Nigeria’s High Production Costs Threaten Manufacturing Competitiveness, NSDC Warns
Nigeria’s manufacturers face rising electricity, financing and logistics costs that are weakening industrial competitiveness, the National Sugar Development Council has warned.
By GLEBM News Desk
Nigeria’s manufacturing sector is facing mounting pressure from soaring production costs that leave local factories struggling to compete with rivals across Asia, according to the National Sugar Development Council (NSDC).
The Executive Secretary of the NSDC, Kamar Bakrin, said Nigerian manufacturers pay significantly more for electricity, financing and logistics than competitors in countries such as Vietnam and China, undermining the country’s industrial competitiveness despite strong market demand for locally produced goods.
Speaking during the technical session of the 17th National Council on Industry, Trade and Investment (NCITI), Bakrin stressed that Nigeria’s manufacturing challenge is driven by production costs rather than insufficient demand.
“The problem is not that people do not want Nigerian products. The real challenge is the high cost of producing them, and that is something policymakers can address,” he said.
According to the NSDC, manufacturers spent an estimated ₦1.34 trillion last year generating their own electricity because of unreliable public power supply. Many factories now rely heavily on diesel generators, significantly increasing operating expenses.
Bakrin explained that industrial electricity costs in Vietnam average about 8 US cents per kilowatt-hour, while Chinese manufacturers pay roughly 10 cents. In contrast, Nigerian factories pay around 15 cents on the national grid, with costs rising to nearly 30 cents per kilowatt-hour when diesel generators are used.
Beyond energy costs, access to finance remains another major obstacle. Industrial borrowing rates in Nigeria range between 27 and 35 percent, compared with approximately 9 percent in Vietnam and 3 percent in China. Logistics also continue to weigh heavily on manufacturers, with Nigeria ranking 88th out of 139 countries on the World Bank’s Logistics Performance Index, well below Vietnam and China.
The council noted that manufacturing contributes only about 8 percent to Nigeria’s Gross Domestic Product (GDP), while factory capacity utilisation has declined to 57.7 percent, limiting the sector’s ability to create jobs, expand exports and drive economic growth.
Although recent macroeconomic reforms have improved stability, with inflation easing from previous highs and external reserves strengthening, Bakrin warned that Nigeria must act quickly as multinational manufacturers continue to reshape global supply chains.
He cautioned that under the African Continental Free Trade Area (AfCFTA), Nigeria risks becoming a destination for imported goods unless local industries become more competitive.
To reverse the trend, the NSDC called for dedicated industrial clusters with reliable electricity, single-digit lending rates for manufacturers, faster port clearance processes, harmonised taxes and levies, and stronger implementation of policies that support domestic production
