Nigeria’s Industrial Recovery Hits Its Financing Constraint

By Jennete Ugo Anya

The federal government and manufacturers are moving to tackle one of the most persistent constraints on Nigeria’s industrial ambitions, the cost and availability of credit.

The push comes through the Lagos Industrial Finance Compact, agreed by manufacturers, government agencies, development finance institutions and commercial banks at the Industrial Revolution Work Group’s Ministerial Roundtable 2, themed ‘From Policy to Production: Financing Nigeria’s Industrial Take-off.’

DEVELOPMENT:

The stakeholders committed to developing practical financing instruments capable of providing manufacturers with cheaper, longer-term capital, with implementation responsibilities to be assigned across 30, 60 and 90-day timelines.

Minister of State for Industry, Sen. John Enoh, said expensive and short-tenored financing was making domestic production commercially inferior to imports.

“If you’re borrowing capital at, let’s say, 30 percent, and the businessman finds it more profitable to just go and import a container, and then get the money, it’s a disincentive towards production and towards manufacturing.”

Enoh said the government wanted the process to move beyond policy declarations.

“We’re still having ongoing conversations which will lead to instruments that can finance Nigeria’s industrial growth. I mean, these discussions just remain as sentiments. That financing is not yet there, and there is no impact on manufacturing,” he said.

DATA:

The financing gap is visible in both credit flows and the sector’s long-term economic weight.

Commercial bank credit to manufacturers fell by about N1.9 trillion in 2025, from N8.5 trillion to N6.61 trillion, a decline of more than 22 percent. Manufacturers were borrowing at prime rates averaging about 27 percent, with some rates reaching the mid-30 percent range.

The sector’s contribution to economic output has also fallen sharply from more than 20 percent in the early 1990s to roughly seven to nine percent over more than a decade.

Yet there are signs of improving sentiment. Manufacturing grew 3.29 percent year-on-year in the first quarter of 2026 and recorded further growth in the second quarter, while the Manufacturers Association of Nigeria’s CEO Confidence Index rose to 52.1 points in Q2 from 48.7 points in Q1, its highest level in more than two years.

SIGNIFICANCE:

The issue is not simply whether manufacturers can borrow. It is whether the financial system can provide capital at a cost and tenor compatible with industrial investment.

Representing the Minister of Finance and Coordinating Minister of the Economy, Dr. Taiwo Oyedele, Special Adviser on Investments, Marie Ukpere, said current lending conditions were incompatible with long-term productive investment.

“For a business planning a seven-, 10, or 15-year investment horizon, a new production line, a factory expansion, a retooling, this is simply not the financing environment that supports patient and productive capital.”

She warned that nominal policy support was meaningless without actual access.

“An inaccessible tax incentive, a guaranteed scheme manufacturers have never heard of, or a development fund that never disburses, has the same outcome as no policy at all.”

NEXT MOVE:

The critical test is whether the compact produces actual financing windows, not another policy framework. Stakeholders are expected to identify bottlenecks around pricing, tenor, collateral and administrative access, while aligning fiscal, monetary and industrial interventions.

The real test will be manufacturers in industrial centres such as Aba, Kano and Ogun accessing cheaper capital and using it to expand production, create jobs and increase exports.

OUR LENS:

Nigeria’s industrial problem is increasingly being recognised as a capital-allocation problem.

If borrowing at 27 to 30 percent makes importing more rational than producing locally, industrial policy is fighting the financial system. The Lagos compact therefore matters only if it changes that equation.

The measure of success will not be another signed commitment. It will be whether patient capital reaches factories at commercially viable costs and makes production, rather than importation, the more rational investment decision.

Jennete Ugo Anya is a journalist and researcher with interests across Nigeria’s economy, public policy, business, development and strategic communications.