Nigeria’s manufacturing sector stagnant after 26 years of democracy, CPPE warns

Nigeria’s manufacturing sector has failed to achieve meaningful transformation despite 26 years of democratic governance, according to the Centre for the Promotion of Private Enterprise (CPPE).

In a statement released on Thursday, Chief Executive Officer of the CPPE, Dr. Muda Yusuf, said the sector’s contribution to gross domestic product (GDP) has remained largely stagnant at between 9 percent and 10 percent over the past two decades, reflecting the country’s inability to achieve sustained industrial growth.

Yusuf described industrialisation as the foundation of economic transformation, noting that it creates quality jobs, enhances value addition, boosts exports and reduces vulnerability to external shocks. However, he said Nigeria’s economy remains heavily dependent on primary commodities and imports despite numerous policy reforms and industrialisation initiatives.

According to him, one of the most visible signs of industrial decline has been the collapse of Nigeria’s public refineries, which he attributed to poor governance, weak accountability, policy failures and entrenched rent-seeking practices. He said the refineries deteriorated over time and eventually ceased operations, depriving the country of a critical industrial asset.

The CPPE chief also highlighted the decline of several manufacturing subsectors, including textiles, tyres, batteries and automobile assembly, noting that many industrial clusters that once drove economic activity have either contracted significantly or disappeared entirely.

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Despite these challenges, Yusuf identified the cement industry, food and beverage sector and the recently established Dangote Refinery as notable examples of industrial success. He said these achievements were largely driven by private-sector resilience and entrepreneurial determination rather than a supportive policy environment.

“Many successful manufacturers have thrived not because conditions were favourable, but despite formidable policy, regulatory and infrastructural obstacles,” he said.

Yusuf identified unreliable electricity supply, poor logistics infrastructure and high borrowing costs as the most significant constraints facing manufacturers. He noted that many firms continue to generate their own power at substantial cost, while decades of underinvestment in rail transport have increased dependence on road haulage and raised distribution expenses.

He also expressed concern over lending rates, which frequently range between 25 percent and 30 percent, describing such financing conditions as incompatible with long-term industrial investment.

The CPPE boss further criticised policy inconsistency, arguing that successive administrations have alternated between protectionist and liberal economic policies, creating uncertainty for investors. He added that local manufacturers face intense competition from imports produced in countries with lower production costs and stronger government support.

According to Yusuf, smuggling has compounded these challenges by undermining tariff protections and exposing weaknesses in border enforcement.

He also warned about the shrinking footprint of indigenous manufacturing firms, saying the growing dominance of foreign-owned enterprises, particularly from Asia, raises concerns about domestic industrial capacity and economic sovereignty.

While acknowledging recent improvements in foreign exchange (FX) market liquidity, Yusuf said the reforms have eased one of the major constraints facing manufacturers. He recalled that the FX crisis of 2022 and 2023 disrupted production, restricted access to imported inputs and forced some firms to scale down operations.

He also commended the Nigerian government’s fiscal measures that provide import duty concessions on critical manufacturing inputs, including raw materials, intermediate goods and industrial machinery. According to him, tariffs ranging from zero to 10 percent have helped lower production costs and improve competitiveness.

Looking ahead, Yusuf called for a new industrial compact centred on competitiveness. He urged the government to accelerate power sector reforms, expand rail infrastructure, strengthen development finance institutions and prioritise locally manufactured products in public procurement.

He also stressed the need to address insecurity, which he said has disrupted access to raw materials, limited market expansion and weakened investor confidence across manufacturing value chains.

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Yusuf further advocated deeper backward integration and resource-based industrialisation, arguing that countries achieve industrial success by processing their natural resources into finished products rather than exporting raw materials and importing manufactured goods.

“The central lesson from the last twenty-six years is unmistakable: industrialisation cannot flourish in an environment of structural inefficiencies and policy uncertainty,” he said.

He added that Nigeria must shift from an economy driven by consumption and imports to one anchored on production, value addition and industrial competitiveness, describing manufacturing as the bridge between natural resource wealth and broad-based prosperity.