Declining manufacturing tax signals weakening industrial activity — Oye

The Nigerian manufacturing sector faces mounting challenges as declining tax revenues signal weakening industrial activity, according to a new report by the Alliance for Economic Research and Ethics (AERE). The organization warns that the 31 percent year-on-year drop in Company Income Tax (CIT) revenue in the first quarter of 2026—reaching N74.48 billion, compared to N107.90 billion in the same period last year, highlights a troubling trend. This decline underscores broader issues affecting the sector, including rising production costs and shrinking profit margins. Dele Oye, chairman of AERE, noted that despite the Bank of Industry (BoI) disbursing a record N644.9 billion in loans during 2025, the support remains insufficient to revitalize the manufacturing industry. While BoI's interventions have helped sustain 1.68 million jobs and fund projects across 14 key sectors, Oye emphasized that these measures fall short of addressing deep-rooted structural problems within the economy. He pointed to the BoI’s Development Impact Report, which marks a shift toward evaluating economic progress through developmental outcomes rather than just financial metrics. The report also highlighted the central role of the Central Bank of Nigeria (CBN) in supporting productive sectors, with Oye acknowledging the bank’s efforts to bolster manufacturing through targeted policies. President Bola Tinubu’s focus on manufacturing as a cornerstone of the Renewed Hope Agenda and the 2025 Nigeria Industrial Policy was similarly praised. However, Oye stressed that these initiatives have yet to translate into tangible improvements for manufacturers, who continue to grapple with persistent obstacles such as frequent power outages, high commercial lending rates exceeding 35 percent, and unresolved foreign exchange obligations totaling over $2.4 billion. Moreover, the report identified other critical barriers to industrial growth, including excessive government borrowing, limited access to affordable long-term financing, and underutilized factory capacities, with many operating below 50 percent of their installed potential. Oye likened the current state of the manufacturing sector to a “desert of industrial thirst,” suggesting that even the BoI’s substantial loan disbursements amount to little more than a “drop of water” in a vast dry landscape. To address these challenges, Oye outlined several urgent recommendations aimed at revitalizing the sector. These include accelerating the implementation of the Nigeria Industrial Policy, restoring tax incentives for businesses operating in Free Trade Zones, enhancing the effectiveness of the National Credit Guarantee Company, reducing fiscal deficits and domestic borrowing, capping lending rates at 15 percent for manufacturing, agriculture, and technology sectors, increasing reliance on capital markets for funding, and establishing industrial clusters equipped with reliable power supplies. The report further underscored the need for rapid job creation, emphasizing that Nigeria must generate at least four million jobs annually to match population growth. With many factories functioning well below capacity, Oye warned that the continued decline in manufacturing output could have serious implications for economic stability and growth. His remarks reflect growing concerns among policymakers and economists about the sustainability of current industrial strategies and the urgency of implementing more robust reform measures.