…19.7% year-on-year increase

•70% manufacturing inputs imported – RMRDC

•Structural weakness compels manufacturers to import – MAN

•It’s failure of import substitution policy – LCCI

•Why import substitution is important – CPPE

Contrary to plans and expectations, Nigeria’s manufacturing sector is increasingly depending on imported raw materials for survival, a development which has undermined the government’s import substitution policy.

Financial Vanguard’s findings revealed that raw materials imports increased by 19.7 per cent, year-on-year (y/y) to N3.53 trillion in the first half of 2025 (H1’25) from N2.95 trillion in the corresponding period of last year (H1’24).

Data obtained from the National Bureau of Statistics, NBS, shows major imports to include sugar cane and associated products for the sugar refining and confectionary industries, additives for lubricating oils manufacturers, sheets for veneering, hides and skins for leeather products.

The imports were largely coming from Brazil, United States of America, United Kingdom, France, China, Germany and Tanzania.

There were also heavy raw materials imports in cement manufacturing, especially in such products as gypsum, while paint producers rely on importation of binders and resins.

Manufacturing sector stakeholders said the country’s rising dependence on imported raw materials was at variance with the import substitution goal of the government, posing a significant concern to the stakeholders, with pressure on the nation’s foreign exchange resources.

Import substitution is a government policy to replace imported goods with locally manufactured ones to stimulate the domestic economy, conserve foreign exchange and create jobs.

Analysts suggest that the importation of a large percentage of Nigeria’s manufacturing inputs is aggravated by high energy costs, lack of local processing capacity and currency devaluation.

70% manufacturing inputs imported, needs 60% reduction – RMRDC

Raising concerns about Nigeria’s excessive dependence on imported raw materials, Director General of Raw Materials Research and Development Council, RMRDC, Prof. Nnanyelugo Ike-Muonso, disclosed that over 70 per cent of the inputs used in the country’s manufacturing sector were still sourced from outside the country.

According to him, this development reflects a major structural weakness that reduces the sector’s contribution to GDP, hinders job creation, and increases production costs. He added that the over-reliance on imported inputs, compounded by factors such as exchange rate volatility, had driven costs off limits of sustainability and threatens Nigeria’s industrial future.

He warned that unless urgent reforms were made, the country risked remaining locked in a cycle of economic dependency.

He called for bold reforms to boost local resource utilisation and drive industrial transformation, adding that Nigeria must reduce its dependence on foreign raw materials by at least 60 per cent over the next five years to reposition itself as an industrial powerhouse.

To further strengthen in-country raw material processing, he disclosed that the federal government recently granted RMRDC the authority to implement significant tax incentive designed to reward manufacturers and innovators using locally sourced inputs in their production processes.

“Very soon, manufacturers who research, develop and patronise local raw materials will pay significantly lower taxes than those who do not. This is now an instrumental tool for attracting private-sector investment and stimulating technology-driven manufacturing.

“In general, it is clear that to reposition Nigeria as an industrial powerhouse, we must reduce foreign raw material imports by at least 60 per cent in the next five years and significantly increase local resource utilisation; incentivise value addition through technology adoption and tax support; support the emergence of industrial hubs and clusters around strategic raw material zones; deepen research–industry collaboration for tailored innovation; facilitate technology transfer, infrastructure finance, and SME integration across the manufacturing spectrum,” Ike-Muonso stated.

Structural weakness compels manufacturers to import – MAN

Director General of the Manufacturers Association of Nigeria, MAN, Segun Ajayi-Kadir, said the cost of imported raw materials and machinery was a major expense for Nigerian manufacturers, especially due to the high cost of energy and currency depreciation.

He lamented that raw materials imports amounted to N6.64 trillion in 2024, with over 70 per cent of manufacturing inputs sourced from abroad, adding that the structural weakness in the economy was making many manufacturing processes requiring imported components, even for basic products.

