Industrial Sector Sees Sharp Rise in Renewable Energy Investment, with Spending Soaring 71.4% to N1.34trn Over Two-Year Period

Nigerian manufacturers spent an estimated N1.34 trillion on alternative energy sources in 2025, marking a significant 71.4 per cent increase from the N781.68 billion recorded in 2023, as the sector struggled to cope with rising production costs amid ongoing economic reforms.

n

This sharp increase was revealed by the Manufacturers Association of Nigeria (MAN) in its assessment of the Federal Government’s economic reforms over the past three years, which the association described as a period of difficult but consequential economic transition.

n

According to the Director-General of MAN, Mr. Segun Ajayi-Kadir, while the economic reforms were necessary to address long-standing structural distortions and reposition the economy for sustainable growth, manufacturers had to bear a disproportionate share of the adjustment burden.

n

The combined impact of fuel subsidy removal, exchange rate liberalisation, electricity tariff adjustments, and tight monetary policy significantly altered the operating environment for industries, Ajayi-Kadir noted.

n

The immediate removal of fuel subsidy in May 2023 caused logistics and distribution costs to rise by over 300 per cent within weeks, Ajayi-Kadir stated, highlighting the severe pressure on manufacturers.

n

Further pressure was exerted on manufacturers following the increase in electricity tariffs for Band A consumers from about N68 per kilowatt-hour to between N209 and N225 per kilowatt-hour, despite which electricity supply remained unstable due to recurring grid collapses and system disruptions.

n

This instability forced manufacturers to rely heavily on alternative energy sources such as diesel, gas, and premium motor spirit, resulting in a significant rise in expenditure on alternative energy from N781.68 billion in 2023 to N1.11 trillion in 2024 and then to N1.34 trillion in 2025.

n

The association revealed that the rising energy costs weakened industrial competitiveness and contributed to a decline in manufacturing capacity utilisation, which fell from 61.3 per cent in the first half of 2025 to 57.7 per cent in the second half of the year.

n

The worsening operating environment also led to significant job losses, with more than 18,900 jobs affected during the review period, according to MAN.

n

MAN also expressed concern over the tight monetary policy environment, noting that repeated increases in the Monetary Policy Rate and the reduction of intervention financing programmes pushed borrowing costs to unsustainable levels.

n

As of March 2026, prime lending rates averaged 24.4 per cent, while maximum lending rates reached 33.8 per cent in several commercial banks, making long-term industrial investment increasingly difficult, Ajayi-Kadir said.

n

Despite these challenges, MAN welcomed several recent policy measures, including the Naira-for-Crude initiative, tax incentives for manufacturers under the 2025 Tax Reform Act, the Nigeria Industrial Policy, and the Nigeria First local content framework.

n

These initiatives could stimulate industrial growth if effectively implemented, but the association stressed that macroeconomic stabilisation must now give way to deliberate policies that support production, lower operating costs, and improve industrial competitiveness.

n

Nigeria cannot achieve sustainable economic prosperity without a strong manufacturing base, MAN stated, urging the government to prioritise affordable foreign exchange access, concessionary financing, reliable electricity supply, and predictable trade policies to unlock the sector’s growth potential.