Nigeria’s manufacturing sector is seeing a revolution. Investments in the industry increased by a remarkable 67% in 2023. In this article, we will be going through the possibilities and prospects of this sector. We will know about this sudden rise and the reasons behind it. We will also look at some key industries that contribute to this sector. And finally, we will learn about the challenges that this sector faces. And the opportunities that come with it.

A Deeper Dive: Inside the Rise of Nigeria’s Manufacturing Sector

A country’s manufacturing sector contributes a lot to its economy. Nigeria’s economy is in a similar situation. It saw an increase in the Manufacturing sector’s contribution to the nominal GDP. On a year-on-year basis, the increase was 36.59% in 2023. This shows the immense contribution this sector has made to GDP. This KPMG report shows the growth of this sector.

This rise is bringing with it opportunities for the Nigerian economy. It creates employment opportunities. It helps generate more revenue for the government. It helps Nigeria diversify its economy by reducing oil dependency. It also helps to stimulate favorable trade balances.

Let us unpack this surge by learning more about the sectors driving this growth.

Power Players in Production: Industries Driving the Growth

The manufacturing sector of Nigeria has 13 different industries. Here, we are going to dive deep into only three. According to KPMG, three industries make up 76.38% of the sector’s contribution to the GDP. The first one is food, beverage, and tobacco. The second one is cement. The third is textiles, apparel, and footwear.

Fizz, Flavor, and Nicotine: Nigeria’s Booming Food, Beverage & Tobacco Scene

Nigeria’s Food, Beverage, and Tobacco sector contributes 34% of its manufacturing GDP. In 2022, it amounted to N5.68 trillion. This is according to a 2023 report by KPMG. Its contribution to the national GDP has hovered around 4.5% during the same period. The FBT sector employs 5% of the local workforce. The food industry consists of global players like- Cadbury, Unilever, and De-United Foods. Competing local powerhouses include- Vicampro Farm, BlackPace, and Kiremko.

The beer industry spearheads the beverage section. Nigeria has the second-largest beer industry in Africa. The industry can grow by 23% over the next few years. Much like the food industry, this industry is also contested among locals and MNCs. Besides this, the beverage industry can grow by 6.19% from 2024-29. Coca-Cola, PepsiCo, and Starbucks Corp. lead the MNCs. Diageo PLC and Kiaori lead the local brands.

The tobacco industry is dominated by British American Tobacco Nigeria (BATN). They have a market share of 78.6%. Some of the local companies are International Tobacco Limited (16.5%), Black Horse Tobacco Limited (3%), and Phillip Morris International Limited (1.1%).

Beyond Brick and Mortar: The Rise of Nigeria’s Cement Industry

The cement industry in Nigeria is one of the largest in Africa. It contributes 22.75% of the manufacturing GDP. It also contributes 3.14% to the national GDP. During the pandemic, there was a rapid increase in demand for cement. This prompted the sudden growth of this industry. This growth took this industry from being import-dependent to a sprawling export-oriented one.

Three companies dominate the cement industry in Nigeria. They are- Dangote, Lafarge Africa, and BUA Group. Dangote Cement produces around 61% of Nigeria’s cement. Lafarge Africa produces 22%. And finally, BUA Group produces around 18%. These three companies spearhead the development of Nigeria’s infrastructure.

Threads, Stitches, and Soles: Nigeria’s Textile, Apparel, and Footwear Revolution

This sector contributes 19.61% to Nigeria’s manufacturing GDP and 2.71% to the national GDP. It employs 25% of the manufacturing workforce.

The textile industry of Nigeria is its oldest and largest manufacturing sub-sector. This industry employs over 250,000 people. In 2021, Nigeria exported textile products worth over 29 million USD. The Nigerian Textile Manufacturing Association (NTMA) includes all the notable textile mills. Some of the most prominent players are- ANYWASH Nigeria Limited, BMT Trading Company, ESORAE HOME, Periti, etc.

The Apparel industry of Nigeria generates vast amounts of revenue each year. In 2024, it can generate up to USD 9.23 billion. The industry is projected to have a growth rate of 9.64% from 2024-28. Some vital international companies include Nike, Zara, and H&M.

The Nigerian Shoe Market is valued at USD 2.63 billion and is expected to grow at 8.16% per year. Local demand is expected to reach 130 million by 2028, positioning this industry for large growth. Some mentionable footwear brands are Peace Conno Inspired, Ivy Barber Shoes, and Kene Rapu Footwear.

Economic Engines: Foreign Direct Investment and Government Policies

The engine behind Nigeria’s manufacturing sector includes two parts: foreign direct investment and government policies. Foreign Direct Investment significantly impacts this growth.

Foreign investment worth USD 19.91 million has been attracted to the food industry, and FDI projects are also ongoing in the beverage industry. In 2021, BUA Group announced a USD 500 million partnership with European DFIs. The Federal Government has attracted USD 3.5 billion to revamp the cotton industry.

The Nigerian government has been very cooperative in the manufacturing sector. The government is trying to improve the business environment. Industrial development plans and streamlining bureaucracy are two of those efforts. The National Industrial Revolution Plan aims to diversify the economy. The Agricultural Transformation Agenda aims to link agriculture and manufacturing.

Thus, the economic engine comes together to drive growth in Nigeria’s manufacturing sector.

Hurdles on the Path to Progress

One of the biggest problems plaguing the manufacturing sector is sky-high operating costs. Although this sector has flourishing conditions, it has not been able to reach its full potential. According to a report by Business Day Nigeria, 50% of the manufacturing costs go to operations. Besides this, electricity woes and infrastructural problems create barriers for this sector.

A Glimmer of Hope: Charting a Future of Prospects and Opportunities

The adoption of newer technologies to increase operational efficiency is taking place. According to a report by KPMG, a technological transfer is taking effect in Nigeria. The development of the manufacturing sector requires sophisticated technologies. The incorporation of locals into this process results in this transfer.

The emphasis on export-oriented manufacturing is also a significant step forward. Various industries are now taking an export approach to manufacturing. This opens new doors for the sector to explore new opportunities.

Concluding the Journey into Nigeria’s Industrial Promise

Despite many challenges, Nigeria’s manufacturing sector seems promising. The increase in foreign investments is always a good indicator. Government policy changes also contribute to this sector’s future. The future holds significant opportunities and prospects for the Nigerian manufacturing sector. If they can navigate the hurdles and leave the other side unscathed, Nigeria can indeed become a pioneer in the African manufacturing sector.