Reforms fail to lift Nigeria’s manufacturing beyond 9% GDP in 10 years

Nigeria’s manufacturing sector has remained trapped in single-digit contribution to the nation’s Gross Domestic Product (GDP) over the past decade, losing ground to peers including South Africa, Morocco, Egypt, and Ghana despite successive policy reforms aimed at accelerating industrialisation.

The 2023 removal of the petrol subsidy aimed to unlock public funds for investment, but instead drove up operating costs for industrial players. Combined with the recently launched National Industrial Policy (2025–2030), which aims for a 20–25 percent GDP contribution by 2030, the sector’s failure to cross the 10 percent threshold highlights a disconnect between policy goals and real-world implementation.

Data compiled from the National Bureau of Statistics (NBS) and the World Bank showed that manufacturing contributed 9.43 percent to GDP in 2015 but declined to 8.05 percent a decade later, highlighting what industry experts have described as a “lost decade” for Nigeria’s industrial sector.

Experts explained that the sector recorded 8.68 percent during the 2016 economic recession before recovering to 9.65 percent in 2018, its highest contribution within the decade. However, the gains proved short-lived as manufacturing slipped to 9.10 percent in 2019 and further dropped to 8.08 percent in 2020, following disruptions caused by the COVID-19 pandemic.

Although the sector posted modest improvements to 8.82 percent in 2021, 9.14 percent in 2022 and 9.27 percent in 2023, it resumed its downward trend, falling to 8.66 percent in 2024 before declining further to 8.05 percent in 2025.

Industry stakeholders say that unless structural challenges, including erratic power supply, high interest rates and policy inconsistency, are addressed, Nigeria may struggle to break out of the prolonged cycle of industrial stagnation and achieve its ambition of becoming Africa’s leading manufacturing hub.

Dele Kelvin Oye, chairman of the Alliance for Economic Research and Ethics Ltd/GTE, described the sector’s performance as evidence of a prolonged period of industrial stagnation.

According to him, while manufacturing was once a major pillar of Nigeria’s economic diversification strategy, its contribution to GDP has remained stuck between 8 and 9 per cent over the last decade, despite the country’s growing population and expanding consumer market.

He said the country’s industrial base has steadily weakened over the past three decades, noting that manufacturing contributed more than 20 per cent to GDP in the early 1990s before sliding into its current state.

“The manufacturing sector has been caught in a persistent ‘9 percent trap’, operating far below its potential and failing to keep pace with the country’s demographic expansion

“Nigeria’s manufacturing sector has long been considered a vital engine for economic diversification, job creation, and sustainable development. However, an analysis of the sector’s performance over the last decade reveals a troubling trajectory of stagnation and structural weakness.

“Despite its vast potential and a rapidly growing population, Nigeria has experienced what can only be described as a “lost decade” in industrialization, with the sector’s contribution to the national economy remaining stubbornly low,” Oye said.

He noted that the sector’s performance remains heavily concentrated in the food, beverage and tobacco subsector, making manufacturing vulnerable to supply chain disruptions, foreign exchange volatility and declining consumer purchasing power.

Oye also pointed to low capacity utilisation, persistent electricity shortages, poor transport infrastructure, multiple taxation and dependence on imported raw materials as major constraints limiting industrial growth.

Comparatively, Nigeria lags behind several African economies, according to the World Bank Development Indicators for 2024, with Morocco recording a manufacturing value added of 15.27 percent of GDP, Egypt 13.89 percent, South Africa 12.80 percent and Ghana 9.84 percent.

“When placed in a continental context, Nigeria’s industrial stagnation becomes even more apparent. As Africa’s most populous country, Nigeria’s manufacturing base is proportionately smaller than many of its peers. According to recent World Bank data, Nigeria’s manufacturing value added at 8.65 percent of GDP lags behind Morocco (15.27 percent), Egypt (13.89 percent), South Africa (12.80 percent), and even Ghana (9.84 percent)

“This disparity poses a significant sovereignty risk; a nation of over 230 million people that cannot manufacture what it consumes remains perpetually vulnerable to external economic shocks,” he noted

He, however, expressed optimism over the federal government’s recently introduced National Industrial Policy (NIP), which targets increasing manufacturing’s contribution to GDP to between 20 and 25 per cent by 2030.

According to him, achieving the target would require massive investments in infrastructure, stable industrial policies, improved access to finance and the elimination of structural bottlenecks affecting manufacturers.

Similarly, Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise (CPPE), said the manufacturing sector’s contribution to GDP has hovered between nine and 10 per cent throughout Nigeria’s democratic era, reflecting limited progress in industrial development.

He described industrialisation as the engine of economic transformation, stressing that a strong manufacturing base is critical for job creation, value addition, export competitiveness and reducing dependence on imports.

“The sector’s contribution to GDP has hovered around nine to 10 per cent for most of the period, underscoring the absence of a decisive industrial transformation despite successive policy pronouncements and reform initiatives,” Yusuf said.

He identified the collapse of Nigeria’s public refineries as one of the clearest examples of industrial decline, blaming poor governance, policy failures, weak accountability and entrenched rent-seeking practices.

According to him, similar declines have occurred in the textile, tyre, battery and automobile assembly industries, resulting in factory closures, job losses and increased dependence on imported products.

He identified inadequate electricity supply, poor logistics infrastructure, expensive financing, policy inconsistency, smuggling and growing import competition as major factors undermining manufacturing competitiveness.

“No manufacturing economy can achieve global competitiveness when power is unreliable, logistics are inefficient and capital is prohibitively expensive,” Yusuf argued.

To reverse the trend, Yusuf urged the government to accelerate power sector reforms, expand rail infrastructure, strengthen development finance institutions, provide concessionary long-term funding for manufacturers and enforce local content policies while prioritising locally manufactured products in public procurement. (BusinessDay)