Manufacturers invest N6.8tn as weak customer demand bites

Investors pumped about N6.8tn into Nigeria’s manufacturing sector over the past decade, but the increase in capital coincided with an erosion in consumers’ purchasing power, limiting demand for locally produced goods.

Exclusive data obtained from the Manufacturers Association of Nigeria showed that annual manufacturing investment rose from N489.6bn in 2015 to N1.33tn in 2025, reflecting increased capital commitments to the sector despite a challenging operating environment.

The data showed that investors put N489.44bn into manufacturing in 2016, N508.98bn in 2017, N552.64bn in 2018 and N496.11bn in 2019. Investment dropped dramatically to N118.52bn in 2020 as the COVID-19 pandemic disrupted economic activities, supply chains and business operations. The sector recovered to N217.22bn in 2021 before rising to N427.18bn in 2022.

The recovery gathered pace in 2023, with manufacturing investment climbing to N658.81bn as economic activities strengthened. By 2025, annual investment had more than doubled from the 2023 level to N1.33tn.

However, the increase in investment has not translated into a corresponding expansion in consumer demand, as high inflation, currency depreciation and rising production costs have squeezed household incomes.

Inflation rose from 13.22 per cent in 2020 to 28.92 per cent in 2023 following the removal of the petrol subsidy and foreign exchange reforms. Headline inflation subsequently reached a 28-year high of 34.19 per cent in June 2024 and remained above 30 per cent for much of the year before easing to 15.15 per cent by December 2025.

Despite the decline in inflation, manufacturers continued to face weak consumer demand and elevated operating costs. Manufacturers’ inventory increased to N1.07tn in the second half of 2025 from N1.04tn in the first half, suggesting that businesses continued to contend with the challenge of converting production into sales.

Inventory in manufacturing represents finished goods, raw materials and other items held by companies for production or future sales.

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said Nigeria’s industrialisation drive remained critical to economic transformation but warned that the country had yet to achieve the level of industrial development required to significantly reduce its dependence on primary commodities and imports.

“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, however, noted that Nigeria had delivered only modest industrial outcomes despite years of investment.

Although the N6.8tn invested in Nigerian manufacturing over 10 years appears substantial in naira terms, currency depreciation significantly reduces its value when measured in dollars.

The total investment is equivalent to roughly $5.2bn at the current exchange rate, highlighting the relatively small scale of capital formation in Nigeria’s manufacturing sector compared with larger industrial economies.

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

Rising costs

More than 100 manufacturing companies have shut down over the past decade, with firms such as Surest Foam Limited, Mufex, Framan Industries, MZM Continental, Nipol Industries, Moak Industries and Stone Industries among those that have ceased operations.

Manufacturers have blamed a combination of unreliable electricity, limited access to credit, poor infrastructure, weak consumer demand, high production costs and frequent policy changes. For some investors, energy costs have proved particularly damaging.

The General Manager of Louis Carter Industries, a plastics manufacturing company that has since become moribund, Ndubuisi Okoli, said inadequate electricity supply contributed significantly to the company’s collapse.

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

Similarly, the Chief Executive Officer of Moak Enterprises, Olatunde Akintunde, said the high raw material costs contributed to the closure of his bottled-water business in 2021. According to him, the cost of raw materials increased fourfold, pushing production costs beyond sustainable levels.

“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.

Credit squeeze

Despite improvements in the foreign exchange market following reforms by the Central Bank of Nigeria, manufacturers continue to grapple with other structural constraints.

MAN data showed that manufacturers’ bank loans fell by 23 per cent to N6.6tn in 2025, limiting access to the long-term financing required to expand productive capacity.

At the same time, manufacturers spent N1.34tn on alternative electricity in 2025, up from N1.1tn a year earlier.

The Director-General of MAN, Segun Ajayi-Kadir, also identified taxation as an emerging concern for manufacturers, particularly following the implementation of four new tax laws from January 2026.

He said the reforms had intensified discussions between the government and private sector over whether taxation should support productivity or add to the burden on businesses.

Ajayi-Kadir had previously highlighted high energy costs, poor access to credit and infrastructure deficiencies as major constraints on manufacturing.

What investors need

Yusuf said Nigeria must move beyond attracting capital into manufacturing and create conditions that allow investors to operate profitably and competitively.

He called for power sector reforms capable of delivering reliable and affordable electricity, alongside faster investment in rail infrastructure to reduce logistics costs.

He also urged the government to strengthen development finance institutions so they can provide long-term industrial financing at concessionary rates.

According to him, government procurement should give greater priority to locally manufactured goods, while executive orders on local content should be backed by enforceable measures.

He further called for urgent action on insecurity, warning that attacks and disruptions were limiting access to raw materials, restricting market expansion and undermining investors’ confidence across manufacturing value chains.(Punch)