Nigeria is at a pivotal juncture in its economic history. With a youthful population eager for better employment and an economy that has long depended on crude oil exports, the country needs a transformative agenda to secure its future. Despite many decades of diversification efforts, crude oil still plays an important role in Nigeria’s economy. According to data from the National Bureau of Statistics, crude oil & oil-related products accounted for 91 percent of export earnings in 2023 despite contributing less than 6 percent to the country’s Gross Domestic Product (GDP). This has continuously made the economy vulnerable to external shocks, leading to severe exchange rate depreciation and rising inflation.
Nigeria has not been able to break away from oil reliance in exports partly because other sectors, like manufacturing, are performing below expectations. Since the 2000s, Nigeria’s industrial capacity has not lived up to its potential. The manufacturing sector’s share of real GDP has declined from 11.4 percent in 2000 to 8.8 percent in 2023, highlighting the sector’s limited capacity to employ the majority of Nigerian workers. The sector’s share in exports was 2.2 percent in 2023. Today, 93 percent of workers in the country are in informal employment, highlighting a sad reality: our economy is not producing mid-to-high productivity jobs. With limited fiscal buffers and weak contributions of manufacturing to growth, export, and employment, our economy is still susceptible to the negative impacts of oil prices and other external shocks.
With this in mind, industrialisation is critical for Nigeria’s economic success for several reasons. First, a vibrant manufacturing sector can create much better jobs for the average Nigerian, providing opportunities for both low-skilled and semi-skilled workers. Second, industrialisation also allows us to add value to our production, empowering local businesses to grow and sell their goods to both the local and export markets. Finally, industrialisation can drive innovation and competitiveness, presenting several opportunities for Nigeria to adopt emerging technologies effectively and improve long-term growth prospects. Without industrial development, Nigeria may continue to experience rising unemployment, weak economic resilience, and have a large workforce engaged in low-productive activities.
Over the last decade, Nigeria has taken several steps to drive industrialisation. The Nigeria Industrial Revolution Plan (NIRP), which was launched in 2014, aimed to diversify the economy and enhance the growth of the agro-processing and petrochemical segments of the manufacturing sector. Special Economic Zones (SEZs) and industrial parks have also been introduced by federal and state governments to attract investments by offering tax breaks, subsidised infrastructure, and streamlined regulations. In 2023, the president announced several funding initiatives, including the N75 billion Manufacturing Sector Fund, to support 75 manufacturing firms with up to N1 billion each at a subsidised interest rate.
Despite these initiatives, Nigeria’s journey towards industrialisation faces several challenges. One major issue is the lack of an integrated approach. Many policies are often implemented in isolation, without a long-term development strategy. For instance, the Manufacturing Sector Fund appears insufficient and is not integrated into a broader strategy that addresses systemic issues like infrastructure deficit and weak value chain. Another challenge is the lack of continuity and implementation of plans and policies. The NIRP faced setbacks when the Buhari-led administration took office in 2015. This lack of continuity and the fragmented approach create uncertainties that deter investments in strategic sectors.
Another problem is inadequate infrastructure. Poor road networks, unreliable power supply, and insufficient transport systems raise the cost of doing business and hinder competitiveness. Finally, limited access to affordable finance stifles business growth. With commercial bank lending rates exceeding 30% and stringent collateral requirements, many small firms struggle to secure credit needed to grow and scale. Development finance, which supports industrialisation in other economies, is limited in Nigeria, implying that industrialisation is grossly underfunded.
The way forward: A clear agenda for 2025 and beyond
For Nigeria to industrialise, we must start by developing a clear vision. The federal government must develop a long-term industrial plan that transcends political administrations. The plan should aim to increase the contribution of manufacturing to real GDP from the current 9 percent to over 20 percent in the medium term and boost the sector’s contribution to export and employment from single digits. This plan must have clear and measurable targets and strategies to address key issues such as policy inconsistency, infrastructure deficits, and limited access to raw materials and affordable finance. However, the vision or plan is not enough. Industrialisation requires a multi-pronged approach that ensures collaboration of government agencies, businesses, and development partners. This calls for strong leadership and effective coordination to avoid mistakes of the past. Industrial policy must be a national priority rather than an agenda left solely to the Ministry of Industry, Trade, and Investment. It should be centrally coordinated by the presidency to ensure alignment across federal and state governments, reduce policy fragmentation, and promote effective implementation.
A priority of Nigeria’s industrial strategy must be to reduce manufacturing firms’ reliance on imported inputs, as many Nigerian firms are exposed to external shocks and exchange rate fluctuations. The government must support the local production of raw materials, such as industrial starch and sugar, which can be easily produced in Nigeria. Efforts must be geared towards strengthening local value chains to drive productivity and unlocking opportunities presented by the African Continental Free Trade Area (AfCFTA) Agreement. Finally, recapitalising development finance institutions and strengthening monitoring and evaluation are essential for providing loans to manufacturers, enabling them to scale.
Industrialisation remains Nigeria’s most promising path to raising productivity and creating better employment opportunities for its citizens. However, this vision can be achieved through strong commitment from federal and state governments, collaboration with the private sector, and support from development partners. By effectively implementing these policies, Nigeria can transform its industrial landscape and guarantee prosperity for future generations.
Authors:
Dr Wilson Erumebor, Senior Economist, Nigerian Economic Summit Group & Demi Samande, Author of In Her Hands: Shaping the Future of Manufacturing in Africa
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