OkabaNigeria’s manufacturing sector is among the largest in Africa, with numerous opportunities. Prior to 2020, the sector faced several structural challenges, which have caused many manufacturing firms to shut down, limiting growth and investment inflows into the sector.

The Nigerian Economic Summit Group (NESG) recognises this fact and this new report on Sectoral reforms and investments in Nigeria focuses on Nigeria’s manufacturing sector and how it can facilitate economic growth and development.

The NESG, in its 2021 Macroeconomic Outlook report, highlighted the manufacturing sector as one of six sectors that have the potential to create jobs and reduce poverty in Nigeria. For the sector to achieve this, the NESG argues that private investment will play a major role. From Nigeria’s recent experience, actual investments in manufacturing are realised when there is an intersection of market opportunities and government support. Nigeria’s reliance on imports, its large market and the coming into effect of the African Continental Free Trade Area (AfCFTA) agreement present a huge opportunity for investment in the manufacturing sector, especially in areas such as agro-processing and light manufacturing. For these opportunities to fully materialise, crucial actions are required by the federal and state governments, some of which include developing industrial policy and sectoral plans for identified priority areas, ensuring commitment to the implementation of existing plans, addressing the challenge of insecurity, and providing targeted infrastructure.

Nigeria’s manufacturing sector faced several challenges even before the outbreak of the COVID-19 Pandemic. Prior to the pandemic, the sector had suffered mainly from the closure of land borders in September 2019, which reduced informal exports and indirectly affected several manufacturing outfits in Aba, Kano and Lagos. Perennial problems of power supply, logistics bottlenecks, infrastructure deficits, limited access to credit, foreign exchange scarcity have continuously affected the sector’s performance over time. Growth of the manufacturing sector has been stagnant (average growth of -0.6% from 2015 to 2019) while capacity utilisation has remained low.

The manufacturing sector is made up of 13 subsectors, including Oil Refining; Cement; Food, Beverage and Tobacco; Textile, Apparel and Footwear; Wood and Wood Products; Pulp, Paper and Paper Products; Chemical and Pharmaceutical Products; Non-Metallic Products; Plastic and Rubber products; Electrical and Electronics; Basic metal, Iron and Steel; Motor vehicles & assembly and Other Manufacturing. The sector is dominated by informal players that are mostly micro, small, and medium enterprises. According to data from the NBS, the sector employed at least 5.4 million individuals in 2017. This represents 7% of Nigeria’s labour force population that are working. Manufacturing is Nigeria’s third-largest sector in terms of employment, after Agriculture and Trade, but the poor quality of infrastructure remains the longest standing problem of the sector in Nigeria and contributes to the high cost of production. Bad road networks and inadequate electricity supply also make it difficult for businesses to maximise returns and limit operations costs in the sector.

However, Nigeria has numerous favourable conditions for investment, especially in its manufacturing sector. Some of these conditions include Large arable land, strategic location in Africa and large market and opportunities presented by the AfCFTA.

Developing Nigeria’s manufacturing sector is the solution to Nigeria’s foreign exchange problems as the sector has the potential to create jobs and lift millions of Nigerians out of poverty if the government addresses the current challenges. Already, there are several initiatives and interventions in the manufacturing sector, ranging from import restrictions to the establishment of 43 export processing zones which are currently at different stages of development, according to the Nigerian Export Processing Zones Authority. In addition, the National Action Committee of the AfCFTA is working to develop Nigeria’s strategy for the AfCFTA, which commenced in January 2021. These initiatives, and many more, will influence the performance of the manufacturing sector. It becomes imperative that there is synergy and consolidation of efforts from all government ministries, departments, and agencies involved in developing the sector.

The country’s current situation requires urgent intervention by the government to develop the industrial sector in Nigeria. The cost of not implementing crucial reforms to reposition the sector for competitiveness is evident in the weak state of the sector and Nigeria’s high unemployment and poverty rates. Good sectoral planning, therefore, must be accompanied by the effective implementation to ensure that Nigeria becomes a prosperous nation in the near future.


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