Nigeria’s Manufacturing Sector Evaluates Effects of Recent Economic Reforms
The Manufacturers Association of Nigeria (MAN) reports a challenging but pivotal period of economic transition, calling for targeted policy support to foster industrial growth
Nigeria’s manufacturing sector has endured a tumultuous yet transformative period over the past three years, as the government embarked on a series of macroeconomic reforms aimed at correcting long-standing structural issues within the economy. While these measures are recognised as necessary steps towards stabilisation and sustainable growth, industry leaders warn that the sector has borne a disproportionate share of the adjustment burden.
In a comprehensive assessment, the Manufacturers Association of Nigeria (MAN) highlights the profound changes that have reshaped the operating landscape for manufacturers, and the challenges that remain.
A Difficult but Necessary Transition
The report underscores the significant impact of policy shifts such as the removal of fuel subsidies, exchange rate liberalisation, electricity tariff adjustments, and a tightening monetary environment. These reforms, while aimed at stabilising the macroeconomy and restoring investor confidence, have also led to unprecedented increases in production costs.
“The immediate removal of fuel subsidy in May 2023 caused logistics and distribution costs to rise by over 300 percent within weeks,” said Segun Ajayi-Kadir, mni, Director General of MAN. “This pressure intensified further following the adjustment of electricity tariffs for Band A consumers from about ₦68 per kilowatt-hour to between ₦209 and ₦225. However, despite the significant tariff increase, electricity supply remained unstable due to persistent grid failures and system disruptions.”
Manufacturers have responded by increasingly relying on alternative energy sources such as diesel, gas, and premium motor spirit, with expenditure on these sources surging from ₦781.68 billion in 2023 to ₦1.11 trillion in 2024, and further rising to ₦1.34 trillion in 2025. This escalation has severely impacted industrial competitiveness, reflected in a decline in capacity utilisation from 61.3 percent in the first half of 2025 to 57.7 percent in the latter half. The sector also experienced job losses, with over 18,900 positions affected during this period.
Foreign Exchange and Monetary Policy Challenges
The liberalisation of Nigeria’s foreign exchange market aimed to eliminate distortions and improve transparency. However, the rapid depreciation of the naira has sharply increased the cost of imported inputs. The exchange rate moved from about ₦463 to the dollar in June 2023 to ₦899 by December 2023, and later to approximately ₦1,535 by December 2024.
Consequently, the cost of imported raw materials doubled from ₦3.04 trillion in 2023 to ₦6.64 trillion in 2024, a rise of approximately 118 percent. Manufacturing value-added also declined significantly, from $45.2 billion in 2023 to $21.84 billion in 2024. Despite the introduction of the Electronic Foreign Exchange Matching System to enhance transparency, access to foreign exchange remains limited, with less than half of the industrial demand currently being met through official channels.
The report highlights the impact of the tight monetary policy environment, which has further constrained growth. Multiple increases in the Monetary Policy Rate between 2023 and 2024 resulted in prime lending rates averaging 24.4 percent as of March 2026, with some banks offering rates as high as 33.8 percent. As a result, long-term industrial investments have become less attractive, and credit to the manufacturing sector declined from ₦10.88 trillion in February 2024 to ₦6.6 trillion in December 2025.
Operational and Policy Challenges
Manufacturers also face uncertainties arising from fluctuating import duty assessments, linked directly to foreign exchange volatility. Customs duty obligations often change in line with exchange rate movements, complicating business planning and increasing inflationary pressures on locally manufactured goods. The Nigeria Customs Service’s transition from the Fast Track Scheme to the more stringent Authorized Economic Operator (AEO) programme in early 2025 has introduced new operational dynamics, offering some relief for compliant manufacturers through faster cargo clearance.
Despite these challenges, the report notes several policy measures with long-term growth potential. The implementation of the Naira-for-Crude initiative has helped reduce foreign exchange pressures within the downstream petrochemical and plastics sectors. Similarly, zero-rating VAT and excise duties on pharmaceutical raw materials and medical devices have provided vital relief for local pharmaceutical manufacturers.
The 2025 Tax Reform Act also introduces key provisions, such as withholding tax exemptions, expanded VAT deductibility, phased reductions in Companies Income Tax, and fiscal incentives for small and medium enterprises. The ongoing harmonisation of levies across states is expected to further ease the tax burden on producers.
Strategic Policy Initiatives and the Road Ahead
The Nigeria Industrial Policy and the renewed emphasis on local content procurement through the Nigeria First framework are critical to strengthening domestic industrial capacity. If effectively implemented, these initiatives could improve market access, deepen local value addition, and stimulate industrial expansion.
Furthermore, the launch of the National Single Window platform offers a major opportunity to streamline trade procedures, reduce cargo clearance delays, and enhance supply chain efficiency—key drivers for industrial resilience.
A Call for Coordinated Action
In conclusion, Segun Ajayi-Kadir emphasised: “The reforms undertaken over the past three years have laid the groundwork for long-term economic restructuring. However, macroeconomic stabilisation must now transition into industrial recovery and growth. The sector requires a more coordinated policy environment that deliberately supports production, lowers the cost of doing business and improves industrial competitiveness.”
The MAN leader further urged government to prioritise targeted interventions that guarantee affordable access to foreign exchange for productive activities, concessionary financing for industrial investment, stable electricity supply and predictable trade policies. Nigeria’s long-term resilience, he stated, hinges on its capacity to produce competitively, create jobs locally and expand industrial value addition.