Why Nigeria’s Manufacturing Sector Is Not Attracting Desired Investment – NESG

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The Nigerian Economic Summit Group (NESG), on Friday stated that only N5.73 trillion has been invested in the manufacturing sector, so far, despite its numerous opportunities.

According to a report issued by NESG the gap between announced investment and actual investment points to the low confidence level of investors in the real sector.

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NESG said that between 2019 and 2020, investment announced stood at US$46.4 billion with the manufacturing sector accounting for 25% (US$11.56 billion) of these announced investments.

Actual FDI inflows into the economy in both years was US$1.96 billion (just 4% of announced investment) with sectors such as Telecoms, Trade, Agriculture and Manufacturing, accounting for the larger inflows (NIPC, 2021).

The report disclosed that one major reason the manufacturing sector has not attracted significant investments when compared with those of other countries is policy and regulatory inconsistency.

Frequent reversals of government policies on importation, lack of implementation of the provisions in national policy documents and regulatory lapses are key factors that have affected the manufacturing sector in Nigeria.

It also added that poor quality of infrastructure is the longest standing problem of the manufacturing sector in Nigeria and it has contributed to the high cost of production. It is a disincentive for investment despite huge potentials and a large consumer market in Nigeria.

Bad road networks and inadequate electricity supply make it difficult for businesses to maximise returns and limit the cost of operations.

According to the World Bank (2021), businesses in Nigeria lose about $29 billion annually due to the country’s unreliable electricity.

The Manufacturers Association of Nigeria (MAN) also confirmed that inadequate electricity supply and the high cost of alternative energy sources are the topmost challenges hampering the performance and growth of the sector.

Other challenges such as port congestion and logistics bottlenecks are also important factors that limit the performance of the sector.


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