…Experts list solutions
By Merit Ibe
Before Nigeria economically hurt itself with crude oil addiction in the 60s and 70s, industrial clusters literally buoyed the economy.
From Aba’s once-thriving shoe and garment hubs to Kano’s fading textile base and Nnewi’s manufacturing belt, many clusters that should drive economic expansion are instead crawling under rising costs and shrinking demand.
Experts warn that without urgent reforms, coordinated investment and easier access to credit, Nigeria risks losing vital industrial ecosystems to imports, unemployment and regional competitors that are rapidly scaling modern production capacity.
Once seen as engines of mass production, jobs and export growth, Nigeria’s industrial clusters are now battling slow decay as poor infrastructure, erratic power supply, weak financing and policy inconsistency choke productivity.
These clusters, which are groups of firms engaged in similar or related industrial activities, are meant to drive efficiency, innovation and competitiveness.
However, severe structural challenges continue to undermine their potential.
According to the United Nations Industrial Development Organisation (UNIDO), industrial clusters thrive when firms are supported by nearby institutions such as business associations and technical service providers. In developed economies, clusters are prioritised for industrial expansion, but in Nigeria, many lack the basic infrastructure needed to function effectively.
Experts have continued to stress that a major constraint to growth of industrial clusters has been the persistent infrastructure deficit, which raises production costs and disrupts supply chains.
Across key manufacturing hubs in Kano, Lagos, and Aba, and other states, businesses grapple with poor road networks, unreliable electricity and inadequate drainage systems. These challenges slow the movement of goods, damage vehicles and products, and increase maintenance and logistics costs.
Energy shortage remains a critical issue. With the national grid unable to provide stable power, manufacturers rely heavily on diesel generators, significantly increasing operational expenses. In many clusters, the absence of shared power facilities further weakens productivity and erodes competitiveness in both local and international markets.
Financial and economic pressures also weigh heavily on businesses within these clusters. Limited access to affordable credit and high interest rates make it difficult for small and medium enterprises to invest in modern machinery or expand operations. At the same time, dependence on imported equipment, coupled with foreign exchange constraints further restricts growth and innovation.
Security concerns and policy implementation gaps compound these problems. Rising insecurity around industrial hubs threatens workers and disrupts logistics, forcing some firms to relocate or shut down. Although government initiatives such as industrial cluster development programmes exist, delays in execution and weak public-private collaboration have limited their effectiveness.
Despite these setbacks, some clusters continue to show resilience, highlighting the sector’s untapped potential. Experts advise that state governments should focus on developing industries based on local raw materials and comparative advantages to attract investment. Strengthening infrastructure, improving transportation networks, and fostering stronger partnerships with the private sector will be critical to revitalising Nigeria’s industrial clusters and restoring their role as drivers of economic growth.
David Etim, Project Lead, Calabar and Gulf of Guinea Municipal and Trade Centre Ltd by Guarantee, said in Nigeria’s industrial space and clusters holistically, manufacturers face multiple taxes and illegal levies at the local government and state levels.
“And this affects costs of moving goods, delays in distribution, reduced competitiveness.
“Though reforms are trying to reduce it, it’s not fully gone yet.”
Etim further noted that Nigeria’s trade environment is faced with several structural challenges that make it fragile and unstable. These challenges he viewed affect manufacturers’ ability to produce, price, and compete effectively in the global market.
“One major problem is the issue of multiple taxation and harassment by revenue collectors at the local and state government levels. “Manufacturers and their workers, including dispatch riders and truck drivers, are often subjected to frequent stops and illegal levies while transporting goods across different regions or states. Although efforts have been made to reduce such practices, they have not been completely eliminated. This increases the cost of doing business and discourages smooth movement of goods.
“Another key challenge is the inefficiency in transport and logistics. The constant harassment of transporters leads to delays and uncertainty in delivery timelines. As a result, manufacturers incur additional costs, which ultimately reduce their competitiveness both locally and internationally.
