysfunction, eventually leading to their shutdown and the loss of a critical pillar of industrialisation,” Yusuf stated.

He noted that similar declines have occurred across several manufacturing subsectors, including textiles, tyres, batteries and automobile assembly.

Textile mills that once employed hundreds of thousands of Nigerians have largely disappeared, while several industrial clusters that previously drove economic activities have either contracted significantly or ceased operations entirely.

The CPPE chief said the cumulative effect had been a weakening of Nigeria’s industrial base and an increasing dependence on imports for products that were once manufactured locally.

Despite these challenges, Yusuf highlighted a number of industrial success stories that have emerged over the years.

He cited the cement industry as one of Nigeria’s most successful industrialisation achievements and commended the resilience of the food and beverage sector despite an increasingly difficult operating environment.

He also described the Dangote Refinery as arguably the most transformative industrial investment in Nigeria’s recent history, saying the project demonstrates the scale of ambition required to reposition Nigeria as a major manufacturing and processing economy.

According to him, however, these successes have largely been driven by private-sector vision, resilience and risk-taking rather than the strength of the policy environment.

“Many successful manufacturers have thrived not because conditions were favourable, but despite formidable policy, regulatory and infrastructural obstacles,” he said.

Yusuf identified inadequate power supply as one of the most significant barriers to industrial competitiveness, noting that manufacturers continue to rely heavily on self-generated electricity at enormous costs.

He also pointed to poor logistics infrastructure, particularly decades of underinvestment in rail transportation, which has forced manufacturers to depend largely on road transport, thereby increasing production and distribution costs.

Another major challenge, he said, is the high cost of financing. With lending rates frequently ranging between 25 and 30 per cent, manufacturers face borrowing costs that are among the highest globally, making long-term industrial investments difficult.

“No manufacturing economy can achieve global competitiveness when power is unreliable, logistics are inefficient and capital is prohibitively expensive,” Yusuf argued.

The CPPE boss further expressed concern over policy inconsistency, saying successive administrations have alternated between protectionist and liberalisation policies, creating uncertainty for investors and weakening industrial planning.

He noted that local manufacturers are often exposed to intense import competition from countries where production costs are lower and government support is stronger, while smuggling continues to undermine tariff protection and expose weaknesses in border enforcement.

Yusuf also raised concerns about the shrinking footprint of indigenous manufacturing enterprises, observing that foreign-owned manufacturing companies, particularly from Asia, have gained increasing dominance in the sector.

While acknowledging the benefits of foreign direct investment, he warned that excessive reliance on foreign-owned enterprises without nurturing local industrial champions could weaken domestic entrepreneurship and long-term industrial sustainability.

On recent economic reforms, Yusuf acknowledged improvements in foreign exchange market liquidity, describing it as one of the notable gains of current policy measures.

He recalled that the severe foreign exchange crisis of 2022 and 2023 disrupted manufacturing operations, constrained access to imported industrial inputs and forced some firms to scale down production.

According to him, improved liquidity in the foreign exchange market has significantly eased access to foreign currency and reduced one of the most critical operational constraints facing manufacturers.

He also commended the Federal Government’s fiscal policy measures that provide import duty concessions on critical manufacturing inputs, including raw materials, intermediate goods and industrial machinery, with tariff rates ranging from zero to 10 per cent.

Yusuf said the concessions would help lower production costs, improve productivity, deepen value addition and enhance competitiveness in both domestic and export markets.

Looking ahead, he called for what he described as a new industrial compact centred on competitiveness, policy consistency and strategic investment.

He urged the government to accelerate power sector reforms, expand rail infrastructure, strengthen development finance institutions and provide long-term industrial financing at concessionary rates.

He also advocated stronger implementation of local content policies, prioritisation of locally manufactured products in government procurement, and improved security to support industrial value chains and investment confidence.

According to Yusuf, Nigeria must deepen backward integration and resource-based industrialisation by transforming its natural resources into finished products rather than exporting raw materials and importing manufactured goods.

“The central lesson from the last twenty-six years is unmistakable: industrialisation cannot flourish in an environment of structural inefficiencies and policy uncertainty,” he said.

He stressed that Nigeria must transition from an economy driven largely by consumption and imports to one anchored on production, value addition and industrial competitiveness.

“The future of economic prosperity lies not in what Nigeria imports, but in what Nigeria produces. Manufacturing remains the bridge between natural resource wealth and broad-based prosperity. Industrialisation is not merely an economic aspiration; it is the foundation of economic sovereignty, sustainable prosperity and national competitiveness in the twenty-first century,” Yusuf added.