Manufacturing share falls to 7.72% as MAN demands urgent industrial reforms

Mercy Iheoma Ihedigbo

Manufacturers Association of Nigeria (MAN) has raised concerns over the quality and sustainability of Nigeria’s economic growth, saying the country’s 4.43 per cent real Gross Domestic Product (GDP) growth recorded in the second quarter of 2026 masks a worrying decline in industrial activity.

MAN, in its position on the National Bureau of Statistics (NBS) Q2 2026 GDP report, acknowledged that the headline growth rate increased from 3.89 per cent in the first quarter of 2026 and 4.23 per cent recorded in the corresponding quarter of 2025.

However, the association said a closer examination of the figures revealed a widening disconnect between headline macroeconomic growth and the performance of the real sector.

According to MAN, Services accounted for 56.62 per cent of GDP, while the broader industrial sector contributed 17.23 per cent.
The association expressed particular concern over the decline in industrial growth, which fell from 7.46 per cent in Q2 2025 to 3.96 per cent in Q2 2026.

It attributed the deterioration largely to the poor performance of the Electricity, Gas, Steam and Air Conditioning Supply subsector, which recorded a contraction of 10.63 per cent during the quarter.

MAN also noted a significant decline in manufacturing’s share of real GDP, from 9.57 per cent in Q1 2026 to 7.72 per cent in Q2, while real manufacturing growth marginally declined from 3.29 per cent to 3.24 per cent.

The association said the figures reflected the severe operating pressures confronting manufacturers, including high production costs, exchange-rate challenges, elevated interest rates and exorbitant electricity tariffs.

Manufacturing growth driven by limited segments

MAN said the performance of individual manufacturing subsectors showed a significant divergence, with growth concentrated largely in capital-intensive and heavy industrial activities.

Oil Refining recorded a 43.94 per cent growth, while Cement expanded by 12.75 per cent.

The association said the strong performance of oil refining demonstrated the potential benefits of domestic value addition and increased local refining capacity.

However, it warned that labour-intensive manufacturing subsectors continued to face serious challenges.

Textile, Apparel and Footwear, which accounts for 22.95 per cent of manufacturing real GDP, contracted by 1.23 per cent, while Motor Vehicles and Assembly declined by 1.02 per cent.

The largest manufacturing group, Food, Beverage and Tobacco, representing 36.58 per cent of manufacturing real GDP, recorded only 2.79 per cent growth.

MAN attributed the weak performance partly to declining consumer purchasing power and persistent food inflation.

The association warned that continued weakness in labour-intensive manufacturing could worsen unemployment and threaten wage employment, particularly among low- and middle-income Nigerians.

Services growth not enough

MAN also questioned the extent to which services-led growth can deliver sustainable economic transformation.

While Services and Trade accounted for significant portions of national economic activity, the association argued that growth in non-tradable services and consumption alone would not provide the productivity gains, export diversification and high-density employment required to absorb Nigeria’s growing labour force.

It warned that relying heavily on services and extraction while domestic productive capacity remains weak could leave the country vulnerable to external shocks and persistent foreign exchange pressures.

“Ultimately, headline GDP growth driven by non-tradable service activities will fail to strengthen foreign exchange reserves, reduce structural inflation, or create sustainable mass industrial jobs,” the association said.

MAN maintained that “a nation that trades and consumes what it does not produce builds prosperity on quicksand.”

Threat to jobs, inflation and naira

According to the manufacturers, the declining performance of key industrial subsectors has broader implications for the Nigerian economy.

The association warned that contraction in labour-intensive sectors such as textiles and vehicle assembly could result in job losses and weaken household incomes.

It also said slow growth in basic consumer-goods manufacturing, particularly Food and Beverages, could worsen supply-side constraints and contribute to persistent inflation.

On foreign exchange, MAN said Nigeria would remain vulnerable as long as the country lacked a sufficiently diversified, export-oriented manufacturing base.

The association further warned that high energy costs and prohibitive borrowing rates were forcing manufacturers, especially small and medium-sized enterprises, to operate below installed capacity.

Rather than investing in modern technology and expanding production, MAN said many factories were struggling merely to remain operational.

MAN demands industrial reforms

To reverse what it described as industrial erosion, MAN called for urgent government intervention in energy, financing, foreign exchange, industrial policy and local procurement.

On electricity, the association urged the Nigerian Electricity Regulatory Commission (NERC) to immediately approve Eligible Customer status for contiguous industrial clusters.

It said this would enable manufacturers to enter into direct bulk Power Purchase Agreements with Generation Companies and reduce dependence on Distribution Companies.

MAN also called for the establishment of a matching-grant facility through the Bank of Industry to support manufacturers investing in captive solar photovoltaic systems and battery storage.

On financing, the association proposed a dedicated credit guarantee scheme through the Ministry of Finance Incorporated and the Development Bank of Nigeria to reduce the risks associated with commercial lending to manufacturers and bring down interest rates.

It also recommended a prioritised and transparent foreign exchange clearance window within the official market for the importation of raw materials and capital machinery backed by Letters of Credit.

Local content, procurement

MAN further urged the government to enact the Nigeria Industrial Policy 2025 as an Act of Parliament to ensure that industrial targets and incentives are legally binding and protected from arbitrary policy reversals.

It proposed integrating the Bureau of Public Procurement portal with a local content registry to ensure compliance with a 60 per cent local procurement target by Ministries,

Departments and agencies

The association also called for a Local Patronage Compliance Act requiring government agencies to give Nigerian manufacturers the right of first refusal in public procurement.

It proposed that foreign purchases should require a temporary Certificate of Non-Availability issued through MAN and the Federal Ministry of Industry, Trade and Investment where equivalent locally manufactured products are available.
Sector-Specific Measures

For the automotive industry, MAN called for enforcement of the 10-year tax relief for local vehicle assembly under the Nigerian Automotive Industry Development Plan, alongside punitive import surcharges on fully built imported vehicles.

It also proposed zero-rated Value Added Tax and early-stage tax exemptions for traceable domestic farm-to-factory supply chains to reduce raw-material costs.

The association further recommended setting an annual threshold for imported goods in areas where Nigeria has limited domestic manufacturing capacity, allowing a three-year window for local assembly and an additional two years for transition to full-scale manufacturing.

MAN said the Q2 2026 GDP figures should serve as a warning that sustainable national prosperity cannot be achieved through service consumption and extraction alone.

It reaffirmed its readiness to work with the Federal Government to strengthen domestic manufacturing, reduce import dependence, expand productive capacity and build a more resilient Nigerian economy.