Manufacturers need more than BOI loans to deliver Nigeria’s $1 trillion economy, Alliance says

…says manufacturing operating below 50% capacity despite BOI support, warns of deeper structural crisis

The Alliance for Economic Research and Ethics (AERE) has said that while the Bank of Industry’s (BOI) record N644.9 billion disbursement in 2025 marks a significant milestone for Nigeria’s industrial development, financing alone will not be enough to deliver the country’s ambition of building a $1 trillion economy unless longstanding structural constraints facing manufacturers are urgently addressed.

In a policy brief signed by Dele Kelvin Oye, chairman of the Alliance for Economic Research and Ethics, the group commended BOI for shifting its focus from measuring success by loan volumes to assessing the developmental impact of its interventions.

According to the report, BOI disbursed N644.9 billion in 2025, supported 1.68 million jobs and financed projects across 14 strategic sectors, with more than 30 percent of its funding going to micro, small and medium-sized enterprises (MSMEs) and over 20 percent benefiting women- and youth-led businesses.

The alliance also lauded President Bola Tinubu for prioritising industrialisation under the Renewed Hope Agenda and Yemi Cardoso, the Governor of Central Bank of Nigeria (CBN), for policies aimed at directing finance toward productive sectors.

However, it argued that the achievements, while encouraging, remain insufficient compared to the scale of Nigeria’s industrial challenges, noting that the intervention represented only a fraction of what is required to transform a $400 billion economy.

“The Bank of Industry (BOI) has, at long last, unveiled its maiden Development Impact Report, a document that tells a story both heartening and humbling. In 2025, BOI disbursed N644.9 billion, supported 1.68 million jobs, and financed projects across 14 strategic sectors. For an institution that has historically measured success by the weight of its ledgers rather than the depth of its impact, this is nothing short of revolutionary.

“An injection of N644.9 billion sounds impressive until contextualised within a $400 billion economy.
It is a drop of water in a desert of industrial thirst. The 1.68 million jobs supported are admirable, yet Nigeria must create at least 4 million jobs annually merely to keep pace with its youth demographic bulge. We are not treading water; we are sinking more slowly,” Oye said

The group said Nigeria needs to create at least four million jobs annually to keep pace with its rapidly growing population, warning that the 1.68 million jobs supported through BOI financing, though significant, fall well short of that requirement.

It further warned that the manufacturing sector remains under severe pressure, operating at less than 50 percent of installed capacity despite government interventions.

According to the alliance, declining manufacturing tax revenue in the first quarter of 2026 signals weakening industrial activity rather than improved tax efficiency.

“When manufacturers pay less tax, it is because they are producing less, selling less and slowly suffocating,” the brief said.

The alliance identified five major constraints undermining the sector’s competitiveness, beginning with unreliable electricity supply.

It noted that manufacturers still self-generate about 60 percent of their electricity, significantly increasing production costs and making Nigerian products less competitive against those from countries such as Vietnam, Bangladesh and Ethiopia, where industries benefit from more reliable and affordable power.

While acknowledging BOI’s N30.6 billion investment in power infrastructure, the group argued that the intervention remains inadequate given persistent weaknesses in the national grid.

It also criticised commercial lending rates, which it said remain above 35 percent, describing them as unsustainable for productive investment.

Although BOI’s lending rates of 13 percent for SMEs and 15 percent for larger enterprises offer some relief, the alliance argued that development finance institutions cannot replace the broader banking system.

The policy brief also renewed calls for the CBN to resolve an estimated $2.4 billion backlog of outstanding foreign exchange forward contracts owed to manufacturers.

According to the alliance, businesses that entered forward contracts with the apex bank to hedge against exchange rate volatility received naira refunds after prolonged delays instead of the promised foreign currency, leaving many unable to meet import obligations as the naira depreciated sharply.

The group described the unresolved contracts as a breach of trust that continues to undermine investor confidence and manufacturers’ ability to plan.

It also blamed persistent government deficit financing for crowding out private sector borrowing, arguing that heavy domestic borrowing by the government reduces the pool of capital available to businesses while keeping interest rates elevated.

The alliance further noted that President Tinubu’s pledge to achieve single-digit interest rates for productive sectors remains unrealised, insisting that affordable financing remains essential for industrial expansion.

To address the challenges, the group proposed a series of policy reforms, including accelerated implementation of the Nigeria Industrial Policy 2026, immediate settlement of outstanding foreign exchange obligations, restoration of tax incentives for Free Trade Zones, expansion of credit guarantee schemes, reduction in public borrowing and the introduction of a lending rate cap of 15 percent for manufacturing, agriculture and technology.

Other recommendations include reducing government expenditure through public sector reforms, establishing industrial clusters with dedicated power infrastructure and deepening capital market financing for manufacturers.

The alliance argued that Nigeria’s long-term fiscal sustainability depends more on expanding domestic production than on increasing tax collection.

“a nation cannot tax its way to
prosperity; it must produce its way there.
At interest rates of 13% for SMEs and 15% for large enterprises, BOI has undercut the commercial banking sector, which has been lending to Nigerian entrepreneurs at 35% and above. In a country where borrowing from a commercial bank often feels less like a financial transaction and more like a hostage negotiation,” the brief noted

Oye urged policymakers to focus on creating an environment where manufacturers can grow, create jobs, increase exports and strengthen government revenue through higher economic activity rather than higher taxation.

The intervention comes as the federal government continues to implement its industrialisation agenda, with BOI playing a central role in providing long-term financing to priority sectors as authorities seek to diversify the economy away from oil dependence and expand domestic manufacturing.