The 2025 REX Index of Industrial Development in Africa, released recently by Business Council for Africa, affirmed that Nigeria is not one of the African countries with structural conditions for industrialisation. According to The PUNCH report, Egypt, Mauritius, Morocco, and South Africa are ready structurally to sustain high-growth industrialisation. Albeit, as usual, the potential is there. Nigeria is always about potential that is rarely realisable. But Nigeria needs rapid industrialisation for a drastic reduction in the current level of unemployment. Every year, the country’s tertiary institutions turn out hundreds of graduates who are saved from unemployment for one year when the majority of them serve the country as national youth corps members.
Beyond the President going abroad to solicit foreign direct investments, we need to ask ourselves about the availability of the structural conditions to promote industrialisation, and then the structural conditions to sustain large-scale industrialisation. The key words there are promotion and sustainability, but one is also the extension of the other.
Structural conditions to promote industrialisation include the existence of human capital, sound financial architecture, and stable policy frameworks that would enable a shift from an agricultural-based economy to a manufacturing-driven one. The key drivers, therefore, include availability of skilled manpower, accessibility to short-, medium- and long-term finance, investments in soft and hard infrastructure, and stable macroeconomic policy under a stable political environment.
Studies, including a comprehensive report from the United Nations Industrial Development Organisation, a specialised agency of the United Nations that focuses on promoting, among other functions, inclusive and sustainable industrial development, have documented some critical conditions necessary for promoting industrialisation. In broad headlines, we have, firstly, the existence of hard and soft infrastructure, which refers to energy, transportation, and digital infrastructure. Second is the human capital and labour, where the concern is about the availability of educated and technically skilled labour with a high level of productivity and ability for technology adoption/adaptation, as well as unskilled labour for general work.
A third condition is the existence of robust financial and economic systems, involving access to finance for long-term investments; entrepreneurship and institutional support to provide a conducive environment for innovation and technological advancement, intellectual property protection, and investments in machinery and manufacturing facilities. A fourth condition is market and resource access. This relates to easy access to raw materials critical to industrialisation, as well as a strong market demand situation in which domestic and export markets exist for products to enhance economies of scale in production.
The issue of policy and legal frameworks is next, and it is a fundamental structural condition for industrialisation because it is where issues relating to strong institutions involving the enforcement of contracts, a stable, non-adversarial regulatory environment, trade policies, targeted investments, and a stable political environment are provided and protected. Such an environment is a major prerequisite, particularly for foreign investors.
We must assess the conditions of these factors within the context of the Nigerian setting with a view to determining why Nigeria does not qualify for the industrial boom reported by the Business Council for Africa and what needs to be done in some of the cases. It is not on record that Nigeria lacks the requisite manpower. There is no area or discipline that one would not find many qualified Nigerians, certificate-wise, but the depth of skill and productivity might be a problem. The solution to the problem is industry-related training.
Nigeria is a major market for foreigners seeking medical personnel, and that is because newly minted Nigerian medical doctors are trainable and can deliver professionally within a short time. They are good theoretically, but require practical training to be industrially useful. Both public and private institutions must fund equipment and facilities for practical purposes. So, it is in many fields due to the underfunding of education, where most funds go into recurrent expenditure and little to capital expenditure for the procurement of equipment for practical, complete training. So, to people like Tosin Eniolorunda, the Moniepoint CEO, who could not find 500 capable Nigerians to be employed in his business, the advice is that, just as he acquired skills over time through “learning by doing”, he can get market-qualified graduates and turn them into industry-qualified personnel through training.
Nigeria has a sound financial architecture when compared with many African countries. Structurally, there are financial institutions in both money and capital markets that can provide short-, medium-, and long-term credits to investors, but there is also the issue of competition for funds between the private and public sectors, where the latter muscles or crowds out the private sector effectively. This fundamentally creates a problem of accessibility to finance for the private sector. And that accessibility to finance is germane to promoting and sustaining industrialisation. Governments must drastically reduce borrowing from domestic financial institutions to allow private borrowing in the domestic market.
The most important constraint to manufacturing in Nigeria is the availability and cost of energy. This is particularly true of electricity. The alternative sources of energy to power industrial machines and equipment from electricity are not only more expensive for industrial use but also inefficient and ineffective. Recent laws have allowed even the private sector to generate electricity, but the government needs to provide a modus operandi and incentives. Where there is industrial concentration, firms can team up to generate electricity through some modular arrangements, while big businesses like Dangote refinery can have a stand-alone plant. In all cases, tax subsidies for a number of years can serve as an incentive to establish the plants.
The Nigerian population, conservatively estimated at 220 million, is a good market for attracting investors. But it is not the population per se; it is the capacity of that population to generate effective demand. Investors will prefer to invest in a population of 50 million citizens in the high-income bracket or in 100 million citizens in the middle-income group, rather than in a country with 200 million poverty-stricken citizens who will not be able to purchase manufactured products and thus will be unable to generate desirable profits.
We cannot expect industrialisation in a country where the government uses poverty as a weapon of political mobilisation and product demand remains ineffective. Despite huge revenue and improved revenue sharing among the three tiers of government, only 20 states are reported to be paying the minimum wage of N70,000.00 agreed in 2024! Where there are such callous politicians as in Nigeria who derive joy in managing poverty, you cannot expect industrial development and the attendant employment generation. We need to look for solutions to these structural impediments to industrialisation.
