Onome Amuge

Efforts to rebuild Nigeria’s local industrial base are being undermined by structural weaknesses that continue to intensify, with the Manufacturers Association of Nigeria (MAN) reporting that factories spent N676.6 billion on alternative energy in the first half of 2025, without achieving sufficient power for production.

The figure, drawn from MAN’s Manufacturing State of Affairs Report for October 2025, underscores a worsening contradiction at the centre of Nigeria’s growth strategy.  While the government pushes for import substitution and local production, the energy system crucial to making that shift viable remains unstable, unaffordable and increasingly detached from industrial realities.

The report, presented by Oluwasegun Osidipe, MAN’s director of research and economic policy, noted that although the cost of alternative energy dipped slightly from the N708.1 billion recorded in the second half of 2024, the reduction offers little relief. Manufacturers, it said, are still operating in conditions where power supply is both insufficient and among the most expensive in Africa.

“Though lower, alternative energy costs of N676.6bn and raw material imports of N1.72tn in H1 2025 remain a heavy burden on operational costs and employment,” MAN wrote, pointing to nearly 19,000 jobs lost in the same six-month period.

What industry leaders find most troubling is not just the quantum of spending but the declining economic value derived from it. Despite hundreds of billions channelled into diesel, gas, small-scale generation and solar systems, production output is not improving at a pace that justifies the investment.

According to the Manufacturers’ CEOs Confidence Index (MCCI) for Q3 2025 (also included in the October report), inadequate power supply and the soaring cost of both grid electricity and alternative energy ranked among the top constraints for executives.

In an interview referenced in the report, John Aluya, former MAN vice-president, captured the sector’s frustration. “We have been battling with energy in our house, in our factory and everywhere in the past two months. Alternative energy at the moment is not meeting our production needs, because for you to get alternative energy, you have to invest first,” he said. 

That upfront investment, industry players argue, is now so high that it negates any efficiency gains alternative power may offer. Aluya noted that industrial-scale solar, often promoted as a cleaner backup to the grid, remains out of reach for most manufacturers due to land requirements and the capital intensity of installation.

“To get one megawatt, you need the whole acre of land. And when you invest in such a thing, where does it go? It goes to your production costs. That is what makes our manufacturing not competitive in Nigeria,” he said.

Electricity pricing remains a flashpoint. MAN has long argued that tariff hikes introduced by the Nigerian Electricity Regulatory Commission (NERC) fail to reflect the chronic inefficiencies in generation, transmission and distribution.

In 2024, the association opposed NERC’s proposed 250 per cent tariff increase, insisting that no manufacturing sector operating in such an environment could absorb such a shock. Segun Ajayi-Kadir, MAN’s director-general, said electricity was a critical but inefficiently supplied input and warned that the proposed tariff regime would cripple local industries.

“We indicated that a 100 percent increase would have been tolerable, and that is for power that is inefficiently generated and run,” he said.

That dispute culminated in a lawsuit filed by MAN against NERC and distribution companies in April 2024. The case was dismissed by the Federal High Court on October 7 for abuse of court process, a ruling that industry groups say does not resolve the underlying market failures.

Despite the legal setback, MAN is pushing for a more decentralised and industry-aligned energy framework. Its recommendations in the latest report urge the federal government to accelerate embedded generation and develop cluster-based power projects using gas and renewable mini-grids.

The association warns that without urgent reforms, the N676.6 billion spent on alternative energy in just six months is likely to rise sharply, eroding competitiveness, discouraging new investments and deepening job losses.