Implementation gap puts Nigeria’s industrial policy goals at risk – Report

…Eight million MSMEs shut down in 18 months as industrial policy faces reality check

Nigeria’s ambition to raise manufacturing’s contribution to Gross Domestic Product (GDP) to 15 percent by 2030 and 25% by 2035 could be undermined by weak implementation unless urgent steps are taken to address the challenges confronting micro, small and medium enterprises (MSMEs), according to a new report by the Alliance for Economic Research and Ethics (AERE) LTD/GTE.

The report, authored by Dele Kelvin Oye, Chairman of the Alliance, warned that while the Nigeria Industrial Policy 2025 (NIP2025) presents a comprehensive blueprint for industrialisation, persistent constraints such as limited access to affordable finance, high energy costs, inflation and policy execution gaps continue to threaten the survival of the country’s small businesses, which are expected to drive the policy’s success.

It further revealed that no fewer than eight million MSMEs shut down across Nigeria between January 2023 and June 2024, wiping out nearly 20% of the country’s estimated 40 million small businesses and casting fresh doubts over whether the Federal Government’s industrial policy can achieve its ambitious targets without urgent reforms in implementation and business support.

Oye warned that while the policy is robust on paper, the harsh operating environment confronting small businesses threatens to derail its objectives unless the government moves swiftly to address financing, infrastructure and macroeconomic constraints.

In the report entitled “The Gap: Nigeria’s Industrial Policy 2025 vs. The Lived Reality of SMEs,” Oye argued that Nigeria’s industrial ambitions cannot be realised if entrepreneurs continue to shut down businesses at an alarming rate despite repeated policy interventions.

“Yet, a profound chasm exists between policy parchment and market pavement. For the millions of Nigerian entrepreneurs fighting for survival today, the NIP2025 reads less like a roadmap and more like a distant, perhaps unattainable, promise. This article examines the lived reality of SMEs in Nigeria, and why, without radical implementation discipline, the NIP2025 risks becoming another well-intentioned document that fails to reach the shop floor,” Oye stated.

He noted that the NIP2025 seeks to increase manufacturing’s contribution to GDP to 15% by 2030 and 25% by 2035, while positioning Nigeria as Africa’s leading industrial hub through increased manufacturing output, export diversification and job creation.

According to the report, the policy rightly identifies MSMEs as the backbone of the economy, contributing 46.32% of GDP and accounting for 87.9% of national employment. However, Oye argued that the sector is battling what amounts to a survival crisis.

He cited research indicating that as many as 95 percent of Nigerian SMEs fail within their first five years, describing the trend as an existential threat to the country’s productive base.

“The lived reality is that millions of entrepreneurs are struggling to keep their businesses alive despite ambitious policy promises,” the report stated.

Oye attributed the collapse of businesses to a combination of persistent inflation, high interest rates, currency depreciation, rising energy costs and limited access to affordable finance.

He noted that although the government has pledged single-digit loans and various incentives under the industrial policy, only 15 to 20% of SMEs currently have access to formal bank credit.

Even when financing is available, he said, borrowing costs have become prohibitive, with commercial lending rates exceeding 35% following sustained monetary tightening by the Central Bank of Nigeria.

According to him, many entrepreneurs are now borrowing simply to pay salaries, rent and purchase inventory rather than investing in machinery, technology or production expansion.

The report also highlighted the growing burden of energy costs on businesses, noting that prolonged electricity shortages have forced many enterprises to depend on diesel-powered generators.

It is estimated that some businesses spend as much as 30 percent of their revenue on diesel, significantly eroding profit margins and reducing competitiveness.

Oye argued that the removal of petrol subsidies and continued depreciation of the naira have further increased transportation and production costs, forcing many firms to reduce operations or shut down entirely.

He noted that some SMEs have reportedly reduced their workforce by as much as 70% in response to worsening economic conditions.

The analysis maintained that Nigeria’s challenge is no longer the absence of industrial policies but the inability to implement them effectively.

According to Oye, previous intervention programmes expanded access to credit in nominal terms but failed to transform businesses because most enterprises used the funds to meet immediate operating expenses instead of investing in productive assets.

He argued that unless macroeconomic stability improves, fresh intervention funds under the NIP2025 risk producing similar outcomes.

The report also criticised the uneven distribution of infrastructure investment, noting that while large manufacturers operating in industrial parks benefit from better facilities, most SMEs continue to provide their own electricity, water, security and waste management, resulting in significantly higher production costs.

To reverse the trend, Oye called on the Federal Government to declare an SME emergency, introducing temporary but targeted support measures, including genuine single-digit financing, energy relief for productive businesses and a moratorium on multiple taxation imposed by state and local governments.

He also urged the Central Bank of Nigeria to ensure that banks offering stronger industrial lending portfolios benefit from differentiated Cash Reserve Ratio incentives while encouraging financial institutions to provide longer loan tenors, revenue-based financing and repayment structures aligned with business cash flow cycles.

Beyond financing, the report recommended that the government prioritise the development of fully serviced SME industrial clusters with reliable electricity, water, roads and security, arguing that delivering infrastructure to a handful of strategic clusters would demonstrate serious commitment to industrial development.

Oye further advocated greater transparency through the quarterly publication of implementation data under the proposed National Industrial Development Monitoring System (NIDMS), detailing the number of SMEs receiving support, the sectors covered, lending rates and employment outcomes.

While commending the Federal Ministry of Industry, Trade and Investment for producing an industrial policy aligned with the African Continental Free Trade Area (AfCFTA), he stressed that policy documents alone would not revive Nigeria’s productive sector.

“Senator Enoh’s advocacy for the NIP2025 is commendable. The policy itself is comprehensive, evidence-based, and aligned with continental frameworks such as the African Continental Free Trade Area (AfCFTA). But Nigerian SMEs do not need more policy documents. They need implementation fidelity

“The ambition is right. The execution must now match it,” he said, adding that millions of Nigerian entrepreneurs need practical support rather than additional policy pronouncements if the country is to realise its industrialisation goals.