Stakeholders Urge Urgent Reforms in Nigeria’s Manufacturing Sector

Stakeholders have raised concerns about Nigeria’s manufacturing sector, which plays a crucial role in the country’s economic growth and diversification. They highlight deep-rooted challenges that demand immediate and transformative reforms.

Despite its capacity to drive industrialisation and reduce reliance on imports, the sector continues to struggle with policy inconsistencies, poor infrastructure, and ongoing energy crises.

A key barrier to growth is the inconsistency in industrial policy. Analysts argue that weak regulatory frameworks and frequent policy changes discourage long-term investments. Additionally, the high interest rates and strict lending conditions limit manufacturers’ access to affordable credit, exacerbating their challenges.

Manufacturers are increasingly worried about their financial stability, as recent data reveals a concerning increase in unsold finished goods. In the first half of 2024, the value of unsold goods soared by 42.93%, rising from N869.37 billion in 2023 to N1.24 trillion, an increase of N370.63 billion.

This data underscores the growing inventory buildup, indicative of broader issues such as reduced consumer demand and inefficiencies in supply chains. Experts warn that the mounting unsold inventory, coupled with high production costs, may further strain manufacturers’ cash flow and profitability. Immediate action is needed to mitigate the negative financial impact on the sector.

Economist Musa Adeyemi stated, “Industrial policy in Nigeria often lacks coherence. We need sustainable strategies to promote local production rather than short-term fixes.” He also stressed that energy challenges remain a major obstacle. The unreliable power supply forces many manufacturing companies to rely on expensive diesel generators.

The Manufacturers Association of Nigeria reports that energy costs account for over 40% of production expenses, making locally produced goods less competitive than imports. Segun Akande, a factory owner in Ikotun, emphasized, “The power sector remains a bottleneck. Without addressing this issue, import substitution will remain a distant goal.” He pointed out that the lack of stable and affordable electricity continues to hamper manufacturing activities, forcing businesses to depend on costly diesel generators, significantly driving up production costs.

Akande further noted that the ongoing energy crisis not only affects the competitiveness of local products but also discourages both local and foreign investment in the sector. He urged the government to prioritize energy reforms, stressing that sustainable solutions are critical to reducing dependence on imports and fostering long-term industrial growth in Nigeria.

Samson Gbadamosi, Deputy Executive of the Nigerian Association of Small and Medium Enterprises, explained that the depreciation of the naira worsens the situation. Imported machinery and raw materials have become unaffordable, causing many factories to operate below capacity. This slows down efforts to boost local production and enhance the sector’s competitiveness.

To address these challenges, stakeholders have called for urgent reforms. Their recommendations include revising industrial policies to ensure clear and consistent incentives, addressing the energy crisis through investments in renewable energy and grid expansion, and improving infrastructure to resolve logistical challenges.

“Nigeria has the potential to become a manufacturing hub in Africa, but targeted interventions are necessary. It is time for the government to make industrialisation a priority for economic growth,” said Gbadamosi.

Currently, Nigeria’s manufacturing sector contributes less than 10% to the nation’s Gross Domestic Product. Revitalising the sector is critical for economic diversification, job creation, and reducing import dependency. A coordinated effort from both the public and private sectors is essential to unlocking the potential of Nigeria’s manufacturing industry and ensuring sustainable growth.

Segun Ajayi-Kadir, Director-General of the Manufacturers Association of Nigeria (MAN), pointed out that recent government reforms and policies have had a negative impact on the sector. He cited the removal of fuel subsidies, the floating of the naira, exchange rate policies, and increases in monetary policy rates as major contributing factors.

Ajayi-Kadir stated, “The challenges facing the manufacturing sector have severely hindered its growth. Our discussions are crucial in strengthening our advocacy and guiding the government toward the right policies to address the sector’s obstacles.” He emphasized that collective action is essential to overcome the challenges hindering the sector’s progress and potential.

He also called on the government to take proactive measures to combat inflation, particularly by addressing high logistics costs, and to align fiscal and monetary policies to support long-term, sustainable economic growth.