Get Guardian on GoogleNigeria has spent decades declaring its ambition to become an industrialised economy. Successive governments have promised to revive manufacturing, reduce import dependence, create jobs and transform the country into a competitive production hub. Yet one fundamental contradiction remains unresolved: we want the prosperity that comes from industrial production, but our financial system often makes trading more attractive than manufacturing.
We encourage entrepreneurs to establish factories while confronting them with borrowing costs that can undermine the viability of those investments. We promote local production but leave manufacturers struggling with financing conditions that make their products less competitive. This raises an important question: can Nigeria genuinely industrialise when the financial incentives of its economy are poorly aligned with productive investment?
Industrialisation requires capital, technology, productive employment and sustained investment. A trader may import finished goods, distribute them and recover capital within months. A manufacturer, however, may spend years acquiring land, constructing facilities, purchasing machinery, training workers and establishing distribution networks before earning meaningful returns. Both activities are important, but their financing requirements are fundamentally different.
Nigeria’s lending environment frequently fails to recognise this distinction. According to the Manufacturers Association of Nigeria (MAN), the average interest rate paid by manufacturers increased from approximately 21 per cent in 2020 to 32.2 per cent in 2025. Although this moderated from 35.6 per cent in 2024, borrowing costs remained exceptionally high for businesses seeking to expand production.
Consider a manufacturer borrowing ₦1 billion at 32 per cent interest. On a simplified interest-only basis, the annual interest obligation would be ₦320 million. At 9 per cent, it would be ₦90 million. The ₦230 million difference could finance additional equipment, raw materials, workforce development or improvements in production efficiency. Instead, it becomes a financial burden that must be serviced before the business can fully realise its investment.
A factory cannot accelerate construction, installation and commissioning simply because its lender expects repayment. When repayment expectations move faster than productive capacity, industrial investment becomes a race against time.
Recent banking statistics raise further concerns about the direction of credit in the economy. The Central Bank of Nigeria’s second-quarter 2026 statistical bulletin shows that outstanding bank credit to manufacturing declined by 26.8 per cent, from ₦7.09 trillion in June 2025 to ₦5.19 trillion in June 2026. This decline does not, by itself, prove that banks have deliberately withdrawn from manufacturing. Repayments, reduced borrowing demand and other factors can affect outstanding balances. Nevertheless, the trend deserves serious examination.
From a bank’s perspective, lending to businesses with rapid inventory turnover may appear less risky than financing factories with long investment cycles and uncertain returns. That preference may be commercially rational for individual institutions. But what is rational for a financial institution does not always produce the best long-term outcome for the national economy.
Trading facilitates the movement of goods and provides essential economic services. However, a country that consistently finds it easier to finance imported finished products than domestic production risks becoming increasingly dependent on the industrial capabilities of other nations. The critical question is not whether trading is profitable, but whether our financial system adequately rewards the patient investment required to create what we trade.
Nigeria’s trade figures illustrate the challenge. A Development Bank of Nigeria research note published in October 2026 reported that imports under major manufactured-goods categories reached approximately ₦35.99 trillion in 2025, while manufactured-sector exports amounted to about ₦2.50 trillion. These figures use different statistical classifications and should not be treated as a perfectly matched trade balance. Nevertheless, they point to substantial dependence on foreign industrial output. The same research indicates that manufacturing’s contribution to real GDP declined from 10.22 per cent in 2014 to 8.05 per cent in 2025.
Nigeria does not need to manufacture everything it imports. It needs to identify industries where it can build sustainable competitive advantages, produce efficiently and compete in export markets. But entrepreneurial ambition alone cannot deliver this. It requires financing that reflects the economics of industrial development.
It would be convenient to blame commercial banks entirely for expensive industrial credit, but that would be incomplete. Banks operate with deposit obligations, regulatory requirements and credit risks. They cannot be expected to provide long-term loans at artificially low rates while facing expensive funding and default risks.
The broader financial system also matters. When government securities offer attractive risk-adjusted returns, banks must weigh lending to businesses against the relative security and liquidity of government instruments. A manufacturing loan requires assessment, monitoring and exposure to operational risks. Government securities may offer a simpler investment proposition. This creates a difficult policy question: can government credibly prioritise industrialisation while fiscal and monetary conditions make lending to productive enterprises comparatively unattractive?
Monetary stability remains essential. However, it must ultimately reinforce, rather than undermine, productive investment. Nigeria needs financial conditions in which price stability, sustainable public borrowing and private-sector industrial growth can coexist.
Expensive credit is also only one part of the problem. According to the Development Bank of Nigeria’s October 2026 research, citing MAN figures, manufacturers spent an estimated ₦1.34 trillion on alternative power in 2025, up from ₦1.11 trillion in 2024. This is capital that could otherwise support productive investment. Manufacturers are already financing machinery, raw materials and workforce development; many must also finance the infrastructure required to keep their factories running.
Affordable credit cannot compensate indefinitely for unreliable electricity, poor logistics, regulatory uncertainty and unstable economic policies. Industrial competitiveness is shaped not only within factory walls but by the environment surrounding them.
The financing challenge is particularly severe for smaller manufacturers. A survey of 133 manufacturing MSMEs conducted in 2021–2022 and referenced by the Development Bank of Nigeria found that 97 per cent had bank accounts, yet only 5 per cent had borrowed in the preceding 12 months. Access to finance was the leading business obstacle for 26 per cent of respondents. Though limited in scope, the findings illustrate an important distinction: financial inclusion does not automatically translate into access to productive capital.
Nigeria therefore needs an industrial financing strategy, not another credit announcement. Financing must reflect the life cycle of industrial investments. Working capital, equipment acquisition, factory construction and export development should not be forced into identical repayment structures. Equipment financing, leasing, purchase-order financing and longer-tenured industrial loans should become more accessible.
Development finance institutions must also connect capital to measurable outcomes. The ₦1 trillion Manufacturing Stabilisation Fund advocated by MAN, including its proposed 9 per cent interest rate, offers one possible policy instrument. But its success should be measured by additional production capacity, jobs created, domestic value added, productivity gains and manufactured exports, not simply the amount disbursed.
Government can further encourage responsible commercial lending through credible guarantees and risk-sharing arrangements. Manufacturers, in turn, must strengthen financial records, corporate governance, cost accounting and management practices. Affordable credit should finance competitive businesses, not permanently subsidise inefficiency.
Ultimately, Nigeria’s industrial progress should be measured by whether factories are expanding, productivity is improving, skilled jobs are being created and more Nigerian products are competing successfully in regional and international markets.
The greatest danger is not merely that manufacturers are borrowing at expensive rates. It is that potentially productive investments may never happen because the economics of financing them do not make sense. Factories that are never built cannot employ workers. Machinery that is never installed cannot improve productivity. Products that are never developed cannot compete in export markets.
Nigeria cannot become an industrial economy merely by financing what it consumes. It must build a financial and policy environment that makes manufacturing a viable, competitive and rewarding long-term investment. That is where genuine industrial transformation begins.
About the Author
Dr. Cornelius Collins Balogun is an entrepreneur and industrial strategist dedicated to sustainable manufacturing and national development. He is the founder of several Nigerian enterprises and a voice for ethical, purpose-driven leadership in Africa’s private sector. He is on LinkedIn @ Dr. Cornelius (Balogun) Collins.
