🍞 Manufacturing's missing decade

Hello Demilade here!

Happy Eid to all of you who were lucky to start your weekend on Wednesday!

Today’s Newsletter is a microcosm of Nigeria’s economy and potential. Our lead story is about the manufacturing industry and what they need to get going. I also touch on AfDB’s reduced GDP growth forecast for Africa, and challenges facing the aviation industry.

Hope you have a great weekend ahead!

Enjoy!!

The case manufacturers are making

35% of production costs go to energy because the national grid meets less than 5% of what the country actually needs. Manufacturers self-generate their energy resources and diesel does the work the grid should do. Add multiple taxation across federal, state, and local layers, expensive short-term credit, port bottlenecks, and import competition from countries with functional electricity, and the cost stack tells you why factories struggle to compete even on home soil. To play in the Manufacturing space in Nigeria, you have to “Bring your own infrastructure.”

The Electricity Act of 2023 transferred regulatory authority to state governments and approved a N3.3 trillion legacy debt settlement for power plants. Three years on, the grid has not meaningfully improved; some may say it’s even deteriorating, with more frequent blackouts happening every day. State-level reform is still mostly on paper. The new Nigeria Tax Act and the Economic Development Incentive scheme have at least started to move the tax side: lower headline corporate tax, recoverable input VAT on assets, and a five-year capital expenditure credit. The fiscal lever is being pulled. The power lever is not.

Why this matters more than it used to

For most of the last twenty years, manufacturing has hovered around 8 to 9% of Nigerian GDP. Comparable middle-income economies sit closer to 15 to 20%. Poland, which a generation ago looked structurally similar to Nigeria, is now around 17%. Without a solid manufacturing base, the country is restricted to import dependency; furthermore, it affects jobs, tax revenue, and FX earnings that the country leaves on the table.

The S&P upgrade two weeks ago and the CBN's recent rate hold have stabilised the top of the funnel i.e capital is cheaper to attract. Unfortunately, sovereign credibility and monetary policy alone cannot build factories 🙃. Stable electricity, predictable port policy, and a competitive tax regime do.

Positive signs from Q1 2026

NBS data released last week showed manufacturing's contribution to GDP rebounded sharply in Q1 2026 to its strongest level in years, with real growth of 3.29% year on year. It is one quarter. It coincides with the early effects of the new tax code and the early signs that the Lagos Industrial Policy is moving from paper to permitting. MAN is targeting a full-year contribution of 10.2%, which would be the highest since the early 2010s.

Portfolio angle: The manufacturing story is the test of whether Nigeria's reform package translates into the real economy. FX has stabilised. Sovereign credit has been upgraded. Banks have recapitalised. Listed industrials and FMCG names have rallied with the broader market. The next leg of the rally requires the factories themselves to start growing. If Q1 2026 is a turning point rather than a one-quarter blip, this is the cycle to own industrials. If it is not, the rally was always about everything except production.

🏦 AfDB slowdown and $1.4 trillion: The African Development Bank's 2026 African Economic Outlook, released at its Annual Meetings in Brazzaville this week, contains two major stories. The first is a near-term slowdown: continental growth is projected at 4.2% in 2026, down from 4.4% in 2025, driven by rising energy prices and import costs linked to global geopolitical tensions. However, they expect this to rebound to 4.4% by 2027. East Africa is still the fastest-growing region at 5.9%, West Africa is forecast at 4.7% on agricultural and infrastructure investments, while Southern Africa lags at 2.1% because of weaker mining output and persistent energy issues. The second story is much more important. The AfDB estimates Africa could unlock up to $1.43 trillion annually through stronger tax mobilisation ($469 billion in additional revenues), improved public investment efficiency ($299 billion in savings), deeper capital markets, reduced corruption, and expanded public-private partnerships. The kicker: global institutional investors manage around $4 trillion in assets, and less than 2.7% of that capital is currently allocated to African infrastructure and productive sectors. Unlocking more of that global capital is key to Africa’s growth.

📱 Telcos respond to the data depletion problem: After months of subscriber complaints about data finishing faster than expected, Nigerian mobile network operators are rolling out new transparency tools, including a planned "data calculator" that would show subscribers exactly how their data is consumed each day, on top of the daily usage reports operators already provide under NCC rules. The NCC ran a billing audit on the major operators in Q3 2024 and reportedly found no major depletion issues. EVC Dr. Aminu Maida framed it as a perception problem driven by background apps, automatic updates, location services, and unsolicited ads. So the new tools are essentially the industry's answer to a trust deficit, not an admission of overcharging. Whether that distinction holds with subscribers - the same ones who saw MTN's 15GB weekly bundle jump from N2,000 to N6,000 in January - is the open question.

✈️ Aviation drops out of the recovery: Nigeria's aviation industry just posted its first quarterly contraction in almost two years. NBS data showed air transport shrinking 47.3% year on year in nominal terms in Q1 2026, with sector output halving from N105.77 billion to N55.74 billion. Real output fell 7.62%, ending seven straight quarters of growth. The contraction is striking partly because the Nigerian economy as a whole grew 3.89% in real terms during the same quarter, and the broader transport and storage sector remained positive at 6.51% nominal growth, helped by road logistics, courier services, and water transport. Aviation is the outlier. The CPPE pinned the breakdown on a tax and fee structure that now consumes as much as 35% of airline revenues, mirroring the same 35% figure manufacturers cited for their energy costs at last week's MAN conference.

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