Africa’s industrial dream at risk as high trade costs choke manufacturers

•Ajayi-Kadir, Isemede push better infrastructure, stronger regional supply chains

Nigeria and other African countries may struggle to realise their ambition of becoming major manufacturing hubs unless governments urgently address the high cost of moving goods across national borders, improve infrastructure and remove the barriers that make regional trade expensive.

Despite the promise of the African Continental Free Trade Area (AfCFTA), manufacturers across the continent continue to contend with costly transportation, cumbersome customs procedures, multiple regulatory requirements, inadequate infrastructure and other obstacles that make it difficult to produce and distribute goods competitively.

Industry leaders warn that unless these challenges are addressed, Africa could have access to a huge continental market without possessing the efficient production and distribution systems needed to exploit its opportunities.

For Nigeria, which has one of Africa’s largest consumer markets and an established industrial base, the consequences are particularly significant. The country’s ability to emerge as a regional manufacturing powerhouse will depend not only on its capacity to produce goods but also on how easily and affordably those products can reach consumers across the continent.

In a recent assessment, the Pan African Manufacturers Association (PAMA) said tariff concessions and preferential trade arrangements would deliver limited benefits if businesses could not move raw materials, production inputs and finished products across borders efficiently and affordably.

The Director-General of the Manufacturers Association of Nigeria (MAN) and Secretary-General of PAMA, Segun Ajayi-Kadir, said Africa’s industrialisation agenda must move beyond creating larger markets to building competitive production systems that support local industries, strengthen regional supply chains and connect African manufacturers to global value chains.

According to him, the continent’s growing population, rapid urbanisation and changing consumption patterns are creating enormous opportunities for manufacturing, particularly in processed foods, construction materials, household goods, transport equipment and other manufactured products.

He noted that the African Continental Free Trade Area had provided a framework for developing a more integrated continental market, while changes in global supply chains and growing investments in critical minerals were creating fresh opportunities for African economies.

“The African Continental Free Trade Area (AfCFTA) has also provided a framework for developing a more integrated continental market, while the reorganisation of global supply chains and growing investment in critical minerals present fresh opportunities for African economies,” he said.

However, he warned that Africa’s manufacturing capacity remained relatively small compared with its population and the size of the global economy, raising concerns about the continent’s ability to translate its economic potential into meaningful industrial development.

Figures from the African Development Bank’s Africa Industrialisation Index 2025 put the continent’s manufacturing value at approximately $351bn in 2025, compared with $285bn in 2020.

Although the increase represents progress, manufacturing contributed only 10.8 per cent of Africa’s Gross Domestic Product (GDP). The continent also accounted for less than two per cent of global manufacturing output and 1.4 per cent of global manufacturing exports. More concerning is the decline in manufacturing value added per person, which stood at approximately $226.7 in 2025, below the $254.9 recorded in 2014.

For Ajayi-Kadir, these figures expose a fundamental weakness in Africa’s industrialisation drive.

He observed that although manufacturing output was increasing, the pace of growth was insufficient to bring about the structural transformation required to improve the continent’s position in the global economy.

“Manufacturing output may be growing, but not rapidly enough to generate the structural transformation required to improve the continent’s position in the global economy.

“The manufacturing base is expanding, but its scale remains limited relative to Africa’s population and the global economy,” he said.

The PAMA secretary-general maintained that Africa’s challenge was not simply to establish more factories but to develop competitive industries capable of adopting technology, building local supply networks and meeting growing domestic and regional demand.

Fragmented continental market

One of the biggest obstacles to achieving this ambition is the fragmented nature of Africa’s business environment.

Although regional trade agreements are designed to create a unified market, manufacturers still have to navigate different national and regional systems involving customs procedures, product standards, transport networks, payment arrangements, tax regimes, currencies and regulatory requirements.

These differences make it difficult and expensive for businesses to move products from one country to another, even when the countries involved have signed agreements intended to promote free trade.

Citing the World Bank’s 2026 report, “Integrating Africa: From Threads to Hubs”, Ajayi-Kadir said approximately 60 per cent of Africa’s trade costs arose from obstacles within national borders, particularly customs administration, logistics, regulations and infrastructure deficiencies.

