Despite policy reforms and isolated success stories, structural challenges continue to hold back industrial growth -Muda Yusuf…..
As Nigeria marks 26 years of uninterrupted democratic governance, concerns are mounting over the country’s inability to translate political stability into meaningful industrial transformation.
While democracy has ushered in economic reforms, private sector growth and increased investment opportunities, the manufacturing sector remains stuck in what experts describe as a low-growth cycle, contributing only about 9 to 10 percent of the nation’s Gross Domestic Product (GDP) over the past two decades.
This assessment was contained in a Democracy Day policy review by Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), who argued that Nigeria’s industrial ambitions have largely remained unrealised despite years of government interventions and policy promises.
According to Yusuf, industrialisation remains the backbone of economic transformation because it creates jobs, expands value addition, strengthens exports and reduces dependence on imports. However, he noted that Nigeria’s democratic journey has yet to deliver the level of industrial growth needed to drive sustainable prosperity.
Decline of Once-Thriving Industries
The economist pointed to the collapse of several strategic industries as evidence of the country’s industrial decline.
Among the most prominent examples, he said, is the deterioration of Nigeria’s state-owned refineries, which gradually became symbols of governance failures, weak accountability and policy mismanagement before eventually ceasing operations.
The challenges extend beyond the petroleum sector. Textile factories that once employed thousands of Nigerians have disappeared across several states, while tyre manufacturing, battery production and automobile assembly operations have either collapsed or significantly declined.
The result, Yusuf argued, is an economy that has become increasingly dependent on imported goods, including products that were once manufactured locally.
Bright Spots Amid the Challenges
Despite the setbacks, some sectors have demonstrated resilience and growth.
Nigeria’s cement industry remains one of the country’s most successful industrial success stories, while the food and beverage sector has continued to expand despite rising operating costs and economic uncertainties.
Yusuf also identified the Dangote Refinery as one of the most significant industrial investments in Nigeria’s recent history, describing it as a project capable of reshaping the country’s manufacturing and processing landscape.
However, he noted that many of these achievements were driven largely by private-sector determination rather than a supportive business environment.
“Several manufacturers have succeeded despite difficult operating conditions, not because those conditions were favourable,” he argued.
Power, Logistics and Cost of Finance Remain Major Obstacles
According to the CPPE chief, unreliable electricity remains one of the biggest barriers to industrial competitiveness.
Many manufacturers continue to depend on self-generated power, significantly increasing production costs and reducing profitability.
He also highlighted poor logistics infrastructure as a major challenge. Years of underinvestment in rail transportation have left manufacturers heavily dependent on road networks, increasing the cost of moving raw materials and finished products.
Access to affordable financing remains another critical concern.
With commercial lending rates often ranging between 25 and 30 percent, Yusuf said manufacturers face borrowing costs that make long-term industrial investment difficult and, in some cases, unsustainable.
“No country can build a globally competitive manufacturing sector with unreliable power, expensive logistics and prohibitively high financing costs,” he stated.
Policy Uncertainty and Import Pressure
The report further identified policy inconsistency as a major factor limiting industrial expansion.
Frequent shifts between protectionist and liberal economic policies have created uncertainty for investors and weakened long-term planning across the manufacturing sector.
At the same time, Nigerian manufacturers continue to compete with imported products from countries where production costs are lower and government support for industries is stronger.
Smuggling, Yusuf added, has compounded the problem by undermining tariff policies designed to protect local industries.
Signs of Progress
Despite the challenges, the economist acknowledged some recent policy gains.
He noted that improvements in foreign exchange market liquidity have eased one of the most severe constraints facing manufacturers following the forex crisis of 2022 and 2023.
The increased availability of foreign exchange has helped businesses access critical raw materials and industrial inputs needed for production.
Yusuf also commended the government’s fiscal measures, particularly import duty concessions on key manufacturing inputs, raw materials and industrial machinery.
According to him, the policy is helping reduce production costs, boost competitiveness and encourage investment within the sector.
The Road Ahead
Looking forward, Yusuf called for a new industrial strategy focused on competitiveness, infrastructure and policy consistency.
He urged the government to accelerate power sector reforms, expand rail infrastructure, improve access to long-term industrial financing and strengthen local content policies.
He also stressed the need to tackle insecurity, which continues to disrupt supply chains, limit access to raw materials and discourage investment in several parts of the country.
Beyond these measures, he advocated deeper investment in resource-based industrialisation and backward integration, arguing that Nigeria must focus on processing its abundant natural resources locally rather than exporting raw materials and importing finished products.
Manufacturing as the Foundation of Economic Sovereignty
For Yusuf, the lesson of Nigeria’s democratic experience is clear: meaningful economic transformation cannot occur without a strong manufacturing base.
He maintained that the country’s future prosperity depends on shifting from an economy driven largely by imports and consumption to one powered by production, industrial competitiveness and value addition.
“The future of economic prosperity lies not in what Nigeria imports, but in what Nigeria produces,” he said, adding that industrialisation remains essential to achieving sustainable growth, economic sovereignty and global competitiveness.
