A plethora of challenges have continued to immerse gains and efforts by the Nigerian Manufacturing Sector that holds significant position to propel the National economy. YEMISI IZUORA, looks at the impact of these challenges and apparent weakness on the part of authorities to address them promptly
A discerning mind would ordinarily be agitated by the recent news that Kenya has displaced Nigeria as Africa’s fastest-growing private-sector economy.
This is according to new data from S&P Global, which showed that business conditions in the East African nation strengthened far more rapidly in November than in West Africa’s largest market.
The development marks the first clear shift in regional momentum this year and raises questions about the durability of Nigeria’s recovery as it heads into 2026.
According to the latest Purchasing Managers’ Index (PMI) surveys, Kenya’s surge to 55.0 in November is its highest reading in five years, surpassing Nigeria, which recorded a PMI of 53.6, and Uganda, which posted a PMI of 53.8.
A reading above 50 signals an improvement in private-sector conditions, while figures below the threshold indicate deterioration.
Economists say the new rankings should serve as a wake-up call for Nigerian policymakers, given the country’s long-held status as a bellwether for non-oil private-sector performance on the continent.
Perhaps, this is one of the reasons why Director General (DG) of the Manufacturers Association of Nigeria Ajayi-Kadir, promptly challenged a recently report by the Country’s Statistics Bureau.
The National Bureau of Statistics (NBS) in its recently report noted that the manufacturing sector generated N9.16tn in nominal terms in the third quarter of 2025.
Even though the report showed the sector grew at 1.25 per cent, stakeholders dismissed it as substantially reasonable arguing that the country’s 3.98 per cent Gross Domestic Product growth does not signal a robust advancement without a corresponding rise in industrial output.
The GDP data for the third quarter of 2025, as reported by the National Bureau of Statistics, show that manufacturing’s nominal contribution rose by 3.45 per cent from the N8.85tn recorded in Q3 2024. The manufacturing sector’s 13 subsectors/activities include food and beverages, cement, basic metals, plastics, textiles, and oil refining, among others.
Manufacturing, which is intended to be the engine that drives mass employment and inclusive prosperity, remains largely sluggish. The sector grew by only 1.25 per cent in Q3 2025 from 0.76 per cent in Q3 2024. Growth without productive capacity is sub-optimal and lacks inclusivity.”
Meanwhile, a quarter-on-quarter comparison showed that the sector’s real growth declined by 0.35 percentage points from 1.60 per cent in Q2 2025.
Any GDP growth without a corresponding elevation in manufacturing output does not portend a robust advancement.
The NBS figures indicate that eight manufacturing activities improved year-on-year, while five declined in their real growth rate. The subsectors that posted declines included Wood and Wood Products (1.64 per cent), Chemical and Pharmaceutical Products (3.75 per cent), Non-Metallic Products (1.51 per cent), Electrical and Electronics (1.17 per cent), and Other Manufacturing (1.45 per cent).
Among the eight improved subsectors, the NBS reported that Textile, Apparel and Footwear, and Pulp, Paper and Paper Products showed signs of recovery but remained in recession, contracting by 2.41 per cent and 1.07 per cent, respectively.
Food, Beverage, and Tobacco remained the biggest contributor, generating N3.08tn, while oil refining was the lowest in nominal contribution at N2.69bn, despite recording the highest real GDP growth rate of 19.42 per cent in Q3.
The MAN’s DG Ajayi-Kadir linked the sector’s fragility to “persistent structural pressures,” including prohibitive energy costs, limited access to foreign exchange, and crippling interest rates.
Ajayi-Kadir said manufacturers “continue to bear the brunt of unreliable power supply,” noting that the cost of alternative energy “surged by 67 per cent from N404.8bn in H2 2024 to N676.5bn in H1 2025.”
He stressed that foreign exchange liquidity remained inadequate, saying members accessed “only 51 per cent” of their forex needs from the official window, while borrowing at 37 per cent interest rates was “effectively a limiting factor for many SMEs.”
Ajayi-Kadir urged the Federal Government to take urgent steps to reposition the industry. He said, “We need a gradual and deliberate reduction in interest rates; swift disbursement of the N1tn Industrialisation Stabilisation Fund; and strict enforcement of the Nigeria-First Policy to strengthen local content and protect strategic industries.”
He argued that Nigeria “cannot build a resilient, competitive and job-creating economy while its manufacturing base struggles for survival,” insisting that “manufacturing must be prioritised, protected and deliberately powered to lead Nigeria’s economic transformation.”
The MAN DG acknowledged that sectors such as solid minerals and oil delivered the greatest improvements year-on-year. He listed Quarrying & Other Minerals (39.49 per cent), Coal Mining (57.96 per cent), Oil Refining (19.42 per cent), Metal Ore (59.11 per cent), and Financial Institutions (19.46 per cent) as the biggest contributors to the GDP rebound.
Ajayi-Kadir said these gains were partly driven by “the historic earmarking of an extra N1tn for the solid minerals sector, reforms in transparency and investment protection, and growing global demand for critical minerals.”
He also attributed oil-sector growth to “increased local refining by the Dangote Refinery and modular refineries, rising gas-processing capacity, and the rollout of CNG adoption.”
