Nigeria’s manufacturing challenge is not demand. It is cost
Industry leaders say Nigeria already has the market to become a manufacturing powerhouse. The bigger challenge is making locally produced goods competitive enough to win.
Nigeria does not have a shortage of customers. What it lacks, according to industry leaders, is the cost advantage needed to compete.
With a population of about 230 million people and duty-free access to the African Continental Free Trade Area (AfCFTA), which connects 1.4 billion consumers across the continent, the country’s manufacturers already have access to one of the world’s largest markets. Yet high production costs continue to limit their ability to compete with rivals from countries such as China and Vietnam.
That was the message from the Executive Secretary of the National Sugar Development Council (NSDC), Kamar Bakrin, who said Nigeria’s industrial future depends less on stimulating demand and more on reducing the cost of doing business.
Speaking at the 17th National Council on Industry, Trade and Investment in Enugu, Bakrin said Nigerian manufacturers pay between two and 10 times more than competitors for electricity, financing and logistics, making locally manufactured goods less competitive both within Nigeria and across Africa.
“The problem is not demand,” he said. “It is a cost-of-production problem, and that distinction matters because costs, unlike demand, are within our power to fix.”
He noted that industrial electricity costs about eight US cents per kilowatt-hour in Vietnam and around 10 US cents in China, compared with roughly 15 US cents on Nigeria’s national grid. The cost rises to nearly 30 US cents when manufacturers rely on diesel-powered generators because of unreliable electricity supply.
According to him, Nigerian manufacturers spent an estimated ₦1.34 trillion generating their own electricity last year, effectively forcing many factories to operate private power stations alongside their core businesses.
Bakrin said businesses also face working capital costs of between 27 and 35 percent, compared with about nine percent in Vietnam and three percent in China. In addition, goods spend between 18 and 21 days clearing Nigerian ports, adding to production costs and disrupting supply chains. Nigeria also ranks 88th out of 139 countries on the World Bank’s Logistics Performance Index, well behind Vietnam and China.
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The combined effect has reduced manufacturing’s contribution to Nigeria’s Gross Domestic Product to about eight percent, while capacity utilisation has fallen to 57.7 percent.
Despite the challenges, Bakrin argued that recent macroeconomic reforms have created a stronger foundation for industrial growth. He pointed to easing inflation and external reserves rising to US$51 billion, their highest level since 2009, as signs of improving economic stability at a time when global manufacturers are searching for new production locations.
He warned, however, that Nigeria must move quickly to take advantage of the opportunities created by AfCFTA or risk becoming a destination for goods produced elsewhere.
“Either our goods are crossing borders going out, or everyone else’s goods are crossing ours coming in. We are either going to compete, or we are going to concede the market,” he said.
To improve competitiveness, Bakrin proposed reducing electricity costs for industrial clusters to between eight and 10 US cents per kilowatt-hour, expanding access to single-digit industrial loans, cutting port clearance times to fewer than seven days and doubling worker productivity by 2030.
He also called on every state government to establish at least one industrial cluster with dedicated power, harmonise taxes and levies, eliminate informal checkpoints along industrial corridors and introduce annual rankings that measure each state’s industrial competitiveness.
To demonstrate that targeted industrial policies can deliver results, Bakrin cited Nigeria’s fertiliser industry. He noted that the country’s urea production capacity increased from about 500,000 tonnes in 2005 to 6.5 million tonnes, making Nigeria one of the world’s top 10 exporters of nitrogen fertiliser.
He attributed that growth to policies that treated natural gas as an industrial input rather than simply a source of government revenue, arguing that a similar approach could help transform other manufacturing sectors.
Bakrin also urged governments to tie incentives such as tax credits, subsidised electricity and procurement preferences to measurable production outcomes, rather than offering blanket support.
His remarks highlight a growing consensus among policymakers and industry leaders that Nigeria’s manufacturing challenge is no longer finding buyers. The country’s domestic market and continental trade opportunities already exist. The priority now is lowering production costs enough to ensure Nigerian-made goods can compete both at home and across Africa.
