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Ikechi Nzeako
According the Centre for the Promotion of Private Enterprise (CPPE), 26 years after the return to democratic governance, Nigeria’s manufacturing sector remains largely trapped in a low-growth equilibrium, adding that the sector’s contribution to GDP has hovered around 9–10 per cent for most of the period, underscoring the absence of a decisive industrial transformation despite successive policy pronouncements and reform initiatives.
In press release entitled “(Manufacturing Under Democracy: A Story Of Resilience Amid Structural Adversity” and signed by the Chief Executive Officer of the centre, Dr Muda Yusuf, it said that “Nigeria’s democratic journey has delivered only modest industrial outcomes, leaving the economy heavily dependent on primary commodities and imports.”
The centre posited that one of the defining features of the democratic era in Nigeria has been the progressive erosion of industrial capacity across several sectors.
“The collapse of the nation’s public refineries remains perhaps the most striking example. What should have been strategic industrial assets became victims of poor governance, policy failures, weak accountability and entrenched rent-seeking. Over time, the refineries deteriorated into symbols of institutional dysfunction, culminating in their complete shutdown and the loss of a critical pillar of industrialisation.”
It stated that the story is similar across several manufacturing subsectors, adding that the, “Textile mills that once employed hundreds of thousands of Nigerians have largely disappeared. The tyre industry collapsed. Battery manufacturing faded. Automobile assembly plants lost momentum. Many industrial clusters that once drove economic activity have either contracted significantly or vanished altogether.”
The consequence, the centre argued, “has been a gradual weakening of Nigeria’s industrial base and a growing dependence on imports for products that were once manufactured domestically.”
However, it said that amid the challenges, a few sectors have demonstrated remarkable resilience.
The stated that the cement industry stands out as one of Nigeria’s most successful industrialisation stories, adding that the food and beverage sector has also sustained growth despite an increasingly difficult operating environment.
But it said that the emergence of the Dangote Refinery represents arguably the most transformative industrial investment in Nigeria’s recent history. According to the centre, beyond refining petroleum products, the project has demonstrated the scale of industrial ambition required to reposition Nigeria as a major manufacturing and processing economy.
It stated the achievements are due to private-sector vision, resilience and risk-taking rather than to the strength of the policy environment.
The centre argued that many successful manufacturers have thrived not because conditions were favourable, but despite formidable policy, regulatory and infrastructural obstacles. “Their success is a testament to entrepreneurial determination rather than institutional effectiveness.”
However, CPPE said that the biggest obstacles confronting Nigerian manufacturers remain structural, adding that power supply continues to be one of the most binding constraints on industrial productivity.
‘Manufacturers are compelled to self-generate energy at enormous cost, undermining competitiveness and eroding profitability.
“Logistics inefficiencies constitute another major burden. Decades of underinvestment in rail infrastructure have deprived manufacturers of a cost-effective cargo transportation system.”
It stated excessive dependence on road transport has inflated production and distribution costs, weakened supply chains and reduced competitiveness.
The centre stated that the cost of finance remains equally prohibitive, adding that with lending rates frequently ranging between 25 and 30 per cent, manufacturers face borrowing costs that are among the highest in the world.
“Such financing conditions are fundamentally incompatible with long-term industrial investment.
It said no manufacturing economy can achieve global competitiveness when power is unreliable, logistics are inefficient and capital is prohibitively expensive,” it asserted.
According to the centre, successive administrations have oscillated between protection and liberalisation, creating uncertainty for investors. Industries that receive policy support today often find themselves exposed to intense import competition tomorrow.
It said this inconsistency has undermined investment confidence and weakened industrial planning, adding that compounding the problem is the influx of imports from economies where production costs are significantly lower and government support for industry is much stronger.
CPPE said that over the last two decades, Nigeria has witnessed a growing dominance of foreign-owned manufacturing enterprises, particularly from Asia.
According to the centre, the severe foreign exchange crisis of 2022 to 2023 inflicted considerable damage on manufacturing, disrupting production, constraining imports of industrial inputs and forcing some firms to scale down operations.
However, it stated that the restoration of liquidity in the foreign exchange market has significantly improved manufacturers’ access to foreign exchange and reduced one of the most critical operational constraints facing the sector.
However, it commended the government’s current fiscal policy framework that provides substantial import duty concessions on critical manufacturing inputs, including raw materials, intermediate goods and industrial machinery, with tariff rates ranging from zero to 10 percent.
However, it argued that Nigeria’s industrial future requires a deliberate and sustained commitment to competitiveness, adding that power sector reforms must deliver reliable and affordable electricity. Investments in rail infrastructure must be accelerated to reduce logistics costs. Development finance institutions should be strengthened to provide long-term industrial financing at concessionary rates.
CPPE argued that Nigeria must move beyond an economy driven largely by consumption and import dependence towards one anchored on production, value addition and industrial competitiveness.
“The future of economic prosperity lies not in what Nigeria imports, but in what Nigeria produces. Manufacturing remains the bridge between natural resource wealth and broad-based prosperity. Until that bridge is strengthened, the promise of economic transformation will remain only partially fulfilled.
“Industrialisation is not merely an economic aspiration; it is the foundation of economic sovereignty, sustainable prosperity and national competitivenes TV’s in the twenty-first century,” it added.