“Foreign exchange volatility is also a critical issue affecting trade. The frequent and unpredictable changes in exchange rates make it difficult for manufacturers to plan their production cycles. Since the process of purchasing raw materials, production, and sales takes time, fluctuations in exchange rates during this period can lead to losses or incorrect pricing of goods. Stability in exchange rates is therefore more important than the actual rate itself.
“In addition, high shipping costs pose a significant challenge. International shipping companies often charge higher prices on routes with less competition, and Nigeria falls into this category. This increases the cost of exporting goods and reduces profit margins for exporters. Consequently, Nigerian products become less competitive in the global market.
Furthermore, local industries face strong competition from foreign companies that operate primarily for profit and are less concerned with the growth of the Nigerian economy. Combined with internal challenges such as policy inconsistency and high operational costs, this further weakens the export sector.
Etim concluded that Nigeria’s export trade remains fragile due to multiple taxation, poor logistics, foreign exchange instability, and high shipping costs. Addressing these issues he said is essential for improving the competitiveness and growth of the country’s trade sector.
He further noted Nigeria and Africa face a fragility crisis caused by insecurity, bureaucracy, and high cost of doing business. Issues like kidnapping, terrorism, and environmental challenges discourage investment.
“Another major problem is bureaucratic delays. For example, a $2 billion investment proposal in Cross River State took about 890 days without final agreement, which discouraged both local and foreign investors.
“Public servants often misunderstand investors, treating them like contractors, which creates unnecessary obstacles. “This slows down economic growth because the private sector, not government, is the main driver of job creation and development.
He insists that governments must reduce bureaucracy, improve ease of doing business, and create an enabling environment that attracts private investment across Africa.
John Isemede, a trade expert and former director general, Nigerian Association of Chambers of Commerce, Industry Mines and Agriculture (NACCIMA) pointed to Nigeria’s industrial sector which remains weak mainly because the country still exports raw materials and imports finished goods at higher prices.
“This limits value addition, which is the core of true industrialisation.”
He explained that industrialisation is not just buying and selling; it involves processing raw materials into finished goods. However, Nigeria operates more like a trading economy within a global market, allowing foreign firms to dominate without strengthening local production.
Isemede emphasized the lack of value addition across sectors like agriculture, petroleum, and solid minerals, which are not fully developed across their stages, upstream (raw extraction); midstream (processing) and downstream (final products).
“This creates leakages where value is lost to other countries.”
Isemede listed other limitations to growth of industries to include multiple government agencies that work at cross purposes, “increasing bureaucracy and costs instead of supporting businesses. This raises the cost of production.
“Weak infrastructure and production environment Nigeria lacks stable electricity, storage facilities (warehouses, silos), efficient transport systems, which discourage local production.
“Import-driven economy: There is a strong preference for imported goods, even when local alternatives exist. Trade missions often promote importation instead of local manufacturing.
“Lack of industrial policy and planning. There is no clear, consistent industrial development plan to revive dead industries or guide growth.
“Poor foreign policy links to trade. Nigeria’s foreign policy is not effectively tied to economic and trade goals, weakening industrial competitiveness.
“High cost of doing business. Businesses face multiple taxation (federal, state, local), high bank charges, and difficult access to finance. This pushes firms to relocate to neighboring countries.
“Weak institutions and human capacity development
There are limited institutions for training industrial managers and producers, reducing productivity and innovation.
“Effects of trade agreements (e.g., ECOWAS) Due to better conditions in neighboring countries, firms relocate production there and export goods back to Nigeria duty-free. This harms local industries.
He pointed to lack of coordination between the government, its officials and the private sector and the impact on Nigeria’s economy.
He said these three key actors operate separately, with little or no collaboration, creating a disconnect in economic planning and execution.
“As a result, the economy is unstable, with high taxes and rising inflation.
