N6.8trn manufacturing investment fails to lift weak demand

Nigeria’s manufacturing sector attracted about N6.8tn in investment over the past decade, but manufacturers are still struggling to sell their products as shrinking household incomes and rising business costs continue to suppress demand.

Data obtained from the Manufacturers Association of Nigeria (MAN) showed that annual investment in the sector increased from N489.6bn in 2015 to N1.33tn in 2025, indicating a significant rise in capital commitments despite the difficult business environment.

Investment remained relatively stable between 2016 and 2019, ranging from N489.44bn to N552.64bn annually, before plunging to N118.52bn in 2020 as the COVID-19 pandemic disrupted production, supply chains and economic activity.

The sector began recovering in 2021, when investment rose to N217.22bn, reaching N427.18bn in 2022 and N658.81bn in 2023. By 2025, the figure had more than doubled from the 2023 level to N1.33tn.

But increased capital inflows have not produced a corresponding improvement in consumer demand.

Manufacturers have been contending with high inflation, naira depreciation, expensive energy, costly raw materials and weak purchasing power, making it increasingly difficult for businesses to convert production into sales.

The pressure was reflected in manufacturers’ inventory, which rose from N1.04tn in the first half of 2025 to N1.07tn in the second half. The buildup suggests that companies were holding more finished products, raw materials and other stock amid challenges in moving goods into the market.

Although inflation eased considerably towards the end of 2025, after reaching 34.19 per cent in June 2024, manufacturers continued to face elevated operating expenses and subdued demand.

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said manufacturing remained fundamental to Nigeria’s economic development but argued that the country had yet to attain the industrial capacity required to reduce its dependence on imports and primary commodities.

“Industrialisation is the engine room of economic transformation. It creates quality jobs, deepens value addition, strengthens export competitiveness and reduces vulnerability to external shocks,” Yusuf said.

He noted that despite years of investment, Nigeria’s industrial performance remained modest.

The scale of investment also appears smaller when converted to dollars because of the depreciation of the naira. The N6.8tn accumulated over 10 years is estimated at about $5.2bn at the prevailing exchange rate, far below the level of annual manufacturing capital formation recorded in some comparable economies.

For instance, data from the South African Reserve Bank showed that manufacturers in South Africa recorded about $59.3bn in capital formation in 2025 alone.

The difficult operating environment has also resulted in factory closures.

More than 100 manufacturing companies have reportedly shut down over the past decade, including Surest Foam Limited, Mufex, Framan Industries, MZM Continental, Nipol Industries, Moak Industries and Stone Industries.

Operators have attributed the closures to unreliable electricity, limited access to affordable credit, inadequate infrastructure, high production costs, weak demand and frequent changes in government policies.

For some businesses, electricity costs and supply problems have been decisive.

Ndubuisi Okoli, General Manager of Louis Carter Industries, a plastics manufacturing company that has become moribund, said inadequate electricity from the Enugu Electricity Distribution Company contributed significantly to its inability to remain operational.

“The Enugu Electricity Distribution Company was not providing us with adequate power. That was our major reason for going under,” he said.

A similar experience was reported by Olatunde Akintunde, Chief Executive Officer of Moak Enterprises, who said his bottled-water business became unsustainable after the cost of raw materials increased fourfold.

“It was difficult for us because the cost of our raw materials increased fourfold, leading to high cost of production. The business was no longer sustainable, so we had to go,” Akintunde said.

Financing remains a challenge

Access to capital is another major obstacle confronting manufacturers seeking to expand production.

MAN data showed that manufacturers’ bank loans declined by 23 per cent to N6.6tn in 2025, restricting access to the long-term financing needed for investment and capacity expansion.

At the same time, companies spent N1.34tn on alternative electricity in 2025, compared with N1.1tn in the previous year, highlighting the growing cost of keeping factories running.

MAN Director-General, Segun Ajayi-Kadir, has also raised concerns about taxation, particularly following the implementation of four new tax laws in January 2026.

He said the changes had triggered renewed discussions between manufacturers and government over the need for taxation to promote productivity rather than impose additional pressure on businesses.

Ajayi-Kadir has previously identified energy costs, inadequate infrastructure and limited access to credit among the major constraints facing the sector.

Yusuf said the government needed to focus not only on attracting manufacturing investment but also on ensuring that businesses could operate profitably once they had invested.

He called for reforms in the power sector to guarantee reliable and affordable electricity, as well as accelerated development of rail infrastructure to bring down the cost of moving raw materials and finished goods.

The private-sector expert also advocated stronger development finance institutions capable of providing long-term industrial funding at concessionary rates.

He urged government agencies to prioritise locally manufactured products in public procurement and strengthen enforcement of local-content policies.

Yusuf further called for improved security across the country, noting that insecurity disrupts access to raw materials, restricts market expansion and threatens manufacturing value chains.

The challenge for Nigeria, he said, is therefore no longer simply attracting investment into factories, but creating an environment where those investments can translate into sustained production, sales, jobs and industrial growth.