He added that many manufacturing companies had scaled down or suspended their previous backward integration plans due to fiscal headwinds against their operations, including insecurity, and emphasised the need for the government to incentivise local processing

“The government should initiate policies focused on encouraging value addition through technology adoption and financial incentives; support the emergence of industrial hubs and research-industry collaborations is crucial for developing tailored local innovations; and adopt smart technologies and resource-efficient processes which are key for building a sustainable and competitive manufacturing sector.

“Locally sourced raw materials are supposed to be cheaper. But sadly, in some cases, we discovered that the imported ones are even cheaper. How do you encourage people to buy local materials?” the MAN DG queried.

According to him, the African Continental Free Trade Area, AfCFTA, is seen as a positive step that can help Nigerian companies access raw materials from other African countries and process them for export.

He added that there was urgent need for policies and investments that promote local content development, advanced technology and value addition to raw materials.

On his part, a former President of MAN, Mansur Ahmed, said: “Our manufacturing sector is weak because it is dependent on imported materials that we then process. We must, therefore, scale up or scale down. Our manufacturers have to go back and do the transformation. We in manufacturing need to focus on this issue. We need to build infrastructure.

“We need to work with the government and, indeed, other stakeholders to ensure that the overall long-term transaction is for us to move our manufacturing sector from where we are today to where we should be, which is less dependence on imported materials, on foreign exchange, and lack of dependence on machinery and spare parts.”

It’s failure of import substitution policy – LCCI

President of Lagos Chamber of Commerce and Industry, LCCI, Gabriel Idahosa, cited the failure of Nigeria’s import substitution strategy as a major reason for the country’s over-reliance on imported raw materials.

According to him, importation of raw materials for production purposes may not be particularly injurious to the local economy if Nigeria is able to equally export raw materials to other countries to make up for the forex spent on our importation needs.

He stated: “Many are just involved in importing their raw materials. In some areas, we cannot do backward integration because we do not have the raw materials or the technology to do it. If you are manufacturing a car in Nigeria, you cannot backward integrate to start building engines or even produce tires. You more or less still import most of the components and just put them together.”

Why import substitution is important – CPPE

Also commenting, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, CPPE, Dr Muda Yusuf, underscored the importance of import substitution policy for national development.

He noted that the government’s support for the manufacturing sector to effectively implement import substitution could revolutionise the economy.

“The government must provide appropriate policies that encourage manufacturers to backwardly integrate and reduce dependence on imported raw materials. This will automatically lower production costs and enable manufacturers to diversify into various value chains within the sector,” Yusuf added.

Despite the challenges, the RMRDC boss, Ike-Muonso, emphasised Nigeria’s vast potential, pointing to over 120 commercially viable solid minerals, abundant agricultural resources, and a youthful population.

He said, “What we lack is not potential, but strategic coordination, bold implementation, and technology-backed commitment. As the world transitions into smart, circular, and efficient production systems, we must not lag.”

Ike-Muonso stressed the need for Nigeria to fully embrace the Fourth Industrial Revolution, urging stakeholders to adopt smart technologies, resource-efficient processes, and a national industrial ethos anchored on sustainability.

He added, “A strategic push towards manufacturing, leveraging local raw materials and skilled labour, can propel Nigeria towards self-sufficiency in essential goods and reduce reliance on imports.”

On RMRDC’s efforts, he pointed to the Research and Demonstration Plant Complex, RDPC, of the RMRDC in Abuja, which houses over 50 pilot plants designed and fabricated locally to convert indigenous materials, such as cassava, talc, and shea, into finished industrial products.

Recall also that in a move to boost efficient use of local raw materials, the National Assembly recently passed the Raw Materials Research and Development Council (Establishment) Amendment Bill (2025), which mandates that no raw material leaves the country’s shores unless they have undergone at least 30 per cent processing or value-addition, aimed at drastically cutting the export of unprocessed commodities. (VANGUARD)