In his policy brief on the GDP figures, Director of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, described manufacturing as “still fragile and under pressure.”
Yusuf said, “Manufacturing expanded by 1.25 per cent, one of the weakest performances across major sectors. High energy and logistics costs, costly borrowing conditions, dependence on imported inputs, and smuggling continue to erode competitiveness.”
He noted that while the economy showed signs of recovery, “achieving higher, more inclusive and sustainable growth will require tackling long-standing structural constraints, especially in agriculture, manufacturing and trade.”
Energy Deficit And Cost Of Alternative Power Supply
The Nigerian manufacturers reportedly spent N676.6 billion in the first half of 2025 to source for alternative energy.
Annual spending figures have reached even higher levels, with manufacturers spending ₦1.11 trillion on alternative energy sources in 2024. This substantial expenditure, primarily on diesel, petrol, and generators, is driven by the nation’s unreliable and often unaffordable electricity supply from the national grid.
According MAN, members in H1, 2025 spent N676.6 billion on alternative energy, while in 2024, total annual expenditure reached ₦1.11 trillion, a 42 per cent jump from the previous year and in 2023, the total cost was N781.68 billion and in 2022, the cost was approximately N144.5 billion.
Subsequently, Inadequate power supply results in an estimated N10 trillion annual economic loss for the sector.
The high cost of energy accounts for a significant portion of the manufacturing industry’s operational expenses, forcing many businesses to invest in off-grid solutions like gas or low-pour fuel oil to ensure continuous production.
Oriental News Nigeria reports that while Nigeria remains firmly in growth territory, the pace of expansion among its regional peers suggests increasing competition for investment, market share, and supply-chain positioning.
Nigeria’s November reading reflects a continuation of the steady, if fragile, recovery that began in the second half of 2024.
Firms reported increased output, improved business sentiment, and a modest rise in new orders, particularly in services, food processing, and consumer goods.
But the expansion was not strong enough to match the sharper upturns recorded elsewhere on the continent. The PMI report identified persistent cost pressures, FX volatility, and high logistics expenses as factors that continue to cap Nigeria’s growth potential.
Companies’ input prices, especially for imported materials, fuel, and packaging, remained a major constraint. Although some firms increased staffing to meet rising workloads, employment growth slowed compared with earlier months, reflecting caution around long-term commitments amid unpredictable costs.
In contrast, firms in Kenya and Uganda benefited from softer price conditions, improved supplier delivery times, and a more stable cost environment, enabling them to accelerate output more rapidly.
Kenya’s jump from 52.5 in October to 55.0 in November was one of the steepest monthly improvements on the continent, driven by a sharp rise in new business volumes and a wave of successful product launches. Firms also reported stronger purchasing power among consumers, supported by easing inflation and steadier currency trends.
Improved supplier performance meant Kenyan companies faced shorter delivery times, allowing them to scale up production and rebuild inventories. The broader strength of these indicators created a momentum Nigeria simply could not match in November.
Uganda, the region’s second-best performer, also posted solid growth, helped by consistent demand across services and agriculture.
Analysts say Kenya’s rise should be viewed not as a one-off development but as part of a broader competitive realignment across East Africa, where medium-sized economies have been quietly strengthening business conditions despite global economic pressures.
For Nigeria, the implication is twofold. First, the non-oil economy remains resilient — but not exceptional. Second, investors comparing African markets may increasingly see faster-expanding economies as more attractive destinations, especially for consumer-facing and export-oriented industries.
Nigeria still retains significant advantages: a large domestic market, an expanding services base, and strong long-term demand fundamentals. However, without decisive progress on FX market stability, inflation control, and logistics reforms, the country risks falling further behind peers whose reforms are proving more immediately effective
Nigerian manufacturers face severe challenges, primarily poor infrastructure(especially power), economic instability (inflation, FX volatility, high rates), policy inconsistency, and intense import competition, leading to high production costs, reduced investment, and even factory closures as companies struggle with forex for raw materials and face a weak local market. These issues stem from systemic problems like weak financial management, outdated tech, and a lack of skilled labor, making it hard to compete globally and retain investment.
Unreliable power supply has forces manufacturers to spend heavily on generators up to 40 per cent of costs while poor transport adds to logistics woes.
High inflation, fluctuating exchange rates (weak Naira), and soaring interest rates drastically increase import costs for raw materials and reduce profit margins.
Inconsistent government policies, sudden tariff changes, and complex taxation disorient investors and discourage long-term planning.
Difficulty accessing affordable credit and managing foreign exchange (forex) liquidity paralyzes operations, with many losing money on uncleared forex obligations.
Cheap, often smuggled, foreign goods flood the market, undercutting local producers who face higher local costs.
Lagging adoption of Industry 4.0, high implementation costs, and a shortage of technically skilled workers hinder modernization and consumer spending power and a preference for foreign goods further depress sales.
This has resulted in hundreds of manufacturers shutting down or becoming distressed, with significant unsold inventory.
Foreign investors pull out, and local capital avoids the sector due to uncertainty.
High production costs make Nigerian goods uncompetitive both locally and internationally.