Nigeria’s manufacturing sector returned to stronger growth in the first quarter of 2026, but its contribution to aggregate output remained below 10 per cent amid persistently low capacity utilisation and sluggish productivity growth, the Nigerian Economic Summit Group (NESG) has said.

In its latest report, Turning Potential into Progress: Accelerating Nigeria’s Industrialisation for Economic Transformation and Inclusion, the NESG said manufacturing growth accelerated to 3.3 per cent in Q1-2026, after recording quarterly growth of less than two per cent throughout 2024 and 2025.
Despite the rebound, the sector’s contribution to real GDP remained below 10 per cent, while capacity utilisation consistently stayed below 60 per cent and productivity growth was estimated at only 0.4 per cent in 2024.

The report said the weak contribution of manufacturing to aggregate output mirrored the sector’s persistently low capacity utilisation and sluggish productivity growth.

The recent improvement was largely underpinned by strong growth in two of the sector’s largest subsectors, with cement expanding by 11.5 per cent and Food, Beverage and Tobacco by 4.1 per cent in Q1-2026.

Textiles, the third-largest manufacturing subsector, however, remained in contraction, a position it has maintained since the second quarter of 2024.

Together, cement, food, beverage and tobacco and textiles accounted for three-quarters of total manufacturing output in the first quarter, highlighting the concentration of growth among a few subsectors.

The NESG said the sector continued to face longstanding structural constraints, including inadequate infrastructure, particularly unreliable electricity supply, heavy dependence on imported intermediate inputs, high borrowing costs, limited access to long-term finance, skills shortages, low technology adoption and intense competition from imported manufactured products.

The financing squeeze was also reflected in the sector’s declining share of bank credit, which fell from 12.2 per cent in H1-2025 to 8.3 per cent in H1-2026, according to the report.

Manufacturing also attracted only 1.5 per cent of total foreign investment inflows in Q1-2026, down from 2.3 per cent in the corresponding period of 2025 and a 2025 peak of 4.8 per cent in Q4.

The group said the financing gap underscored the need for measures to improve access to affordable, long-term finance, strengthen the credit system and enhance the investment climate for productive sectors.

The sector’s weak productivity was also reflected in its manufacturing trade performance.
The share of manufactured goods in Nigeria’s total exports, which had risen to 4.3 per cent in Q3-2025, fell sharply to 1.4 per cent in Q1-2026.

Similarly, manufactured goods accounted for only 0.9 per cent of Nigeria’s intra-African trade in Q1-2026, down from 2.0 per cent in Q3-2025.

The NESG said the trends underscored Nigeria’s limited participation in regional and global manufacturing value chains and continued reliance on primary commodity exports.

It warned that Nigeria would be unable to fully harness the opportunities presented by the African Continental Free Trade Area unless it accelerated the development of a competitive manufacturing sector.

According to the group, reducing dependence on crude oil exports, expanding domestic value addition and promoting manufacturing-led non-oil exports would be necessary to diversify export markets, strengthen foreign exchange earnings and create more resilient and sustainable sources of economic growth.