Economy: Declining manufacturing, agric sectors threaten Nigeria’s industrialisation
yarkarkara
…As services sector takes the driving seat
··Manufacturing loses N1.2trn in 5 years —Report
•FDI plummets amid waning investors’ confidence
•Rebasing exposes sector’s structural weakness —MAN
•Nigeria struggling with de-industrialisation, says NESG
•Manufacturing should contribute 40% to GDP —Ekpo
By Yinka Kolawole
THERE is a growing concern among industry stakeholders as the gap between real and services sectors’ contributions to the economy widens in favour of the latter.
The stakeholders say the development is consolidating the country’s economic structural defect, which subdues progress towards industrialisation, as the real sector is considered the bedrock of economic growth.
Available official data indicates that while the real sector, consisting mainly of manufacturing and agriculture, is entering its sixth consecutive year of decline in 2025, the services sector is on the increase.
The data shows that the manufacturing sector recorded a mere 8.8 per cent average contribution to the Gross Domestic Product, GDP, between 2020 and 2024. The Agriculture sector grew by 25.5 per cent.
In contrast, the Services sector recorded average contributions of 54.9 per cent.
Available data from the National Bureau of Statistics (NBS) shows that the manufacturing sector’s contribution to the economy in 2020 stood at 8.99 percent and 8.99 percent in 2021, it declined to 8.91 percent in 2022; 8.64 percent in 2023; and 8.41 percent in 2024.
Similarly, the Agriculture sector contributed 26.21 percent in 2020 and declining to 25.88 percent in 2021; 25.58 percent in 2022; 25.18 percent in 2023; and 24.64 percent in 2024.
Comparatively, the Services sector contributed 52.44 percent to GDP in 2020 and rising to 53.56 percent in 2021; 55.40 percent in 2022; 56.18 percent in 2023; and 56.89 percent in 2024.
In the first quarter of 2025, Q1 2025, though the GDP rebasing improved manufacturing sector contribution to 9.62%, industry experts said the contribution was actually lower in real terms.
Also the improvement did not make positive impact on the widening gap as the services sector’s contribution increased further to 57.50 percent.
Worsening the position of the real sector is another decline in the Agriculture sector contribution which stood at 23.33 percent.
Stakeholders highlight challenges
Industry leaders attribute the declining performance of the real sector to the impact of multiple challenges constraining the realization of the huge potentials of the sector.
These include persistent structural challenges, including unreliable power supply, inadequate infrastructure, limited access to affordable finance, and regulatory bottlenecks, and the significant reduction of consumer purchasing power, driven by rising inflationary pressures, which has weakened domestic demand for locally produced goods, further worsening the overall challenges confronting the manufacturing sector.
The stakeholders argue that the prospect of recovery in the manufacturing sector would depend on implementing policy stimuli and export-focused trade strategies, and called for policy interventions for the sector, including foreign exchange (FX) stability, development funds for manufacturing, and improved infrastructure, especially electricity.
Rebasing exposes sector’s structural weakness – MAN
Commenting on the data, Director General of MAN, Segun Ajayi-Kadir, lamented the underperformance of the industry sector in general, especially the manufacturing sector, adding that manufacturing growth has remained uneven and fragile across sub-sectors.
He noted that the recent rebasing of the GDP has further exposed the structural weaknesses in the country’s productive base, particularly in manufacturing, which is central to any ambition of building a resilient, competitive, and inclusive economy.
His words: “Manufacturing is structurally weak, with sub-sectors that should be growth drivers performing below potential, as indicated in the report. Based on the figure released, the average annual growth rate of the manufacturing sector between 2019 and 2024 is negative (-0.76 percent).
“This means Nigeria’s manufacturing sector has been shrinking in real terms over the last five years. The rebasing confirms that Nigeria’s economy may be statistically larger, but it is not more productive, nor more industrialised.
“Industrial output remains largely declining. Following the rebasing, the industrial sector’s share of GDP dropped from 27.65% in the 2010 base year to 21.08 percent in the 2019 base year.
“More worrisome is the underperformance of the manufacturing sector. Despite its critical role in job creation, export diversification, and economic transformation, the sector’s contribution to GDP remains low and increasingly volatile.
“Key subsectors such as oil refining and motor vehicle assembly have recorded consistent declines in real output, eroding Nigeria’s industrial performance.”
The MAN DG urged the government to see the rebased GDP as a strident call for structural industrial reforms. He said the government should prioritise manufacturing and industrialisation to reflect the real economic situation and gains of the country’s rebased GDP.
“Nigeria must re-industrialise to achieve inclusive growth, build export capacity, and reduce dependence on primary commodities and informal activities.
