Manufacturing Sector’s Appeal Dims Amid Shrinking Investments
The manufacturing sector is losing foreign investments, as an 87 per cent gap in 27 months betrays an unattractive industry. Stakeholders say that only stable macroeconomic conditions can cause a rebound.
The gap between foreign capital inflows into Nigeria’s manufacturing sector and the national total has widened to alarming levels, deepening concerns about the sector’s attractiveness to investors.
An analysis of the National Bureau of Statistics capital importation data from 2023 to the first quarter of 2025 shows that manufacturing attracted $2.85bn in foreign investment over the 27 months, representing just 13.02 per cent of the $21.87bn total. This left a gap of 87 percentage points between manufacturing inflows and the national (total) figure.
Analysts, including the former president of the Chartered Institute of Bankers, Prof. Segun Ajibola said that the widening gap between the total capital imported and the productive/manufacturing sector’s share shows that “nothing much is happening in the manufacturing sector because of the perennial challenges.”
In 2023, manufacturing secured $1.29bn out of $3.91bn in total inflows, a 33.05 per cent share, leaving a 66.95 percentage point gap. By 2024, the sector recorded $1.43bn in inflows, but its share dropped to 11.57 per cent of the $12.32bn national total, expanding the gap to 88.43 percentage points.
The slide accelerated sharply in Q1 2025 when manufacturing received just $129.92m of the $5.64bn imported into the country, accounting for a meagre 2.30 per cent.
The figures indicate that while overall foreign investment into Nigeria surged in the period under review, inflows to manufacturing failed to keep pace, raising questions about investor sentiment toward the sector.
In separate virtual interviews, analysts explained that the gap can be narrowed by the Federal Government working to stabilise the macroeconomic conditions to improve purchasing power and addressing the infrastructural issues.
Manufacturing Remains Unattractive to Investors
The Manufacturers Association of Nigeria earlier in the year, in its MAN CEO’s Confidence Index report for the fourth quarter of 2024, confirmed that investment in the sector remains under pressure. MAN reported from its internal survey that manufacturing investment dipped 1.2 per cent in Q4 2024, following a 3.5 per cent contraction in the previous quarter.
The MCCI report, which analysed the effects of the macroeconomic environment on manufacturing, covered categories such as production and distribution costs, capacity utilisation, production volume, investment, employment, sales volume, and shipment costs.
On investment sentiment, MAN noted: “After summing up the percentage of ‘Neutral’ responses and ‘Declining’ responses, a total of 78.8 per cent of the respondents did not affirm that the macroeconomic environment had an increasing effect on investment in the fourth quarter of 2024.”
The former president of the Chartered Institute of Bankers, Prof. Segun Ajibola, said manufacturing’s unattractiveness to foreign investors stems from persistent structural challenges and competition from other sectors, notably banking.
He said that while the surge in capital flows to the banking sector is not ideal for industrial growth, investors are ultimately driven by safety and returns. “If they believe that the banking sector offers more competitive returns on investment and they feel safe there, nobody can help that,” he said.
Ajibola added that recapitalisation in the banking sector is also a major draw for investors.
He declared, “That sector is going through a lot of challenges, yes, but it may not be a beautiful bride at the moment because of the importation of raw materials, foreign exchange policies, inflation, power, security, and others. We may not see much more happening in manufacturing because of these perennial challenges. It has been an ongoing trend.”
The former CIBN president advised that a rebound in manufacturing investment can only occur “when the macroeconomic outlook is more stable and predictable for manufacturing concerns to operate profitably.” He stressed that unsold stock and weak demand further deter fresh inflows, adding, “It’s only when the macro becomes stable and investors can predict that they are safer that manufacturing can start regaining some form of investment.”
While acknowledging government efforts, Ajibola said global and domestic economic realities make the challenge difficult to address swiftly.
Reversing Headwinds in Hope for an Investment Rebound.
Director of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, attributed manufacturing’s struggles largely to structural impediments.
“The major headwinds currently from manufacturing are essentially issues you can describe as structural issues,” he noted.
He listed inadequate infrastructure, poor port facilities, high logistics costs, unreliable energy supply, and elevated energy costs as the key obstacles. He also identified high borrowing costs and exchange rate instability as significant deterrents to manufacturing competitiveness.
“To ensure that we have a rebound, we have to tackle these impediments,” Yusuf stressed. “We need better infrastructure support, a better power supply, better logistics, a much better credit environment, sustained exchange rate stability, and improvements in the logistics component of the port environment.”
Yusuf stressed that improving citizens’ purchasing power is critical for reviving manufacturing. “We often pride ourselves as the largest market on the continent, but unless the citizens have the purchasing power, that claim may be interrogated,” he said.
The economist argued that without stronger domestic demand, even well-produced goods will struggle to gain traction locally.
“These are the things I think we can do to stem the decline in manufacturing,” he added, noting that some sub-sectors are still performing fairly well despite the overall challenges.
A Persistent Investment Gap is Risky
Industry watchers caution that if manufacturing continues to lag in attracting foreign capital, Nigeria’s long-term industrialisation goals could be undermined. The sector, critical for job creation, export diversification, and economic resilience, risks becoming increasingly sidelined as investors favour sectors with lower risk profiles and faster returns.
Analysts agree that narrowing the investment gap will require a deliberate, multi-pronged approach, combining macroeconomic stability, infrastructure upgrades, credit reforms, and trade facilitation. They also highlight the need for consistent policy frameworks to assure investors of long-term stability.
Manufacturing is a key pillar of sustainable economic growth, but it needs an enabling environment. According to Ajibola, the timing of a recovery will depend on how quickly Nigeria can stabilise its economic fundamentals.
He remarked, “It’s not easy for anybody, but if the right conditions are created, manufacturing can once again become attractive to local and foreign investors.”