Nigeria's manufacturing growth eases as power cuts and cost pressures intensify, NESG report shows

Frequent electricity interruptions, climbing production expenses and constrained access to finance are dampening the pace of manufacturing growth in Nigeria, according to the Nigerian Economic Summit Group's (NESG) Business Confidence Monitor for October 2026. While the sector remained in expansion territory, its Current Business Performance Index slipped to 107.The figure dropped to 3 points in October, a decrease from the previous 108.In September, the value was 4 points, with a total of 111.A figure of 3 points was noted one year prior.

The NESG report highlights that power outages, insufficient raw‑material supplies, high rental rates, limited credit and broader infrastructure deficits are the chief constraints confronting manufacturers. These factors have pushed operating costs higher, forcing many firms to rely on costly backup generators and other alternative energy sources.

Background

The Business Confidence Monitor, released monthly by the NESG, tracks performance across Nigeria's economy using a series of sub‑indices. In the October edition, the broader Current Business Performance Index for the whole economy fell to 115.4 points from 117.September saw a score of 8 points, although the level remained higher than 111.October 2025 recorded a value of 3 points. While every key sector kept growing, just Trade and Services outperformed the prior month, as Agriculture, Manufacturing, and Non-Manufacturing all experienced decelerating expansion.

Within manufacturing, the report notes divergent trends among subsectors. Textile, Apparel and Footwear moved into contraction, with its performance index dropping sharply to 99.7 points from 127.5 points in September. Cement also stayed in contraction at 94.5 points. By contrast, Food, Beverage and Tobacco remained in expansion and was the sole subsector among the three major groups to improve its index.

Cost‑related sub‑indices underscore the pressure on firms. The sub-index measuring business expenses was positioned at 45.This represented 2 points, whereas the prices sub-index registered 65.Amounting to 5 points, these figures were significantly lower than the 100-point neutral threshold, suggesting that the majority of firms still encounter high operational expenses and producer pricing.

Why it matters

Manufacturers rely heavily on a stable power supply to run production lines, process raw materials and maintain factory operations. The NESG data suggests that unreliable electricity is eroding competitiveness by compelling firms to incur additional expenses for generators, diesel and maintenance. Higher input costs and limited credit further strain profitability, potentially curbing investment and employment in a sector that traditionally contributes significantly to Nigeria's GDP and export earnings.

The slowdown in key subsectors such as textiles and cement signals broader vulnerabilities in the industrial base, especially as the country seeks to diversify away from oil dependence. Persistent cost pressures could also affect downstream industries, including construction and consumer goods, which depend on locally produced inputs.

What happens next

Even amidst present challenges, the NESG's Future Business Expectations Index climbed to 130.This marked an increase of 8 points in October compared to 128.September showed 9 points, reflecting increasing confidence regarding conditions in the coming one to three months. Manufacturing's own expectations index increased to 145.This was 1 point, lagging behind Trade's 194 points but surpassing Non-Manufacturing's 135 points. The group attributes this upbeat outlook to anticipated stronger consumer demand during the year‑end festive period and ongoing political campaign activities.

The NESG has not announced specific policy interventions in this release, but the data suggests that addressing electricity reliability, easing credit constraints and managing input costs will be critical for sustaining manufacturing momentum in the months ahead.