Nigeria’s Factory Closure Risk Rises as Manufacturing Growth Slows

Manufacturers Association of Nigeria (MAN)

Nigeria faces renewed risks of factory closures as the Manufacturers Association of Nigeria (MAN) warns that slowing manufacturing growth, rising production costs and heavy dependence on imported goods are undermining domestic industrial activity.

/ You Might Also Like /

The association said Nigeria exported $1.65 billion worth of manufactured goods against imports valued at $21 billion, highlighting the gap between domestic production and demand for manufactured products.

MAN warned that the pressures confronting local manufacturers could trigger further company closures within the next six months, particularly in subsectors already experiencing contraction, unless the government introduces comprehensive and coordinated support measures.

The warning comes as Nigeria’s wider economy continues to expand, raising questions about whether headline growth is translating into stronger industrial production, job creation and investment.

Manufacturing Growth Slows Despite Wider Economic Expansion

Nigeria recorded real gross domestic product growth of 4.43 per cent in the second quarter of 2026. However, manufacturing and other industrial activities have struggled to maintain the pace of expansion needed to strengthen domestic production.

Industrial growth fell from 7.46 per cent in the second quarter of 2025 to 3.96 per cent in the corresponding period of 2026.

Manufacturing’s contribution to national output also declined to 7.72 per cent in the second quarter of 2026, compared with 9.57 per cent in the first quarter.

The figures highlight a structural challenge for an economy seeking to generate more employment, diversify exports and reduce dependence on imported products.

Economic growth driven largely by services does not necessarily translate into an equivalent expansion in factory output, domestic supply chains or industrial employment.

For manufacturers, the immediate concern is whether improving macroeconomic conditions will translate into lower operating costs, stronger consumer demand and more competitive production.

Imports Outpace Manufactured Exports

The disparity between manufactured imports and exports highlights the difficulty domestic producers face in supplying the Nigerian market and competing internationally.

Nigeria imported $21 billion worth of manufactured products while exporting just $1.65 billion, according to figures cited by MAN from the National Bureau of Statistics’ fourth-quarter 2025 trade data.

The association calculated the dollar values using the World Bank’s average exchange rate of ₦1,518.38 per dollar for 2025.

A large gap between imports and exports can reflect insufficient domestic production capacity, weak export competitiveness and dependence on foreign suppliers. It also means that a substantial share of spending on manufactured goods supports production outside Nigeria.

For local factories, competition from imports becomes more difficult when domestic producers face expensive electricity, high financing costs, foreign exchange exposure and costly logistics.

However, reducing imports alone would not guarantee industrial recovery. Manufacturers must also be able to produce goods at competitive prices, meet quality standards and deliver reliably to domestic and export markets.

Rising Costs and Weak Demand Pressure Factory Operations

MAN identified rising production costs and declining consumer purchasing power as major constraints on manufacturers.

When electricity, transportation, financing and raw materials become more expensive, producers must either absorb higher costs, increase prices or reduce output. Each option can weaken business performance.

Increasing prices can further reduce demand in a market where households are already struggling with the cost of essential goods and services. Cutting production, meanwhile, can reduce capacity utilisation and leave factories with higher inventories of unsold products.

These pressures can undermine companies’ ability to invest in machinery, expand facilities, hire workers and develop new products.

MAN also acknowledged the government’s efforts to manage inflation and public debt, which the association put at ₦159.35 trillion, with debt servicing consuming more than 60 per cent of government revenue.

The association nevertheless argued that economic stabilisation must translate into better conditions for businesses that produce goods, create jobs and supply domestic markets.

Textiles and Vehicle Assembly Face Additional Risks

MAN highlighted textiles and apparel, as well as motor vehicles and assembly, as subsectors experiencing contraction in the second quarter of 2026.

Textiles and apparel contracted by 1.23 per cent, while motor vehicles and assembly declined by 1.02 per cent.

The performance of these industries matters because they support employment and connect manufacturers with suppliers, distributors, retailers and other businesses.

A prolonged slowdown could affect workers directly through reduced shifts, retrenchments or factory closures. It could also weaken demand for locally sourced inputs and services, extending the impact beyond manufacturing plants.

The association said 767 manufacturing companies shut down operations in 2023, while another 335 became distressed. It warned that the underlying challenges had not been adequately addressed.

Although the figures relate to 2023, the latest warning suggests that manufacturers remain concerned about the sector’s ability to sustain operations under current conditions.

Manufacturing Stabilisation Fund Faces Implementation Test

MAN identified the proposed ₦1 trillion Manufacturing Stabilisation Fund among the policy initiatives that could help address the sector’s challenges.

The association also pointed to the Nigeria Tax Act and the Nigeria First policy, while cautioning that manufacturers need tangible improvements rather than policy announcements alone.

A stabilisation fund could support industrial activity depending on its eligibility requirements, financing terms, disbursement process and the businesses it ultimately reaches.

Access to affordable credit is particularly important for manufacturers that need working capital to purchase inputs, maintain equipment and meet operating expenses. However, financing support would have limited long-term impact if electricity, logistics and other structural costs remained prohibitive.

The effectiveness of the proposed fund will therefore depend on its implementation and its ability to address the constraints preventing viable businesses from expanding production.

Housing and Construction Could Feel the Wider Industrial Impact

Manufacturing weakness also matters to Nigeria’s housing and construction sectors because building activity depends on locally produced materials, industrial inputs and a network of suppliers.

Cement, steel products, roofing materials, pipes, electrical fittings and other construction inputs are linked to industrial production and distribution. Pressures on manufacturers can affect the availability and cost of materials, although the effect varies by product and market conditions.

Factory closures and job losses could also weaken household purchasing power, reducing the capacity of some families to save for homeownership, pay rent or finance property improvements.

At the same time, industrial expansion can support housing demand by creating jobs, strengthening incomes and attracting investment to areas where manufacturing and supply-chain businesses operate.

For housing developers, investors and policymakers, the wider concern is that weak industrial performance could constrain employment growth and add pressure to construction costs.

However, the extent of any effect on property prices and housing delivery will depend on individual material markets, labour costs, financing conditions and the performance of the broader economy.

Nigeria Needs Stronger Domestic Production and Export Capacity

MAN’s warning points to the need for policies that improve the competitiveness of local manufacturers rather than relying on import restrictions alone.

More reliable and affordable electricity, lower-cost financing, improved transport infrastructure, consistent regulation and stronger domestic supply chains could help factories raise output and compete more effectively.

The country also needs to expand the range and value of manufactured goods it exports. Access to regional markets could provide manufacturers with a larger customer base, support economies of scale and encourage investment in production capacity.

The association has expressed concern about trade agreements that lack clearly defined market-access arrangements and adequately negotiated tariff schedules. It argues that such agreements may deliver limited benefits if Nigerian manufacturers cannot compete effectively in the markets they are expected to enter.

Nigeria’s position within West Africa provides an opportunity to develop regional manufacturing value chains, but realising that opportunity will require competitive production, dependable logistics and consistent trade policies.

The immediate challenge is to prevent further industrial contraction while creating the conditions for sustainable expansion.

If production costs remain high and consumer demand stays weak, factory closures could deepen employment pressures and limit the benefits of wider economic growth. A recovery in manufacturing would depend on turning policy commitments into measurable improvements in production, investment, exports and job creation.

READ MORE