Apart from FX volatility and higher costs, Nigeria’s huge infrastructure gaps are also increasing the burden of doing business in Africa’s most populous country. The availability of adequate infrastructure is a major determinant of the success of every country’s industrial sector. However, Nigeria does not have adequate infrastructure to grow businesses, especially developed transport systems such as roads and railways connected to the nation’s seaports.
Energy is a key element of the production process. Nigeria’s inability to supply and distribute sufficient electricity has left businesses at the mercy of generators powered by diesel and petrol, whose prices have surged in recent months. Manufacturers spend 40 percent of their total production cost on generating energy for their businesses, according to the Manufacturing Association of Nigeria, MAN.
In a June 2023 statement, the association put the annual economic loss caused by inadequate power supply at N10 trillion, accounting for almost two percent of the country’s Gross Domestic Product. While the government has pledged commitments to power projects including the Siemens Energy initiative and the enhancement of the reliability of transmission lines towards addressing power shortages in the country, experts have stressed the urgent need to address the structure of the power sector. “The government needs to consider bringing private sector investment into the transmission segment of the power sector,” Chinyere Almona, Director-General of the Lagos Chamber of Commerce and Industry, said in a statement following President Bola Tinubu’s New Year Address. “This would ensure adequate technical and financial capacity for a well-functioning sector to power economic growth,” she said.
The rising cost of energy and FX pushed the country’s inflation rate to an 18-year high of 28.2 percent in November, according to the National Bureau of Statistics.
The challenging macroeconomic issues impacted the manufacturing sector as its growth rate slowed to 0.48 percent in the third quarter of 2023, lower than 2.20 percent in the preceding quarter and 1.61 percent in the first quarter.