By Segun Ajayi-Kadir
The Manufacturers Association of Nigeria (MAN) views the past three years as a period of difficult but consequential economic transition. The administration embarked on substantive macroeconomic reforms intended to correct long-standing structural distortions within the economy and reposition the country for sustainable growth.
While we acknowledge the necessity of these reforms and commends the government’s resolve to confront entrenched economic inefficiencies, manufacturers have also borne a disproportionate share of the adjustment burden arising from the implementation and sequencing of these policies.
The combined impact of fuel subsidy removal, exchange rate liberalization, electricity tariff adjustments and tight monetary policy significantly altered the operating environment for manufacturers. Although these measures were designed to stabilize the macro-economy and restore investor confidence, they simultaneously triggered unprecedented increases in production costs across the industrial sector.
The immediate removal of fuel subsidy in May 2023 caused logistics and distribution costs to rise by over 300 percent within weeks. This pressure intensified further following the adjustment of electricity tariffs for Band A consumers from about ₦68 per kilowatt-hour to between ₦209 and ₦225 per kilowatt-hour. However, despite the significant tariff increase, electricity supply remained unstable due to persistent grid failures and system disruptions.
As a result, manufacturers continued to rely heavily on alternative energy sources such as diesel, gas and premium motor spirit to sustain operations. Expenditure on alternative energy surged from ₦781.68 billion in 2023 to ₦1.11 trillion in 2024 and further increased to ₦1.34 trillion in 2025. This development severely weakened industrial competitiveness and contributed to declining manufacturing capacity utilization, which dropped from 61.3 percent in the first half of 2025 to 57.7 per cent in the second half of the same year. The rising operational burden also contributed to significant job losses across the sector, with over 18,900 jobs affected during the review period.
The liberalization of the foreign exchange market also produced mixed outcomes for manufacturers. While the unification of exchange rate windows sought to improve transparency and eliminate market distortions, the rapid depreciation of the naira sharply increased the cost of imported industrial inputs. The exchange rate moved from about ₦463 to the dollar in June 2023 to ₦899 by December 2023 and later to approximately ₦1,535 by December 2024.
Consequently, the cost of imported raw materials rose from ₦3.04 trillion in 2023 to ₦6.64 trillion in 2024, representing an increase of about 118 percent. Manufacturing value-added also declined significantly from $45.2 billion in 2023 to $21.84 billion in 2024. Although the introduction of the Electronic Foreign Exchange Matching System improved transparency within the market, manufacturers still face inadequate access to foreign exchange at the official window, where less than half of industrial demand is currently met.
The tight monetary policy environment further constrained industrial expansion. In response to inflationary pressures, monetary authorities implemented multiple increases in the Monetary Policy Rate between 2023 and 2024 and scaled back its direct credit intervention programmes. Although these measures aimed to stabilize prices and strengthen macroeconomic fundamentals, borrowing costs for manufacturers became excessively high.
As of March 2026, prime lending rates averaged 24.4 percent, while maximum lending rates climbed to 33.8 percent in several commercial banks. Under such conditions, long-term industrial investment became increasingly difficult and commercially unattractive. Credit to the manufacturing sector consequently declined from ₦10.88 trillion in February 2024 to ₦6.6 trillion by December 2025.
The sector also faced uncertainty arising from fluctuating import duty assessments linked directly to exchange rate volatility. Manufacturers that imported essential machinery and raw materials struggled to maintain predictable pricing structures because customs duty obligations changed frequently in line with foreign exchange movements. This development complicated business planning and further increased inflationary pressure on locally manufactured products.
Additionally, between 2024 and 2025, the Nigeria Customs Service began phasing out the Fast Track Scheme in favour of the stricter Authorized Economic Operator programme. While the daily fluctuation of the customs exchange rate made corporate planning and pricing extremely difficult for manufacturers importing vital machinery and industrial inputs, the full rollout of the AEO programme in early 2025 provided some operational relief for highly compliant manufacturers through preferential treatment and faster cargo clearance processes at the ports.
Despite these challenges, the sector recognizes several recent policy measures that hold strong potential for industrial recovery and long-term growth. The implementation of the Naira-for-Crude initiative has helped reduce foreign exchange pressure within the downstream petrochemical and plastics value chain.
Similarly, fiscal measures that zero-rated VAT and excise duties on pharmaceutical raw materials and medical devices provided critical relief for local pharmaceutical manufacturers.
In addition, the 2025 Tax Reform Act introduced several important provisions capable of improving the industrial climate. These include withholding tax exemptions, expanded VAT deductibility on fixed assets and services, phased reductions in Companies Income Tax, tax incentives for research and development and fiscal relief measures for small and medium industries. The ongoing harmonization of levies across several states also offers hope for reducing the burden of multiple taxation on manufacturers.
The Nigeria Industrial Policy and the renewed emphasis on local content procurement through the Nigeria First framework equally represent important steps toward strengthening domestic industrial capacity. If properly implemented and consistently enforced across all government institutions, these initiatives could significantly improve market access for locally manufactured goods, deepen local value addition and stimulate industrial expansion. The launch of the National Single Window platform also presents a major opportunity to simplify trade procedures, reduce cargo clearance delays and improve supply chain efficiency for manufacturers.
Overall, MAN believe that the reforms undertaken over the past three years have laid the groundwork for long-term economic restructuring. However, macroeconomic stabilization must now transition into industrial recovery and growth. The sector requires a more coordinated policy environment that deliberately supports production, lowers the cost of doing business and improves industrial competitiveness. We therefore urge government to prioritize targeted interventions that guarantee affordable access to foreign exchange for productive activities, concessionary financing for industrial investment, stable electricity supply and predictable trade policies.
Nigeria cannot achieve sustainable economic prosperity without a strong manufacturing base. The country’s long-term resilience depends on its capacity to produce competitively, create jobs locally and expand industrial value addition. The current reforms can still deliver meaningful industrial transformation if implementation becomes more coordinated, more responsive to productive sectors and more focused on reducing the structural constraints limiting manufacturing performance.
Ajayi-Kadir, mni, is Director General, MAN
