Nigeria’s manufacturing industry, once seen as the engine of Africa’s economic revolution, now teeters dangerously close to collapse. Confronted with crushing inflation, a volatile naira, rising energy and logistics costs, and an ever-expanding list of policy failures, the sector’s downward spiral has intensified. Experts and stakeholders warn that unless the federal government urgently pursues coordinated and bold reforms, the country could lose an entire generation of industrial progress—along with millions of jobs and foreign investment opportunities.

The Bleak Landscape of Nigerian Manufacturing

The problems plaguing Nigerian manufacturers have reached alarming proportions. Data from the Manufacturers Association of Nigeria (MAN) paints a dire picture. In just one year, 767 companies shut their doors, and over 18,000 jobs vanished from the manufacturing space. Profit margins for most manufacturers, excluding the cement sector, shrank by 36 percent between 2021 and 2023.

Compounding this crisis is the burden of unsold goods. By 2024, inventory valued at N2.14 trillion sat idle, marking an 87.5 percent increase year-on-year. This sharp rise reflects diminished consumer purchasing power, increased production expenses, and plummeting demand—especially for small and medium-sized manufacturers (SMEs), who form the backbone of the sector.

Capacity utilisation has steadily nosedived—from a high of 73.3 percent in 1981 to just 57 percent in 2024. Worse still, the sector’s contribution to GDP has shrunk from 29.9 percent in the early 1980s to a dismal 8.6 percent today. Non-oil exports, a key growth area, have dropped dramatically, plunging from 82.37 percent in 2019 to just 25.13 percent in 2024.

Adding salt to the wound, international corporations like Procter & Gamble, Unilever, GlaxoSmithKline, Diageo, Sanofi, and Kimberly-Clark have either exited or severely reduced their operations in Nigeria, citing economic instability and currency volatility as core reasons.

A Cascade of Structural and Economic Failures

The sector’s struggles cannot be separated from the broader economic dysfunction. Inflation now hovers around 33 percent, while interest rates have been raised to a punishing 27.25 percent in an attempt to curb it. As a result, manufacturers find themselves priced out of affordable credit, unable to scale, or even sustain operations.

The naira’s depreciation has further eroded profitability, particularly for firms dependent on imported raw materials. The cost of doing business has soared, with many companies allocating up to 40 percent of their operational budgets to alternative energy sources like diesel generators, due to unreliable power supply from the national grid.

Beyond energy woes, Nigeria’s decrepit transport infrastructure increases logistics costs and causes supply chain delays. For many manufacturers, moving goods between key industrial corridors, such as Lagos and Kano, is a costly nightmare.

Security concerns present another formidable challenge. Armed banditry, kidnappings, and terrorism have rendered some regions—especially those critical to agriculture and manufacturing—largely inaccessible. Investment has dried up in these insecure zones, both domestic and foreign, as companies abandon expansion plans in favour of safety.

International Examples Offer a Blueprint for Change

Despite the grim scenario, several emerging economies have reversed similar downturns through visionary policies. These examples offer hope—and a roadmap—for Nigeria.

China’s high-tech pivot under its “new-type industrialisation” strategy has positioned it as a global manufacturing leader. With an investment of $1.4 trillion into sectors like artificial intelligence and semiconductors between 2020 and 2025, China has boosted domestic production, lowered dependence on imports, and enhanced global competitiveness.

India’s resurgence stems from the “Make in India 2.0” initiative, focused on regulatory simplification and massive infrastructure projects like the $100 billion Delhi-Mumbai Industrial Corridor. A key driver has been the Production-Linked Incentive (PLI) scheme, offering $26 billion in subsidies to electronics and pharmaceutical companies.

Vietnam’s remarkable growth in 2024—where manufacturing expanded by 8.7 percent—shows the potential of smart FDI policies. With 15 trade agreements in place and attractive tax holidays, Vietnam drew in over $25 billion in FDI last year alone.

What Nigeria Must Do Now

Nigeria must treat the crisis as a national emergency and respond with a holistic, multi-pronged approach:

1. Macroeconomic Stabilisation

The Central Bank and fiscal authorities must align policies to stabilise inflation, lower interest rates, and halt the naira’s freefall. A dedicated foreign exchange window for manufacturers would provide affordable access to vital imports. Interest rates for manufacturers should be capped at 15 percent, similar to India’s MSME loan schemes.

2. Massive Infrastructure Investment

The country needs to modernise its transport and energy infrastructure. Upgrading the Lagos-Kano rail line would drastically reduce shipping costs and time. Modular refineries must be deployed to cut diesel prices by as much as 40 percent, significantly easing production costs.

3. Skilled Labour Development

Nigeria must invest in technical education and vocational training tailored to manufacturing needs. Creating regional innovation hubs, in collaboration with partners like Germany and China, can foster research and development in robotics, AI, and smart manufacturing. Additionally, STEM scholarships should be tied to mandatory service in local industries to close the skills gap.

4. Secure the Industrial Landscape

The government must intensify efforts to secure industrial and agricultural zones. Without addressing security concerns, manufacturers will continue to flee risky areas, dragging the economy further into decline.

5. Revamp Trade and Tax Policies

Trade policies should favour local industries and be aligned with the African Continental Free Trade Agreement (AfCFTA). A simplified and unified tax regime would ease the regulatory burden on manufacturers, especially SMEs. Policymakers must also incentivise domestic production by offering tax breaks to local manufacturers and exporters.

6. Innovation Through Incentives

Nigeria must follow the path of Vietnam and India by offering incentives like 10-year tax holidays for high-tech firms and fast-tracking approvals for manufacturing projects. Special economic zones focused on agro-processing and digital manufacturing should be established in strategic regions.

Promising Steps Already in Motion

There are signs of progress. The Nigerian Startup Act has laid the foundation for innovation and enterprise development. The federal government’s N1.3 trillion disbursement plan for MSMEs through the Bank of Industry, the Syndicated De-risked Loan Scheme, and SMEDAN’s solar-powered innovation hubs are positive developments. But success hinges on execution. Past initiatives have failed due to poor implementation, lack of accountability, and policy inconsistencies.

As MAN’s Director-General, Segun Ajayi-Kadir, aptly stated, “These challenges are interconnected, and addressing them piecemeal will not yield the industrial transformation Nigeria desperately needs.”

A $150 Billion Opportunity Awaits

With the right reforms, Nigeria’s manufacturing sector could unlock a $150 billion opportunity by 2030. This potential can drive inclusive economic growth, create millions of jobs, reduce poverty, and transform Nigeria into a manufacturing powerhouse on the global stage.

But this can only happen if the Tinubu administration commits to coordinated, deliberate, and urgent reforms. The time for pilot projects and rhetoric is over. Nigeria’s industrial future depends on bold action now.