Nigeria’s manufacturing sector is expected to return to modest growth in 2026 after a difficult year marked by contraction, with industry groups projecting a real growth rate of 3.1 percent and an increase in the sector’s contribution to gross domestic product to 10.2 percent, provided key policy reforms are effectively implemented.
The upbeat outlook follows a challenging 2025, during which manufacturing activity was constrained by high inflation, tight monetary policy, foreign exchange volatility and structural bottlenecks. The sector recorded successive quarterly declines, with real growth falling by as much as 1.25 percent in some periods, underscoring the strain on industrial output.
In its outlook for 2026, the Manufacturers Association of Nigeria (MAN) said the anticipated recovery would depend largely on the execution of incentives under newly enacted tax laws, the operationalisation of the National Single Window Project and the effective implementation of the Nigeria Industrial Policy in alignment with the government’s “Nigeria First” policy framework.
MAN’s director-general, Segun Ajayi-Kadir, said the projections signalled a gradual rebound for a sector that has struggled to regain momentum amid macroeconomic headwinds.
“Real growth is projected to reach 3.1 percent, while contribution to real GDP is expected to rise to 10.2 percent,” Ajayi-Kadir said. “These gains, however, hinge on the effective execution of incentives under the new tax laws, the operationalisation of the National Single Window Project and the purposeful implementation of the Nigeria Industrial Policy in close alignment with the Nigeria First policy framework.”
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He noted that manufacturing recorded real growth of about 1.25 percent in the third quarter of 2025, suggesting early signs of stabilisation despite persistent challenges.
MAN also forecast improvements in macroeconomic indicators that are critical to manufacturing performance. The association expects the naira to strengthen further to between 1,300 and 1,400 to the dollar, supported by a recovery in global oil prices, stronger external reserves, improved export earnings, increased foreign investment and higher remittance inflows.
On inflation, MAN projected further moderation to around 14 percent in 2026, citing easing food prices, more stable energy costs and exchange rate appreciation. Nigeria’s headline inflation eased to 14.45 percent in November 2025 from 16.05 percent in October, offering some relief to manufacturers grappling with high input costs.
The association also anticipates a more accommodative monetary policy stance. Ajayi-Kadir said MAN expects the central bank to cut its benchmark interest rate to about 23 percent in line with the disinflationary trend, a move that could help stimulate credit expansion and output growth.
Lower lending rates, combined with the completion of the banking sector recapitalisation exercise, are expected to improve access to credit, strengthen investment and boost capacity utilisation across the manufacturing sector, he added.
On the broader economy, MAN projected overall GDP growth of about four percent in 2026, driven by higher oil output, improved fiscal space, expansion in the financial and manufacturing sectors and increased consumption linked to election-related activities in the fourth quarter of the year.
A similar, though more cautious, view was expressed by the Centre for the Promotion of Private Enterprise (CPPE). In its report titled Nigeria’s Manufacturing Sector: Outlook, Risks and Policy Priorities (2026), the think tank said manufacturing performance would improve modestly if macroeconomic stability is sustained, but warned that deep-rooted structural constraints remain a major threat.
CPPE director Muda Yusuf said the challenges facing manufacturers were “predominantly structural, not cyclical,” requiring medium- to long-term solutions rather than short-term fixes.
“Structural bottlenecks in energy, logistics and ports cannot be resolved within a single fiscal year,” Yusuf said. “However, improving macroeconomic fundamentals are expected to support better manufacturing outcomes in 2026.”
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He said firms that are backward-integrated, less exposed to foreign exchange volatility and more aligned with domestic input sourcing are likely to record stronger returns under current reform conditions.
Yusuf identified high energy and logistics costs, expensive and short-tenured financing and unmanaged import competition as the biggest risks to manufacturing growth, warning that without addressing these issues, the sector would remain structurally uncompetitive.
Both MAN and CPPE urged the government to sustain reform momentum, prioritise macroeconomic stability and avoid disruptive policy reversals, saying effective implementation of reforms in power, trade and development finance would be critical to reviving Nigeria’s manufacturing sector in 2026.