This suggests that the major obstacles to trade are not necessarily the tariffs governments impose on goods entering their markets but the administrative and operational difficulties businesses encounter before their products reach another country.

“This means that the cost of trading within Africa is driven not only by tariffs imposed on goods entering different markets but also by the administrative and operational difficulties businesses encounter in moving products across borders,” he said.

According to PAMA, many of these barriers are within the control of national governments and can be addressed through deliberate policy reforms, infrastructure development and more efficient trade administration.

The association argued that the true size and value of a market should not be measured solely by the number of potential consumers but also by how easily and affordably manufacturers can reach them.

For manufacturers, access to a large market is commercially meaningful only when goods can be transported, cleared and delivered without excessive costs and delays.

This is particularly important because manufacturing depends heavily on economies of scale. Investments in machinery, factory buildings, quality assurance systems, engineering, product development and management require businesses to produce and sell sufficient quantities of goods to recover their costs.

Where manufacturers are restricted to small domestic markets or face prohibitive expenses accessing neighbouring countries, their ability to increase production and compete with larger international manufacturers becomes limited.

Ajayi-Kadir said regional integration could provide African manufacturers with access to larger markets, allowing them to expand production, spread their fixed costs across more products and improve competitiveness.

“Regional integration could provide African manufacturers with access to larger markets, enabling them to expand production, spread fixed costs and improve competitiveness,” he said.

He explained that stronger regional production networks would also allow African countries to specialise in different stages of production, combine their industrial capabilities and attract investments in sectors that individual national markets might not be able to sustain independently.

The World Bank identified processed foods, petrochemicals, minerals and metals, machinery, transport equipment, textiles, energy and services as areas where stronger regional production networks could deepen industrial capacity.

For instance, countries with strong agricultural production could supply raw materials to neighbouring economies with established processing facilities.

Similarly, manufacturers could source intermediate products from different parts of the continent, combine them in their factories and assemble finished goods for distribution across regional and international markets.

Such arrangements would reduce dependence on imports from outside Africa, strengthen local supply chains and create opportunities for countries to develop industries around their areas of competitive advantage.

For Nigeria, this could mean sourcing agricultural produce and other industrial inputs from neighbouring countries, processing them locally and exporting finished products to wider African markets.

It could also enable Nigerian manufacturers to supply intermediate products to factories in other African countries, creating opportunities beyond the domestic market.

However, achieving these benefits would require governments to address the practical challenges that continue to make cross-border trade expensive.

Power, financing and logistics worsen the situation

Beyond customs procedures and regulatory bottlenecks, African manufacturers are battling fundamental production challenges that weaken their ability to compete.

According to PAMA, a survey of more than 100 manufacturers across the continent identified persistent electricity outages, high borrowing costs and inefficient transport logistics as the major barriers to building a competitive manufacturing sector.

These challenges are particularly serious because African manufacturers already compete against cheaper imported products and international producers who often enjoy more reliable infrastructure, lower financing costs and larger production capacities.

In Nigeria, unreliable electricity supply forces manufacturers to depend heavily on alternative energy sources, including diesel generators and other private power arrangements.

Although these alternatives help factories maintain production, they add substantially to operating expenses, making locally manufactured products more expensive.

The cost of borrowing is another major concern. High interest rates make it difficult for businesses to finance machinery, expand factories, purchase raw materials and invest in modern production technologies.

For small and medium-sized manufacturers, access to affordable financing can determine whether they expand their operations, maintain existing production levels or struggle to remain in business.

Poor roads, inadequate rail connections, inefficient port operations and weak logistics systems further increase the cost of moving goods from production centres to markets, including across national borders.

The combined effect is that locally manufactured products often become more expensive, reducing their ability to compete with imported alternatives.

The situation raises questions about how effectively Nigeria and other African economies can benefit from AfCFTA when the cost of producing and distributing goods remains high.

Although West Africa, led by Nigeria, attracts significant overall foreign direct investment (FDI), investment in manufacturing continues to face constraints arising from infrastructure deficits and inconsistent policies.

