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Home Industries Manufacturing

Where to invest in Nigeria’s manufacturing sector

Abiola Odutola by Abiola Odutola
May 16, 2021
in Manufacturing, Spotlight
AfCFTA: NESG advises FG to strengthen domestic value chains
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Investors have been advised to channel their funds to the manufacturing sector, especially the agro-process, renewable energy and pharmaceutical industries among others. Experts described these industries as lucrative segments that will give investors desired returns.

The advice was given by the Nigerian Economic Summit Group (NESG) in its Sectoral Reforms and Investments in Nigeria Report, which was seen by Nairametrics.

The Group explained that Nigeria has numerous favourable conditions for investment, especially in its manufacturing sector. Some of the conditions listed include large arable land, strategic location in Africa, large market and opportunities presented by the AfCFTA.

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The NESG also highlighted that import-dependent manufactured and agricultural goods accounted for 72.5% of total import in 2020, and weak manufactured goods exports – share of manufactured goods to total exports was 7.7% in 2020.

Investment areas

According to the report, specific areas to invest in, within the agriculture sector are the Wheat value chain, Maize value chain, Sorghum value chain, Poultry value chain, Piggery value chain, Cassava value chain, Rice value chain and Renewable energy.

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Other listed areas are pharmaceuticals and oil refining, as these sectors also have huge investment potential in Nigeria.

When will actual investments be realised?

  • Actual investments will be realised when there is an intersection of market opportunities and government support for the sector.
  • For the manufacturing sector in Nigeria, the existence of opportunities is not enough to attract significant investment into the sector, especially given Nigeria’s history of policy inconsistency.
  • Investors are therefore apprehensive to make huge investments despite having an in-depth understanding of the opportunities that exist. This is reflected in the huge gap between announced and actual investments.

How to attract investors

  • To attract significant investments and narrow the gap between potential and actual investments, federal government support for the sector is of utmost importance.
  • Drawing from the experience of the few sub-sectors in manufacturing that have attracted investments in the last few decades, government support in the form of (1) developing sector plans and (2) intervening to resolve specific challenges faced by investors in the sector have been instrumental in attracting investment.
  • When these two conditions are available, investors are more assured to make significant investments amidst structural challenges such as inadequate power supply and infrastructure deficit. Even when issues of policy inconsistency and regulatory heavy-handedness arise, they are often resolved while investors are protected by the government.

Bottomline

The current situation of the country requires urgent intervention by the government to develop the industrial sector in Nigeria. The cost of not implementing crucial reforms to reposition the sector for competitiveness is evident in the weak state of the sector and in Nigeria’s high unemployment and poverty rates.

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