Nigeria’s manufacturing sector, a critical driver of economic growth, is facing mounting challenges that threaten its competitiveness, according to industry stakeholders. While unreliable power supply has long been a concern, experts argue that import dependency, foreign exchange (FX) risks, and the lack of local enterprise manufacturing are even more pressing issues.
Power: A Persistent but Secondary Challenge
Manufacturers across Nigeria, from machine shops to foundries, cite high energy costs and unreliable electricity as major hurdles. “Power is a foundational issue,” said Uche P Okoye, an industry observer. “Without it, we can’t accurately assess other problems.” The reliance on costly diesel generators inflates production costs, making Nigerian goods less competitive.
However, some stakeholders, like Kelvin, a manufacturing analyst, argue that power is not the sector’s biggest challenge. “Power is an indirect cost,” he said. “The real issue is the FX risk tied to importing semi-processed inputs, which heavily impacts the Cost of Goods Sold.”
Import Dependency and FX Risks
Nigeria’s consumer-focused manufacturing sector, which produces goods like food and household products, relies heavily on imported inputs such as steel, PVC, and chemicals. This dependency exposes manufacturers to FX volatility, driving up costs. Samuel Udeji, an entrepreneur, shared his experience: “I considered producing electrical knockout boxes but backed out after seeing the cost of importing light steel sheets.”
Stakeholders also highlighted Nigeria’s reliance on imported PVC, rubber, and steel products. “Why are we importing anything made from steel?” asked Bodunde Asafa, a manufacturing advocate. The consensus points to a glaring gap: the absence of local enterprise (B2B) manufacturing to supply these inputs domestically.
Ajaokuta: A Missed Opportunity
The dormant Ajaokuta Iron and Steel Company was repeatedly cited as a potential game-changer. “If Ajaokuta were functional, we wouldn’t need to import steel products,” Udeji noted. Reviving this facility could reduce FX pressure, lower production costs, and support both consumer and enterprise manufacturers. However, decades of delays have left Ajaokuta as a symbol of untapped potential.
Policy and Supply Chain Solutions
Stakeholders called on the Minister of Trade, Investment, and Industry to prioritize derisking supply chains and simplifying import economics. “This should be the minister’s forte,” Kelvin said, advocating for policies to incentivize local production and streamline logistics. Proposals include tax breaks for B2B manufacturers, targeted FX access for critical inputs, and the development of industrial clusters with reliable power and logistics.
A Call to Action
To unlock Nigeria’s manufacturing potential, experts urge a multi-pronged approach:
Power Investments: Expand grid capacity and renewable energy to ensure affordable electricity.
Local B2B Manufacturing: Support industries producing steel, plastics, and chemicals to reduce import reliance.
Ajaokuta Revival: Fast-track efforts to operationalize the steel company through public-private partnerships.
Policy Reforms: Simplify regulations and offer incentives to boost local production.
As Nigeria seeks to strengthen its industrial base, addressing these challenges will be crucial to creating jobs, reducing poverty, and building a competitive manufacturing sector. The clock is ticking for policymakers and stakeholders to act.