“Ideally, there should be strong cooperation among these groups to ensure effective policy implementation. The President, who serves as the coordinating authority of the economy, is expected to oversee and assign responsibilities to ministers and Ministries, Departments, and Agencies (MDAs). However, the absence of a functional coordinating centre weakens this structure.
The core issue is the lack of what can be described as CCC — Communication, Cooperation, and Coordination. Without these, policies are fragmented, and economic activities are not aligned toward a common goal.
“If proper coordination is established, it would lead to reduced inflation, lower dependence on imports, and increased local production. This would strengthen the industrial sector across all levels, from upstream production to downstream processing, and from local markets to exports.”
Isemede’s view is that Nigeria does not just need discussions about industrialisation or globalization, but a clear, coordinated industrial plan driven by unity among key stakeholders to secure a sustainable economic future.
He explained that the decline of industries in Nigeria is largely driven by excessive dependence on importation.
He insisted that industrial hubs such as Ikeja, Oregun, Trans-Amadi in Port Harcourt, Aba, and Kano among others have experienced significant decline due to this import dependence.
“This has contributed to rising unemployment, increasing national debt, and economic instability.”
To reverse this trend, Isemede advised that Nigeria must reduce its reliance on imports and focus on rebuilding local industries. “Reintroducing structured systems like commodity boards, promoting value addition, and supporting local manufacturing will help revive industrial zones, create jobs, and strengthen the economy.
“This trend dates back to the colonial era, when colonial powers structured the economy to export raw materials and import finished goods. Unfortunately, Nigeria has continued in this pattern, failing to develop strong local industries and value addition.
“A major turning point occurred during the Structural Adjustment Program, when the government, under the advice of the International Monetary Fund, dismantled commodity boards. “These boards previously supported local production, regulated prices, and encouraged value addition. Their removal weakened Nigeria’s ability to control its agricultural products and compete globally.
“Today, Nigeria exports raw materials such as cocoa and sesame seeds, while foreign countries process and rebrand them. Ironically, products like cocoa are often labeled as coming from countries like the Netherlands, even though the raw materials originate from Nigeria. “Despite contributing significantly to global cocoa production, Nigeria earns only a small fraction of its potential revenue because it exports raw cocoa beans instead of finished products like chocolate.
“According to global trade patterns highlighted by the World Trade Organization, Nigeria’s participation in value-added exports remains very low. At the same time, local markets are flooded with imported goods, which undermines domestic industries and leads to factory closures.”
For Gertrude Akhimien, Lagos Chairman, Nigerian Association of Small Scale Industrialists (NASSI), the idea of industrial clusters is laudable, but it has not been properly implemented.
Akhimien lamented that problems faced in these clusters included erratic power supply, multiple fees, lack of skilled workers, activities of state and non-state actors among others.
The NASSI boss further pointed to manufacturers reducing their freight costs by outsourcing, adding that some others have gone into partnerships with freight companies to increase production capacity .
For the exchange rate volatility, she said it has caused a rise in the cost of raw materials and consequently increased the price of goods.
“The trickle down effect has made many products inaccessible to consumers whose incomes have dropped with inflation.”
She said: “Industrial clusters were created to provide the MSMSEs conducive environment for manufacturing products. The idea was to provide shared facilities to enable the MSME to reduce their costs of production.
“The idea thought laudable has not been properly implemented. The problems faced in these clusters include the following;
“ Erratic power supply. In one of the clusters in Lagos, the electricity supply is inadequate to carry the machinery and equipment . It is recommended that there should be an upgrade from 11 thousand KV feeder to a 33 thousand KV feeder to provide enough electricity supply to the facility.
“Government agencies inundate those in the cluster with many different types of levies and fees. This goes against the principle of government protection of MSME, to enable them to grow their business.
“Difficulty in getting skilled workers, especially machine operators. There needs to be a strategic approach to training youths to acquire skills in machine operations and maintenance.
“The activities of state and non-state actors. Movement of finished goods and raw materials is a problem because at different roadblocks demands are made for payment for different reasons. These payments add to the cost of the finished product.”
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