Nigeria charts new course to revive factories

Nigeria has launched a sweeping industrial policy aimed at restarting idle factories, boosting domestic manufacturing and positioning Africa’s largest economy as a competitive production hub in global supply chains.

Federal authorities say the framework is designed to tackle long-standing structural weaknesses that have undermined output, including erratic power supply, limited access to long-term finance, foreign exchange volatility and infrastructure gaps. Manufacturing accounts for less than 10 per cent of gross domestic product, a level economists argue is insufficient for a country of more than 220 million people seeking to diversify away from oil.

Officials describe the policy as a coordinated effort across ministries to revive moribund industrial clusters, promote value addition in priority sectors and deepen linkages between small enterprises and large manufacturers. Targeted industries include agro-processing, textiles and garments, petrochemicals, pharmaceuticals, automotive assembly and light engineering. The government also plans to strengthen special economic zones and industrial parks, offering fiscal incentives and streamlined regulation to attract domestic and foreign investment.

Nigeria’s push comes at a time of economic strain. Inflation has remained elevated following currency reforms and subsidy removals, squeezing consumer demand and raising input costs for producers. The naira’s depreciation has made imported machinery and raw materials more expensive, while electricity shortages continue to force factories to rely on diesel generators. According to manufacturers’ associations, capacity utilisation has fluctuated around the mid-50 per cent range, with many firms operating well below optimal levels.

The new industrial strategy seeks to address these constraints through a combination of financing mechanisms, trade policy adjustments and infrastructure commitments. Authorities have indicated that development finance institutions will expand concessional lending to manufacturers, particularly those investing in local raw material sourcing and technology upgrades. There are also proposals to harmonise tariffs to protect strategic sectors while ensuring compliance with regional trade obligations under the African Continental Free Trade Area.

Energy reform is central to the blueprint. Government officials have pledged to accelerate power sector investments, including transmission upgrades and support for captive and embedded generation within industrial zones. Analysts note that reliable electricity remains one of the most critical determinants of competitiveness, with energy costs in Nigeria significantly higher than in several peer economies.

The policy also emphasises backward integration, encouraging companies to source inputs locally rather than rely on imports. Agro-processing has been identified as a priority, given Nigeria’s vast agricultural base. By linking farmers to processors through contract farming and storage infrastructure, policymakers aim to reduce post-harvest losses and increase the share of processed goods in exports. Similar logic underpins plans to expand petrochemical and fertiliser production, leveraging the country’s natural gas reserves.

Business leaders have broadly welcomed the announcement, while cautioning that implementation will determine its success. Manufacturing executives argue that past initiatives have often faltered due to policy inconsistency and bureaucratic delays. They are calling for predictable regulation, transparent incentives and sustained dialogue between government and industry.

Economists say the stakes are high. With youth unemployment elevated and population growth outpacing job creation, industrial expansion is viewed as essential for absorbing labour and raising incomes. Comparative studies of emerging economies indicate that sustained growth in manufacturing output tends to generate spill-over effects across logistics, services and technology sectors. For Nigeria, diversifying export earnings beyond crude oil could also stabilise public finances and reduce vulnerability to global commodity price swings.

Foreign investors are watching developments closely. Nigeria remains one of Africa’s largest consumer markets, yet investment inflows have been uneven in recent years. Analysts note that clear industrial priorities, improved infrastructure and currency stability could enhance confidence. At the same time, concerns persist about security challenges in some regions and the broader macroeconomic environment.

Regional competition adds urgency to the reform effort. Countries such as Morocco, Egypt and South Africa have expanded manufacturing capabilities in automotive and pharmaceuticals, integrating into global supply chains. Within West Africa, Ghana and Côte d’Ivoire have attracted agro-processing investment through targeted incentives and improved logistics. Nigerian policymakers argue that with its scale, labour force and resource base, the country can compete effectively if bottlenecks are addressed.

Trade policy alignment will be another balancing act. While protective tariffs may shield nascent industries, excessive restrictions risk raising consumer prices and undermining regional integration commitments. Officials have signalled an intention to calibrate measures carefully, supporting domestic producers without isolating the economy.

Digital transformation features in the strategy as well. Authorities are encouraging manufacturers to adopt automation, data analytics and modern quality standards to improve productivity. Partnerships with universities and technical institutes are expected to expand vocational training, aiming to bridge skills gaps that have constrained higher-value production.