High production costs make Nigerian factories uncompetitive — NSDC boss

July 26, 2026 2:48 pm

Nigeria’s manufacturers pay between two and 10 times more than their counterparts in countries such as Vietnam and China for electricity, credit and logistics, putting the country’s factories at a major competitive disadvantage, the National Sugar Development Council has said.

The Executive Secretary of the NSDC, Kamar Bakrin, disclosed this while presenting a paper at the technical session of the 17th National Council on Industry, Trade and Investment in Enugu.

This was contained in a statement made available to PUNCH Online on Sunday.

Bakrin said the high cost of production, rather than weak demand, was the biggest challenge confronting Nigerian manufacturers.

“None of this is a demand problem. Nobody on this continent needs persuading to buy what Nigeria makes.

“It is a cost-of-production problem — and that distinction matters because costs, unlike demand, are within our power to fix,” he said.

According to him, industrial electricity costs about eight US cents per kilowatt-hour in Vietnam and around 10 cents in China, compared with about 15 cents on Nigeria’s national grid, rising to nearly 30 cents when manufacturers rely on diesel generators.

He added that Nigerian manufacturers spent an estimated ₦1.34tn generating their own electricity last year.

“Every factory in Nigeria is running a second, unwanted business as a private power station,” Bakrin said.

“Working capital costs 27 to 35 per cent in Nigeria against about 9 per cent in Vietnam and 3 per cent in China, while on the World Bank’s Logistics Performance Index, Nigeria ranks 88th out of 139 countries, compared with Vietnam’s 43rd and China’s 19th.

“The result: in a country of 230 million consumers, with duty-free access to 1.4 billion more under the African Continental Free Trade Area, manufacturing contributes barely 8 per cent of GDP, and capacity utilisation has slipped to 57.7 per cent,” the statement read.

He argued that the timing could not be more consequential.

“The government’s macroeconomic reforms have delivered stability — inflation roughly halved from its peak and reserves at $51bn, the highest since 2009 — giving factories, for the first time in years, the conditions to plan and invest.

“Global supply chains are being redrawn as companies diversify, and ‘a factory anchored in another country this decade will not move twice.’ And AfCFTA cuts both ways: ‘Either our goods are crossing borders going out, or everyone else’s goods are crossing ours coming in. We are either going to compete, or we are going to concede the market,” he said.

He cited Nigeria’s urea industry as evidence that competitive pricing of industrial inputs could transform the country’s manufacturing fortunes.

According to him, Nigeria’s urea production capacity increased from 500,000 tonnes in 2005 to 6.5 million tonnes, making the country one of the world’s top 10 exporters of nitrogen fertiliser after natural gas was priced as an industrial input rather than solely as a revenue source.

“The whole lesson is in one sentence: ‘When a country prices inputs as if it wants industry to live, industry lives,’” Bakrin said.

To improve industrial competitiveness, he outlined four key targets.

“Mr Bakrin attached firm targets to each of the four factors he identified as determining competitiveness: power delivered to industrial clusters at 8–10 cents per kilowatt-hour around the clock; industrial lending in single digits at meaningful volume; port clearance in under seven days, down from 18–21 days today; and output per worker doubled by 2030,” the statement read.

“These are not aspirations to admire. They are the line at which a made-in-Nigeria product stops apologising,” he said.

He also tabled four resolutions for the Council’s adoption.

“Every state should designate at least one industrial cluster for a dedicated power arrangement within 12 months; a federal-state compact should harmonise levies and clear informal checkpoints on industrial corridors; an annual State Industrial Competitiveness Index should rank every state publicly on power, land, levies and logistics; and Nigeria First procurement should be enforced at the federal and state levels with quarterly compliance dashboards.”

He added, “Every resolution needs a named owner, a date and a way to measure it. Otherwise, it becomes another document that gets filed, framed and forgotten.”

Underpinning all four, the NSDC boss said, was a single operating principle: public support must be earned continuously and transparently. Every tax credit, every unit of subsidised power and every act of government patronage, he argued, should be conditional on performance that is verified and published — the same discipline the NSDC applies under the Sugar Backward Integration Programme, where support is tied to independently verified production.

“Nothing should be handed out as an entitlement — because once it is, it can never be taken back,” he said.

Bakrin further urged state governments to leverage the Electricity Act 2023 to develop competitive power markets, improve access to industrial land, streamline levies and align technical education with industrial needs.

He said improving industrial competitiveness would create jobs for millions of young Nigerians, strengthen the naira through higher exports and import substitution, and reduce emigration.

“The reform half of Nigeria’s story has been written.

“The industrial half will be written in kilowatt-hours, lending rates and port days. The window is open. No window stays open forever,” Bakrin said.

Saheed Oyelakin

Saheed is a journalist at Punch Newspapers with over two years of experience covering metro, technology, sports, politics, and human-interest stories. He focuses on producing clear, engaging reports across diverse beats. Saheed’s work reflects hands-on newsroom experience and a commitment to accurate and balanced journalism.

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