Working to rebuild Nigeria’s manufacturing industry
Nigeria’s manufacturing industry has suffered from neglect, since the country’s economy has depended on the petroleum sector since the 1970s. As the government tries to diversify the economy, it is working to reinvigorate the manufacturing sector so as to increase its contribution to Nigeria’s prosperity.
Lagos and its surroundings are home to about 60% of Nigeria’s industrial base. Other key industrial centres are Kano, Ibadan and Kaduna. Nigeria’s most important manufacturing industries include beverages, cement, cigarettes, food processing, textiles and detergents.
Restarting the Manufacturing Sector
Manufacturing contributed of 4.2% GDP in 2009, up from 3.6% in 2008. The sector’s contribution to GDP has changed little over the course of the decade. Even as industries like cement and beverages attract investment from home and abroad, other industries are closing up shop; between 2000 and 2010, more than 850 manufacturing companies either shut down or temporarily halted production. Capacity utilisation in manufacturing is around 53%. Imports of manufactured goods dwarf sales of homegrown products – manufactured goods have constituted the biggest category of imports since the 1980s. But the government is working to revitalise the ailing sector: in May 2010, the Nigerian government announced a USD1.3 billion fund to help banks extend credit to the manufacturing sector, following the decline in available financing after the onset of the global economic crisis.
The biggest problem facing manufacturers over the past decade has been inadequate infrastructure in general and lack of power supply in particular. The country set a target of generating 6’000 MW of electricity by the end of 2009, but estimated national demand is 25’000 MW. Manufacturers have mainly installed their own generators to compensate for spotty supply from the state – the manufacturing industry as a whole generates around 72% of its own energy needs. But operating these generators greatly increases the cost of manufacturing goods, and the cost increase is passed on to the consumer, making it difficult for Nigerian goods to compete with cheaper imports. The government is embarking on a major drive to improve power generation with the express aim of improving conditions for industry: in March 2010 it unveiled plans to invest USD3.3 billion in power projects throughout the country.