Nigeria’s Industrial Ambitions Stalled Amid Economic Headwinds — Despite 63 years since gaining its independence, Nigeria continues to struggle with fostering a robust industrial sector due to a heavy reliance on imports and a rapidly devaluing currency.
For the first time ever, the Naira has slipped past the N1,000/$ mark on the parallel market, posing significant challenges for local manufacturers, some of whom have been compelled to cease operations while others operate sub-optimally.
Experts highlight that during the 1960s through to the early 1980s, a stronger Naira vis-à-vis the US dollar inadvertently promoted import dependency. This economic condition stifled the growth and development within the manufacturing sector, leading to a slowdown in industrialization efforts.
Furthermore, the currency’s instability has barred Nigeria, Africa’s largest economy, from effectively leveraging the African Continental Free Trade Area (AfCFTA) agreement initiated in 2019. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), pointed out that the once-strong Naira made imports easily accessible, fostering a dependency that became unsustainable once the currency weakened.
Yusuf stressed that a more sustainable approach would have been resource-based industrialization, where industries are developed based on available local resources, reducing the dependency on imports. This approach was sidelined during the 1970s oil boom, which brought a surge in dollars and increased imports.
“With the dwindling oil revenues, the country lost its inclination and culture towards industrialization, landing us in our current predicament,” lamented Yusuf.
Toye Folosho of the Manufacturers Association of Nigeria (MAN) shared that the Naira’s depreciation has not only eroded value for investors but also escalated production costs. He revealed that over 80% of raw materials and machinery, quoted in dollars, are imported, further straining the manufacturing sector.
Despite various policies introduced since 1960 aimed at reducing import dependence, generating employment, and conserving foreign exchange, lack of effective implementation and continuity has impeded the nation’s industrial progression. Data from the National Bureau of Statistics (NBS) indicates a slowdown in manufacturing sector growth, from 7.3% in 2010 to a mere 2.2% in Q2 2023.
As the Naira continues to lose value, industries heavily reliant on imports are facing the brunt of the economic downturn, with the country’s imports soaring by 678.1% between 2008 and 2022.
The inflation rate, too, has surged to a staggering 25.80% in August, marking an 18-year high. “The Naira’s dismal performance spells doom for the economy, deterring investors and leading to business closures,” said Femi Egbesola, National President of the Association of Small Business Owners of Nigeria.
Indeed, the economic landscape is grim as reflected by the decrease in registered manufacturing firms with MAN – from 4,850 in the early 1980s to just 2,000 in 2010. Over the past five years, more than 50 manufacturing companies have closed down, including major firms like Unilever and GlaxoSmithKline Consumer Nigeria, which recently announced their exits from the country.
Chinyere Almona, Director-General of Lagos Chamber of Commerce and Industry, warned that if this trend continues, the potential for economic growth will remain unrealized. She emphasized that this critical situation mirrors the nation’s poor standing in ease of doing business, a concern that has been repeatedly raised by the chamber.
The deteriorating economic conditions, marked by the rising petrol prices and Naira devaluation, are eroding the capital of several multinational companies, said Dele Oye, National President of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture.
In light of these challenges, Segun Kuti-George, National Vice President of the Nigerian Association of Small Scale Industrialists, urged the government to declare a state of emergency on the industrial sector. He advocated for immediate financial support to Micro, Small, and Medium Enterprises (MSMEs) to prevent further closures of local industries while foreign companies continue to thrive due to stronger support from their home countries.