Nigeria’s manufacturing sector is showing signs of a stronger recovery as improved business activity and rising corporate confidence point to renewed momentum in industrial production, even as persistent infrastructure and financing constraints continue to weigh on operators.
The latest Nigerian Economic Summit Group (NESG) Business Confidence Monitor shows that manufacturing recorded the strongest business performance among the major sectors in August 2026, with its Current Business Performance Index rising sharply to 120.4 points from 110.5 points in July and 106.2 points in August 2025.
The improvement comes against the backdrop of faster real growth in the manufacturing sector during the second quarter of 2026. Data from the National Bureau of Statistics showed that manufacturing growth increased to 3.24 percent in Q2 2026, up from 1.69 percent in the corresponding quarter of 2025.
However, the sector’s contribution to total economic output remained under pressure. Manufacturing accounted for 7.72 percent of real GDP in Q2 2026, compared with 7.81 percent in Q2 2025 and 9.57 percent in Q1 2026.
This suggests that while manufacturing output is expanding, the sector has yet to translate the improved output into a larger share of overall economic activity.
The Manufacturers Association of Nigeria’s CEO Confidence Index increased to 52.1 in Q2 2026 from 48.7, reaching its highest level in more than two years. The improvement signals that manufacturers are becoming more optimistic about operating conditions and future demand.
‘Specifically, within the second quarter of 2026, manufacturers reported a return of confidence in doing business in Nigeria,’ the MAN report stated.
Manufacturers also pointed to recent policy developments as contributing to the improved outlook, including new tax laws, executive orders, the Nigeria Industrial Policy, and the Nigeria First Policy.
The renewed optimism is being supported by expectations of better foreign exchange access, lower borrowing costs, and greater policy stability, factors that could encourage manufacturers to increase production, rebuild inventories, and undertake delayed investments.
The NESG report reinforces this positive sentiment. Its Future Business Expectations Index rose to 129.3 points in August from 128.3 points in July, while manufacturing recorded the highest sectoral optimism at 161.2 points, ahead of trade at 149.2 points.
This means manufacturers are not only reporting stronger activity currently but also expect conditions to improve over the next one to three months.
Food, chemicals lead manufacturing expansion
The August improvement was broad-based, with Food, Beverage and Tobacco and Chemical and Pharmaceutical Products recording particularly strong expansion, according to the NESG report.
Several other subsectors also moved from contraction into expansion during the month. Plastic and Rubber Products, Pulp, Paper and Paper Products, Wood and Wood Products, and Motor Vehicles and Assembly all recorded expansion after contracting in July.
Textile, apparel and footwear also remained in expansion and performed better than in the previous month, while cement maintained an elevated level of activity despite a marginal pullback. Basic metals, iron and steel, also remained in expansion.
The breadth of the recovery is significant because it suggests that the improvement is not being driven solely by one or two manufacturing segments.
However, the recovery remains uneven. Electrical and Electronics moved into contraction, while Non-Metallic Products remained below the expansion threshold.
Policy reforms lift expectations
The improving sentiment coincides with the Federal Government’s efforts to reposition manufacturing as a central driver of domestic production and economic growth.
The Nigeria Industrial Policy, launched in the first quarter of 2026, has recorded progress in areas including financing, skills development, industrial infrastructure, exports, and support for local manufacturing.
The Ministry of Trade and Investment said it had mobilised more than $380 million in strategic financing within the first 90 days of implementation and advanced plans for a proposed N350 billion MSME Development Fund.
The government’s Nigeria First Policy has also sought to prioritise domestic industries and increase patronage of locally manufactured goods.
These measures appear to be improving business sentiment, with manufacturers increasingly expecting government policies to create a more supportive operating environment.
Despite the stronger performance, the NESG data show that the recovery is taking place under significant cost pressures.
The NESG’s August assessment found that the Cost of Doing Business Index stood at 56.7 points, while the Prices Index was 58.7 points. Both remained below the neutral 100-point threshold, indicating that a net majority of businesses continued to report rising costs and producer prices.
Manufacturers continue to face inadequate electricity supply, shortages of raw materials, high rental costs, and limited access to financing.
These constraints could limit the extent to which improved confidence translates into new factory capacity, capital expenditure, and employment.
The wider business environment nevertheless strengthened in August. Nigeria’s composite Current Business Performance Index rose to 112.7 points from 108.6 in July and 107.3 in August 2025, with manufacturing emerging as the strongest-performing sector.
Stronger Q3 outlook
Manufacturers’ Q3 expectations reinforce this outlook, with business conditions, employment, and production indices projected at 55.6, 55.2 and 63, respectively.
The NESG survey also found that manufacturing had the strongest near-term optimism among all sectors, suggesting that manufacturers are positioning for higher demand and activity.
Still, sustaining the momentum will depend on whether policy improvements are matched by tangible reductions in production costs, better power supply, easier access to credit and foreign exchange, and improved infrastructure.