Nigeria’s manufacturing sector is facing one of its toughest periods in recent years as soaring production costs, expensive energy, and high borrowing rates continue to threaten business survival. Despite slight improvements in overall economic activity, industry experts warn that manufacturers remain under immense pressure, with many struggling to stay afloat. Analysts say meaningful recovery will remain out of reach unless the government urgently addresses the rising cost of doing business.
According to the latest Purchasing Managers’ Index (PMI) tracked by Nairametrics, the Manufacturing PMI rose marginally to 50.10 in June from 49.6 in May. While the figure suggests a slight improvement, many manufacturers continue to report declining output, weaker production activity, and fewer new orders. The sector’s momentum has slowed significantly after recording strong growth earlier in the year, raising fresh concerns about the future of Nigeria’s industrial economy.
Industry leaders point to escalating production costs as the biggest challenge. Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, explained that rising diesel, gas, and other energy prices have sharply increased operating expenses for manufacturers. He also noted that persistently high interest rates have made access to affordable financing increasingly difficult, limiting business expansion even as foreign exchange availability has improved. Similarly, President of the Association of Food and Agro-allied Processors of Nigeria, Kuteyi Duro, warned that increasing fuel prices, expensive raw materials, and multiple government taxes are squeezing manufacturers’ profit margins and forcing some companies to consider shutting down.
Although Nigeria’s headline inflation eased slightly to 15.91% in June and foreign exchange reserves climbed above $52 billion, economists say these improvements have not translated into lower operating costs for businesses. The Central Bank of Nigeria’s decision to retain the Monetary Policy Rate at 26.5% continues to keep borrowing costs high, discouraging investment across the manufacturing sector. While manufacturing contributed 9.57% to Nigeria’s real Gross Domestic Product in the first quarter of 2026—an improvement from the previous quarter—experts believe the gains remain fragile as businesses continue to battle high transport costs, unreliable power supply, multiple regulatory charges, and weak consumer purchasing power.
Analysts believe Nigeria’s manufacturing sector can still recover, but only through targeted reforms that reduce production costs and improve the operating environment. Affordable credit, stable electricity, better infrastructure, incentives for local sourcing, and policies that strengthen household purchasing power are seen as critical to restoring confidence in the sector. Without these measures, manufacturers warn that production will remain under pressure, investment could slow further, and one of Nigeria’s largest employers may continue to struggle, with wider consequences for economic growth and non-oil exports.
source: nairametrics