“We urge the government to prioritise manufacturing in policy, financing, and infrastructure development, because without a strong industrial base, GDP expansion may just become a hollow statistic.
“MAN strongly advocates a manufacturing-led growth strategy. This must include sector-specific interventions such as energy reliability for manufacturers, incentivised local content policies, streamlined regulatory frameworks, and strategic trade facilitation to boost competitiveness.
“We call for urgent rebalancing of economic policies in favour of productive sectors, especially manufacturing. The current structure, heavily reliant on services and primary production, is not sustainable for long-term development,” Ajayi-Kadir stated.
Industrialisation, most viable path to economic devt – NESG
The Nigerian Economic Summit Group (NESG) also warned that without a shift from consumption to production, the country will remain trapped in slow growth and import dependence, noting that industrialisation remained the most viable path to unlocking Nigeria’s economic potential.
In a statement issued by Ayanyinka Ayanlowo, NESG’s Head of Strategic Communications and Advocacy, the policy think tank,said the country’s economic renaissance hinges on building a strong industrial base capable of creating jobs, boosting exports, and driving inclusive prosperity.
“Nigeria has struggled with de-industrialisation, overdependence on imports, and limited value addition in key sectors.
“Indurialisation offers a strategic solution to these challenges by unlocking the country’s manufacturing potential, enhancing productivity, and strengthening linkages across agriculture, extractives, and services,” NESG stated.
According to NESG, the nation’s manufacturing sector has faced years of decline, bedeviled by poor infrastructure, inconsistent policies, and limited value addition in key industries.
It said reversing this trend required coordinated action between the government and the private sector to build competitive industries anchored on innovation, local content, and technology adoption.
“Industrialisation is not just about factories, it is about creating a national ecosystem of productivity where skilled labour, reliable infrastructure, access to finance, and supportive policies work together,” the group added.
Manufacturing should contribute 40% to GDP – Ekpo
A former Director General of the West African Institute for Financial and Economic Management (WAIFEM Prof. Akpan Ekpo, at an event, said the manufacturing sector’s contribution to Nigeria’s GDP must reach 40 percent before the country could have a strong economy.
According to him, Nigeria must industrialise to build a strong economy that could withstand negative external shocks. Ekpo,who is also a former board member of the Central Bank of Nigeria (CBN) said: “Since 1963, Nigeria’s manufacturing sector has contributed less than 12 per cent to the GDP. For you to have a strong economy, that sub-sector, and its value chain, must contribute at least 40 percent to the GDP.
“But the irony of it is that recent data revealed that the service sector is contributing about 55 per cent or more to the GDP, which we have to be cautious and very careful about because it is a false narrative that shows that we have arrived.”
In terms of growth trajectory, Ekpo said a country’s grows from an agriculturally dominated economy to an industrialised economy, with a strong manufacturing base before growing to a point where the service sector would lead the economy.
Sector loses N1.2trn in 5 years – Report
A report by Quartus Economics, a research company, which analysed the country’s economy, following the GDP rebasing exercise of NBS, indicated that the country’s manufacturing sector lost about N1.2 trillion between 2019 and 2023.
Acording to the report, titled, ‘Inside Nigeria’s Quiet Recovery‘, between 2019 and 2023, both the agriculture and services sectors struggled and “failed to keep pace with population growth, while manufacturing declined sharply.
“Between 2019 and 2023, agriculture grew at 11 percent and services at only 3 percent, while the manufacturing sector declined by 21 percent. Between the period, Nigeria shed over N1.2 trillion in manufacturing GDP.
“During the years of stall, more than half of Nigeria’s industry categories (26 out of 46) declined in value, while nearly 20 percent (9/46) were in slow-growth mode relative to 2019. By the end of 2024, however, only 7 industry groups remained in decline.”
FDI plummets amid waning investors’ confidence
Meanwhile, analysts at Proshare have highlighted significant decline in foreign direct investment (FDI) into the manufacturing sector, reflecting waning investor confidence.
“In Q1’25, FDI inflows into the sector plummeted to just $129.2 million, a sharp decline from $421 million recorded in the previous quarter, marking the lowest quarterly inflow since Q2’22, when the sector attracted a mere $98.2 million.
“The steep drop in investment reflects growing investor apprehension amid persistent structural challenges, macroeconomic instability, and policy uncertainty, further undermining the growth of the sector,” they stated.
Looking ahead, analysts said the manufacturing sector holds strong potential to become a significant driver of Nigeria’s industrialisation agenda, adding, however, that “this potential will require deliberate and sustained efforts to address entrenched structural deficiencies, as well as prevailing macroeconomic pressures”.
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