The cost of keeping factory lines running has become one of the biggest challenges facing manufacturers, with spending on alternative energy rising to an unprecedented N1.34 trillion in 2025 as unreliable grid power continues to disrupt production.Â
New data released by the Manufacturers Association of Nigeria (MAN) shows that the country’s industrial sector has become increasingly dependent on self-generated power amid persistent electricity supply challenges, despite substantial increases in electricity tariffs and broader economic reforms aimed at stabilising the economy.
The mounting energy burden has emerged as one of the clearest indicators of the pressures confronting manufacturers as they grapple with rising production costs, foreign exchange volatility, high borrowing costs and weakening consumer demand.
According to MAN, spending on diesel, gas and premium motor spirit used to power factories rose from N781.68 billion in 2023 to N1.11 trillion in 2024 before climbing further to N1.34 trillion in 2025.
The figures come as manufacturers continue to assess the impact of major economic reforms introduced under President Bola Tinubu’s administration, including fuel subsidy removal, exchange rate liberalisation, electricity tariff adjustments and monetary tightening.
While acknowledging that the reforms were intended to restore macroeconomic stability and improve long-term economic efficiency, manufacturers argue that the industrial sector has absorbed a significant share of the adjustment costs.
Segun Ajayi-Kadir, director-general of MAN, said the reforms fundamentally altered the operating environment for manufacturers and triggered unprecedented increases in production expenses.
The removal of fuel subsidy in May 2023, he noted, led to an immediate rise in transportation and logistics costs, with distribution expenses rising by more than 300 percent within weeks.
At the same time, electricity tariffs for Band A customers increased sharply from approximately N68 per kilowatt-hour to between N209 and N225 per kilowatt-hour.
However, despite the substantial tariff adjustments, electricity supply reliability remains a major concern for businesses.
Manufacturers say persistent grid disturbances, power outages and system failures have prevented firms from fully benefiting from higher tariff categories, forcing continued dependence on costly backup energy systems.
The consequences are becoming increasingly visible in key industrial performance indicators.
Manufacturing capacity utilisation fell from 61.3 percent in the first half of 2025 to 57.7 percent in the second half of the year, reflecting weakening production efficiency and rising operational constraints.
Economists note that capacity utilisation remains one of the most important indicators of industrial health, with declining levels often signalling reduced output, lower profitability and weaker investment activity.
The manufacturing sector’s struggles have also translated into employment losses.
According to MAN, more than 18,900 jobs were affected during the review period as companies adjusted operations to cope with escalating costs and a challenging business environment.
Beyond energy costs, manufacturers continue to contend with the effects of exchange rate reforms.
Although the unification of Nigeria’s foreign exchange market has improved transparency and reduced multiple exchange rate distortions, the rapid depreciation of the naira has significantly increased the cost of imported raw materials and industrial inputs.
The exchange rate moved from around N463 per dollar in mid-2023 to N899 by the end of that year before weakening further to approximately N1,535 per dollar by December 2024.
As a result, the cost of imported raw materials rose from N3.04 trillion in 2023 to N6.64 trillion in 2024, representing a 118 percent increase.
The pressure on manufacturers has been compounded by limited access to foreign exchange through official channels, forcing many businesses to source foreign currency at higher market rates.
MAN reported that manufacturing value added declined from $45.2 billion in 2023 to $21.84 billion in 2024.
Access to affordable financing has emerged as another major concern.
With the Central Bank of Nigeria maintaining a tight monetary stance to combat inflation, borrowing costs have remained elevated.
Prime lending rates averaged 24.4 percent as of March 2026, while some commercial banks charged maximum lending rates of up to 33.8 percent.
Industry stakeholders say such financing costs make long-term industrial investment increasingly difficult, particularly for manufacturers seeking to expand production capacity, modernise equipment or invest in local value chains.
Reflecting these conditions, credit to the manufacturing sector declined from N10.88 trillion in February 2024 to N6.6 trillion by December 2025.
Despite the difficult operating environment, manufacturers acknowledged several policy initiatives introduced by the Federal Government that could support industrial recovery if effectively implemented.
These include the Naira-for-Crude programme, tax incentives for pharmaceutical manufacturers, the Nigeria First framework, the National Single Window platform, the Nigeria Industrial Policy and the 2025 Tax Reform Act.
Industry analysts argue that the next phase of economic policy must focus on translating macroeconomic stabilisation into productive-sector growth.
While inflation control, fiscal consolidation and foreign exchange market reforms remain important, they note that sustainable economic growth ultimately depends on the performance of sectors capable of generating employment, exports and domestic value addition.
MAN said the priority should now shift toward measures that directly improve industrial competitiveness, including stable electricity supply, affordable access to foreign exchange, concessionary financing for productive investments and predictable trade policies.
