Manufacturers Worry As Nigeria’s Economy Now 57% Service-driven

Nigeria’s economy is increasingly dominated by the services sector, now accounting for 57 percent of GDP—a structural tilt that is triggering alarm among industrialists, who warn that the country is drifting into deindustrialisation.
At the heart of this concern is the growing exodus of manufacturers facing suffocating operating costs, unstable infrastructure, and what many describe as an avalanche of taxes and levies from all levels of government.

“The economy is now about 57 per cent services,” said Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise (CPPE), during the annual tax conference of the Chartered Institute of Taxation of Nigeria (CITN) in Abuja. “Many manufacturers are abandoning the sector because they are overburdened by energy costs, logistics bottlenecks, forex volatility, and customs duties. If you are in the service sector, you don’t need a 100 KVA generator or to clear containers from the ports.”
Yusuf said the shift away from manufacturing is not a function of market evolution but a reflection of structural dysfunction. Manufacturers, he explained, are increasingly forced to build their own roads, power their facilities with diesel generators, and provide water—basic infrastructure that should be public.
Segun Ajayi-Kadir, director-general of the Manufacturers Association of Nigeria (MAN), echoed the warning, saying multiple taxation is one of the biggest threats to industrial survival in the country.

“The duplication of taxes—sales tax, VAT, education levies, land use charges, tenement rates—raises production costs, erodes margins, and discourages investment,” Ajayi-Kadir said. “Small and medium manufacturers are hit the hardest, and this Zndermines Nigeria’s ability to compete under the African Continental Free Trade Area (AfCFTA).”
In 2023, a MAN survey found that 89 per cent of its members cited multiple taxation as a major constraint on productivity and growth.
The lived experience of manufacturers offers a clearer picture. In Aba, the commercial hub of Abia State often dubbed “the Japan of Africa,” Chinedu Okafor runs a second-generation shoe factory once started by his father in the 1980s. Back then, he recalled, the city buzzed with enterprise and the hum of production. Now, the scene is bleak.
Standing in his factory, Chinedu recently received his fourth tax notice in a month—this time labeled an “Environmental Impact Compliance Charge.” It joins a long list that includes income tax, company tax, education tax, signage fees, waste disposal levies, and a so-called “developmental contribution” demanded by community leaders.
“There’s no road to my factory, electricity is erratic, and I spend hundreds of thousands monthly on diesel,” he told NATIONAL ECONOMY. “What am I paying all these taxes for?”
He is not alone. At a recent meeting of manufacturers, one participant from Lagos recounted how her bottled goods were impounded by touts claiming to be collecting a “Market Access Levy.” Another said he had to pay both local and state fees to transport goods on a single route.
In all, manufacturers face more than 70 taxes and levies across the three tiers of government, according to a document obtained by NATIONAL ECONOMY from MAN. The breakdown includes 23 taxes by the federal government, 25 by state governments, and 22 by local governments.

Dr. Yusuf of CPPE said the problem is worsened by regulatory duplication. “You have environmental levies collected by both federal and state authorities. In the Niger Delta, there’s even a special tax for the environment, layered on top of these. Some regulatory fees are just too burdensome.
“And then there are these nuisance road agents—touts collecting money with impunity under the guise of local government mandates. Whether you’re moving raw materials or finished goods, they extort you. That’s not taxation. That’s lawlessness,” he added.

Yusuf said Nigeria’s ongoing tax reforms are expected to streamline the system, but warned that informal and unofficial extortion must also be addressed separately. “The miscreants on the roads are not captured in the new tax reform bill. That’s a law enforcement problem, and it must be tackled decisively.”
Princess Bakare Okeowo, vice president of the Lagos Chamber of Commerce and Industry (LCCI) and managing director of FAE Limited, described the issue as an “open secret.”
“A paper on tax reforms has been presented to the federal government and may soon be signed, but I feel saying too much now might be premature,” she said. “If it goes the wrong way, we’ll cry out.”

Manufacturers said the fragmented fiscal environment not only hurts profits, but also investment, employment, and competitiveness. A manager at a Lagos-based bottled water company said operational costs tied to tax compliance now outweigh investment in machinery, staff, or innovation.
“As costs rise, so do product prices,” he said. “That’s why Nigerian-made goods are losing market share both locally and regionally. Some of us are already exploring Ghana or Benin Republic.”

Professor Tayo Bello, a development economist at Adeleke University, said the real crisis is one of policy dissonance. “The federal government wants to boost local production, but states and LGAs are imposing levies without considering the macroeconomic effects. This disconnect not only discourages investment—it erodes trust.”
MAN noted that high tax burdens inflate operating costs and deter both local expansion and foreign investment. “Multiple taxation leads to business closures, capital flight, and the spread of informality. It also drives up unemployment and reduces industrial output,” the association said.
In the absence of coordinated reform, analysts warned that Nigeria’s manufacturing base will continue to shrink—accelerating its shift to a service-led economy that may prove less resilient, less inclusive, and increasingly import-dependent.