Segun Ajayi-Kadir, Director General,The Manufacturers Association of Nigeria (MAN)
Manufacturers in Nigeria have delivered a sobering assessment of the country’s economic reforms, revealing that while the policies may have laid the foundation for long-term economic restructuring, they have also imposed severe short-term costs on the industrial sector, weakening competitiveness, shrinking production capacity and threatening thousands of jobs.
In a statement signed by Segun Ajayi-Kadir, Director General of the Manufacturers Association of Nigeria (MAN), the association described the last three years as a period of “difficult but consequential economic transition,” marked by sweeping reforms aimed at correcting structural distortions and restoring macroeconomic stability.
According to MAN, manufacturers have borne a disproportionate share of the adjustment burden arising from the removal of fuel subsidies, foreign exchange liberalisation, electricity tariff hikes and tight monetary policies.
Production Costs Soar as Reforms Bite
The association noted that the immediate removal of fuel subsidy in May 2023 triggered a dramatic surge in logistics and distribution expenses, with transportation costs rising by more than 300 percent within weeks.
The situation worsened following the increase in electricity tariffs for Band A consumers from about ₦68 per kilowatt-hour to between ₦209 and ₦225 per kilowatt-hour. Despite the sharp increase in tariffs, electricity supply remained unreliable due to recurring grid collapses and system failures.
As a result, manufacturers increasingly relied on self-generated power through diesel, gas and petrol-powered alternatives to keep factories operational.
Data released by MAN showed that spending on alternative energy rose from ₦781.68 billion in 2023 to ₦1.11 trillion in 2024 before climbing further to ₦1.34 trillion in 2025.
The escalating energy burden significantly eroded industrial competitiveness and reduced production efficiency across the sector.
Capacity Utilisation Falls, Jobs Lost
The mounting cost pressures translated directly into lower factory output.
Manufacturing capacity utilisation declined from 61.3 percent in the first half of 2025 to 57.7 percent in the second half of the year, reflecting the growing challenges facing industrial operators.
The sector also recorded substantial employment losses, with more than 18,900 jobs affected during the review period as companies struggled to remain viable amid rising operational costs.
Industry observers warn that continued declines in capacity utilisation could undermine Nigeria’s ambitions to diversify its economy away from crude oil dependence and expand domestic production.
Naira Depreciation Doubles Cost of Imported Inputs
MAN acknowledged that foreign exchange market liberalisation was intended to improve transparency and eliminate distortions. However, the rapid depreciation of the naira significantly increased production costs for manufacturers dependent on imported raw materials and machinery.
The exchange rate moved from approximately ₦463 per dollar in June 2023 to ₦899 by December 2023 and further weakened to about ₦1,535 per dollar by December 2024.
Consequently, the cost of imported industrial inputs surged from ₦3.04 trillion in 2023 to ₦6.64 trillion in 2024, representing a 118 percent increase.
The impact was equally evident in manufacturing value-added output, which dropped sharply from $45.2 billion in 2023 to $21.84 billion in 2024.
Although the introduction of the Electronic Foreign Exchange Matching System improved transparency within the market, manufacturers said access to foreign exchange remains inadequate, with less than half of industrial demand reportedly being met through official channels.
High Interest Rates Choke Industrial Expansion
The association further identified Nigeria’s tight monetary policy environment as a major obstacle to industrial growth.
In response to inflationary pressures, monetary authorities implemented multiple increases in the Monetary Policy Rate between 2023 and 2024 while scaling back direct credit intervention programmes.
While the measures were designed to stabilise prices and strengthen economic fundamentals, they also drove borrowing costs to levels many manufacturers consider unsustainable.
As of March 2026, prime lending rates averaged 24.4 percent, while maximum lending rates reached as high as 33.8 percent in several commercial banks.
According to MAN, these financing conditions have made long-term industrial investment increasingly difficult and commercially unattractive.
The consequence has been a contraction in manufacturing sector credit, which declined from ₦10.88 trillion in February 2024 to ₦6.6 trillion by December 2025.
Customs and Trade Challenges Deepen Pressure
Manufacturers also highlighted challenges arising from exchange-rate-linked customs duty assessments.
Frequent fluctuations in customs valuation complicated pricing decisions and disrupted business planning for firms importing machinery and essential industrial inputs.
Between 2024 and 2025, the Nigeria Customs Service phased out the Fast Track Scheme in favour of the stricter Authorized Economic Operator programme.
While daily adjustments in customs exchange rates increased uncertainty, MAN acknowledged that the full implementation of the AEO framework in early 2025 provided operational benefits for compliant manufacturers through faster cargo clearance and preferential treatment at ports.
Bright Spots Emerge Amid Difficult Transition
Despite the challenges, the association identified several policy initiatives that could support industrial recovery and strengthen long-term competitiveness.
Among them is the Naira-for-Crude initiative, which has helped reduce foreign exchange pressure in the downstream petrochemical and plastics value chain.
Manufacturers also welcomed fiscal incentives that zero-rated VAT and excise duties on pharmaceutical raw materials and medical devices, describing them as critical support measures for local pharmaceutical production.
The 2025 Tax Reform Act was singled out as another significant development capable of improving the investment climate.
Key provisions include withholding tax exemptions, expanded VAT deductibility on fixed assets and services, phased reductions in Companies Income Tax, research and development incentives, and fiscal relief measures for small and medium-sized manufacturers.
Similarly, efforts to harmonise levies across states were praised as a potential solution to the longstanding problem of multiple taxation.
Local Content Policies Offer Hope
MAN also expressed optimism about the implementation of the Nigeria Industrial Policy and the government’s renewed emphasis on local content procurement through the Nigeria First framework.
The association said these initiatives could significantly expand market opportunities for domestic manufacturers, deepen local value addition and accelerate industrial growth if consistently enforced across government institutions.
The launch of the National Single Window platform was also identified as a potentially transformative reform capable of simplifying trade procedures, reducing cargo clearance delays and improving supply chain efficiency.
Manufacturers Call for Shift from Stabilisation to Growth
While acknowledging that recent reforms have laid the groundwork for long-term economic restructuring, MAN stressed that Nigeria must now move from macroeconomic stabilisation to industrial recovery and expansion.
The association urged government to implement targeted measures that improve access to foreign exchange for productive sectors, provide concessionary financing for manufacturers, ensure reliable electricity supply and create a predictable trade policy environment.
“Nigeria cannot achieve sustainable economic prosperity without a strong manufacturing base,” the association stated.
According to MAN, the nation’s long-term resilience depends on its ability to produce competitively, create jobs locally, expand industrial value chains and strengthen domestic value addition.
The association concluded that the current reform programme still has the potential to deliver meaningful industrial transformation, but only if implementation becomes more coordinated, responsive to productive sectors and focused on eliminating the structural bottlenecks constraining manufacturing performance.
Manufacturers Association of Nigeria says recent economic reforms raised production costs, cut capacity utilisation, increased energy spending to ₦1.34 trillion and affected over 18,900 jobs despite long-term growth prospects.
Discover more from Ameh News
Subscribe to get the latest posts sent to your email.
