Nigeria’s manufacturing sector is staging one of its most significant recoveries in the past decade, as new data from the Manufacturers Association of Nigeria (MAN) indicates rising production output, improved capacity utilization, and renewed investor interest across multiple industrial segments. This resurgence comes after years of stagnation fueled by foreign exchange volatility, inconsistent energy supply, and high import costs that weakened factory operations nationwide.
The manufacturing sector, long considered the backbone of job creation and a vital catalyst for economic diversification, contributes between 8% and 10% of Nigeria’s GDP. Industry players have consistently argued that with stable policies, affordable credit, and reliable energy, the sector could triple in size within a decade. Now, some of those expectations appear to be gaining traction.
According to figures referenced in a recent report by The Guardian, manufacturers recorded a notable expansion in production volumes during the last two quarters, driven largely by increased local sourcing of raw materials, moderate currency stabilization, and improved access to imported machinery following recent FX reforms. The Guardian report noted that factory output growth in food processing, chemicals, paper, plastics, cement, and pharmaceuticals is “significantly stronger than the same period last year.”
Manufacturing executives say the renewed momentum is the result of both structural adjustments and necessity-driven innovation. Many firms that once relied heavily on imported inputs have shifted to local suppliers due to the high cost of foreign exchange. In doing so, they have sparked new value chains in agriculture, solid minerals, and petrochemicals, creating multiplier effects across the economy.
Capacity Utilization Rises Despite Energy Constraints
Although persistent electricity shortages remain a major challenge, many companies have adapted by investing in off-grid solutions such as gas-powered plants, solar installations, and energy-efficient machinery. These adjustments have enabled firms to return to higher capacity utilization levels compared with 2022–2023, when operations were severely disrupted by diesel price spikes and grid instability.
The latest MAN survey indicates that average capacity utilization across major manufacturing groups has climbed above 60%, compared to lows of 48% recorded at the peak of FX volatility last year. This marks the highest utilization rate since 2018.
Sectors showing notable rebounds include:
- Food and beverage: Supported by improved agricultural output and increased consumer spending as inflation begins to moderate.
- Pharmaceuticals: Boosted by investments in local production following lessons from the COVID-19 pandemic.
- Cement and building materials: Driven by private construction activity and federal infrastructure spending.
- Chemical and plastics: Supported by expansions in petrochemical feedstock availability.
Industry leaders describe the trend as the beginning of a long-term recalibration rather than a temporary spike.
FX Stability: A Critical Turning Point
One of the biggest factors behind the sector’s revival is improved transparency and stability in the foreign exchange market. The Central Bank of Nigeria’s FX reforms, including the reduction of intervention windows and efforts to unify rates, have allowed manufacturers to better predict import costs and plan procurement cycles.
In previous years, unpredictable FX access created severe bottlenecks. Companies often waited months for Form M approvals or faced huge cost disparities between official and parallel market rates. Many were forced to cut production, lay off workers, or shut down completely.
Now, with improved liquidity and greater clarity, firms say they have regained confidence in placing forward orders for machinery, spare parts, and essential inputs. The recovery remains fragile, but executives note that even marginal FX stability makes long-term investment more feasible.
Local Sourcing Is Transforming the Industrial Ecosystem
A major structural shift is underway as manufacturers increasingly turn to domestic suppliers. For instance, confectionery and beverage producers are purchasing more locally grown starch, sorghum, and cassava derivatives to replace imported alternatives. The packaging industry is sourcing more resin and paper products from Nigerian plants. Cosmetics and household goods manufacturers are contracting local chemical producers for essential inputs.
This shift in procurement has produced two outcomes:
- Lower exposure to FX volatility
- Stronger linkages across local value chains
Economists say these linkages are critical for Nigeria’s long-term industrialization. When factories depend on local feedstock instead of imports, the entire economy benefits through job creation, technology transfer, logistics expansion, and sectoral resilience.
Investment Flows Returning to the Sector
For the first time in years, manufacturers are reporting new capital investments in plant upgrades, automation, and product line expansions. Several multinational companies in the food and beverage sector have announced new infusion lines, packaging facilities, and expansion of distribution networks.
Similarly, indigenous producers particularly in pharmaceuticals and building materials are upgrading their facilities to comply with global standards and expand export capacity to West African markets.
The Nigeria Export Processing Zones Authority (NEPZA) notes increased inquiries from foreign investors seeking to set up manufacturing operations within free trade zones to take advantage of tax incentives and ease of doing business reforms. Analysts say geopolitical tensions pushing global firms to diversify supply chains away from Asia could also create a window for Nigeria, provided infrastructure constraints are addressed.
Persistent Obstacles Remain
Despite the positive trend, manufacturers warn that systemic issues could slow momentum if not addressed promptly. Among the most pressing challenges are:
1. Energy Costs
Electricity supply remains erratic in many industrial hubs. While companies have invested heavily in alternative power, the high cost of diesel and gas continues to squeeze margins.
2. High Interest Rates
Commercial lending rates above 25% make it difficult for manufacturers to access funds for expansion. Development finance institutions play a role, but not enough to close the credit gap.
3. Logistics Bottlenecks
Port congestion, road deterioration, and high haulage costs weaken competitiveness, particularly for export-oriented manufacturers.
4. Tax Multiplicity
Manufacturers frequently cite overlapping federal, state, and local government taxes as a major burden. Efforts to streamline compliance are ongoing but slow.
5. Inflationary Pressures
Although inflation has begun to moderate, persistent rises in food and transport costs continue to affect consumer purchasing power.
Stakeholder Perspectives
MAN President Francis Meshioye emphasized that Nigeria’s manufacturing revival must be consolidated through consistent policies, investment in industrial parks, and aggressive reform of electricity tariffs. He noted that while progress is being made, the sector needs greater fiscal support to compete internationally.
Economist Ifeoma Ibekwe adds that the manufacturing resurgence is not accidental but a response to necessity: “Manufacturers were forced to redesign their supply chains because import dependence became too risky. That necessity is now fostering innovation and new partnerships.”
The Federal Ministry of Industry, Trade, and Investment has reiterated its commitment to supporting manufacturers through targeted interventions in export incentives, SME financing, and industrial cluster development.
Looking Ahead: Is Nigeria Entering a Manufacturing Renaissance?
Experts believe Nigeria may be at the threshold of a manufacturing renaissance, but warn that the trajectory will depend on policy continuity, infrastructure upgrades, and sustained macroeconomic stability.
Key indicators to monitor over the next 12 months include:
- FX market liquidity
- Energy supply reliability
- Inflation and interest rate movement
- Capital investment trends
- Export performance
- Consumer demand recovery
If these variables remain stable, Nigeria’s industrial sector could contribute significantly to GDP growth, job creation, and economic diversification.
