In Nigeria, factories are adapting to tough economic times by relying more on homegrown materials, a move that’s helping them navigate the ups and downs of the naira’s value and scarce foreign currency.
This change comes as businesses grapple with higher costs and supply disruptions, but it’s also sparking innovation and resilience across the sector.
The push for local alternatives stems from recent policy shifts aimed at stabilizing the economy. When the government decided to let the naira float freely, it was part of broader reforms under President Bola Tinubu to boost growth and draw in investors.
However, this led to wild swings in the currency’s value, making it hard for companies to buy imported goods. With oil production, Nigeria’s main source of dollars on the decline, foreign exchange became even harder to come by.
Manufacturers, who make up around 9% of the country’s GDP, felt the squeeze intensely. Last year alone, about 800 firms closed their doors because input costs skyrocketed and dollars were in short supply, according to industry reports.
Take the case of a leading paint producer in Lagos. Just a year ago, they imported key ingredients like calcium carbonate from countries such as South Africa and Egypt. But with exchange rates changing by the minute, placing orders became a nightmare.
“From a supply chain perspective, it was the worst period I’ve ever seen,” said the company’s chief supply officer, Lekan Aluko. “We’d issue a purchase order, and within seconds, it was rejected because prices were so unstable.”
To survive, the firm switched to sourcing 90% of that material from three local vendors. This not only cut their costs by nearly 60% in the first 10 months but also shielded them from forex risks. Their CEO, Bolarin Okunowo, explained the urgency: “In an environment where the exchange rate is so volatile, it pushed us to act as costs kept rising and the naira depreciated sharply.”
Without this shift, they might have hiked prices by an extra 50%, but now they can keep increases below actual inflation levels, making products more affordable for everyday Nigerians.
This trend isn’t isolated. Across the board, manufacturers boosted their use of local raw materials to an average of 57.1% last year, a jump of five percentage points from the previous period.
In the glass bottling industry, one major player started partnering with international suppliers who now import soda ash directly to Nigeria and bill in naira, avoiding dollar dealings altogether. “Using our hard-earned dollars for raw materials felt like we were just working for the banks,” said Alex Gendis, CEO of the glass company, pointing to lending rates above 25% that add extra pressure.
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Even in oil-producing areas like Rivers State, where industrial activities often tie into energy resources, businesses are echoing these strategies. Factories there, dealing with similar infrastructure hurdles like poor roads and unreliable power, are exploring local partnerships to reduce import dependence.
This not only cuts costs but also supports nearby communities by creating jobs for local suppliers, though challenges remain, many domestic producers still lack the capacity to meet high demands fully.
Economists see this as a silver lining in the chaos. Dumebi Oluwole from a Lagos-based analytics firm noted that companies are getting creative: “Most manufacturers are innovating in how they procure, process, and distribute materials, with more collaboration along supply chains.” Multinational giants like Procter & Gamble and Unilever have scaled back, but those staying are adapting similarly.
Looking ahead, there’s cautious optimism. The naira has steadied somewhat since the initial devaluation, and business confidence is rising, fueled by better consumer spending outlooks. Gendis added, “Things are trending in the right direction.”
For workers in these factories, many supporting families amid rising living costs, this shift means more stable jobs and a chance for the sector to build long-term strength. While hurdles like regulatory uncertainties persist, this local focus could redefine Nigeria’s manufacturing landscape, turning economic hardship into a foundation for self-reliance.
