By Sam Otuonye
Nigeria’s manufacturers have been besieged with soaring production costs associated with persistent inflation, elevated energy costs and high interest rates which have persisted with no recovery hope in sight.
Despite signs of a modest improvement in business activity, manufacturers continue to grapple with mounting cost pressures that are weighing on production and new orders.
According to the latest Purchasing Managers’ Index (PMI), the Manufacturing PMI stood at 50.10 in June, from 49.6 in May.
The latest reading indicates that more manufacturers recorded declines in output, new orders and production activity than those reporting growth, extending the sector’s weak performance after a strong start to the year.
Analysts attribute the prolonged contraction largely to rising production costs, elevated borrowing costs and weak consumer demand.
They say higher energy costs have significantly increased manufacturers’ operating expenses.
The latest PMI marks a sharp reversal from the sector’s performance earlier in the year.
Manufacturing activity expanded strongly between September 2025 and March 2026 before slipping into contraction in April, where it has remained for three consecutive months.
The slowdown has coincided with persistent production costs despite improving foreign exchange liquidity and stronger external reserves.
Although headline inflation eased marginally to 15.91 per cent in June from 15.93 per cent in May, manufacturers continue to contend with expensive energy, high borrowing costs and subdued consumer demand.
The CBN also retained the Monetary Policy Rate (MPR) at 26.5 per cent in July, keeping financing costs elevated for manufacturers that rely on bank credit to fund production and expansion.
According to the National Bureau of Statistics, Nigeria’s manufacturing sector contributed 9.57 per cent to the country’s real Gross Domestic Product in the first quarter of 2026.
Industry analysts say prolonged weakness in manufacturing could weigh on Nigeria’s broader economic performance, given the sector’s contribution to employment, value addition and non-oil exports.
While Nigeria’s external reserves have risen above $52 billion and exchange rate stability has improved, analysts say these gains alone are insufficient to restore manufacturing growth.
Manufacturers continue to face high energy and financing costs.
Household purchasing power remains weak, limiting demand for manufactured goods.
High lending rates continue to discourage investment and expansion.
Analysts say affordable credit, improved electricity supply, infrastructure upgrades and incentives for local sourcing are needed to revive the sector.