For Nigeria, addressing these challenges could strengthen its position as a regional manufacturing and production hub.

More importantly, stronger regional supply chains would create opportunities for Nigerian manufacturers to obtain production inputs from other African countries, expand their customer base and participate in industrial networks beyond the domestic market.

Despite the structural challenges, manufacturers expressed cautious optimism about business prospects in the third quarter, suggesting that opportunities for expansion remain if governments take the necessary steps to improve the operating environment.

Ajayi-Kadir urged governments and development partners to prioritise stable electricity supply, reduce financing costs, upgrade transport and logistics infrastructure and ensure that the private sector was actively involved in shaping continental trade and economic agreements.

He stressed that industrialisation policies must be informed by the realities confronting businesses rather than focusing largely on trade agreements and market-access commitments.

“Africa’s manufacturing ambitions will depend on whether the continent can move from having trade agreements on paper to building efficient production and distribution systems that allow businesses to compete.

“Without addressing the cost of doing business across borders, the promise of a single African market may remain largely untapped, with manufacturers unable to fully exploit the opportunities created by a growing population and expanding regional demand.”

For Nigeria and the rest of Africa, the next phase of industrialisation will therefore depend not just on opening markets but on making production, transportation and trade more affordable.

Nigeria’s export infrastructure needs urgent attention

Beyond the cost of production and cross-border transportation, Nigeria must also address weaknesses in its export infrastructure if it hopes to take full advantage of AfCFTA.

Trade expert and former Director-General of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), John Isemede, identified several gaps limiting the competitiveness of Nigerian businesses in regional and international markets.

These include inadequate export infrastructure, weak logistics systems, insufficient trade financing, poor port configuration, limited market development, lack of coordinated documentation processes, inadequate trade policies and poor connections between production centres and export corridors.

According to him, these shortcomings make it difficult for Nigerian businesses to move products from factories and farms to international markets efficiently.

He stressed the need to develop modern border infrastructure, container collection centres, pre-shipment inspection facilities, multimodal transport systems and transit arrangements to support trade with landlocked countries in West and Central Africa.

These facilities would help address some of the difficulties exporters encounter in transporting and processing goods before they reach their final destinations.

For example, container collection centres could provide facilities for consolidating export goods before shipment, while efficient pre-shipment inspection arrangements would help reduce unnecessary delays and repeated checks.

Similarly, multimodal transport systems that combine road, rail, inland waterways and maritime transportation would give exporters more options for moving their products at competitive costs.

The development of efficient transit arrangements is also important for Nigeria’s ambition to serve as a gateway to markets in West and Central Africa, particularly countries without direct access to the sea.

Such countries depend on neighbouring coastal economies for access to international shipping routes. Efficient ports, border facilities and transport corridors could therefore create additional trade and logistics opportunities for Nigeria.

Isemede also emphasised the need for stronger integration between Nigeria’s industrial and agricultural sectors, noting that better coordination would help maximise the benefits of AfCFTA.

According to him, Nigeria must do more to connect agricultural production with manufacturing so that locally available raw materials can support industrial growth.

This would create opportunities for food processing, textiles, packaging and other industries that depend on agricultural inputs.

Rather than exporting raw agricultural commodities and importing finished products, stronger connections between farmers, processors and manufacturers would enable the country to retain more value within its economy.

It would also create employment opportunities, improve farmers’ access to markets and provide manufacturers with more reliable sources of raw materials.

However, Isemede expressed concern over what he described as poor coordination among government agencies responsible for implementing AfCFTA.

He noted that many institutions continued to operate independently instead of pursuing a common national strategy.

This lack of coordination can create confusion for exporters, increase compliance costs and undermine the country’s ability to take advantage of opportunities offered by the continental trade agreement.

For instance, businesses may have to deal with different agencies responsible for customs, product standards, inspections, export documentation and other regulatory requirements.

Where these institutions fail to coordinate their activities, exporters may encounter repeated procedures, conflicting instructions and unnecessary delays.

Isemede’s position highlights the importance of having a coordinated national framework for implementing AfCFTA, with clearly defined responsibilities for relevant government institutions.

For Nigeria to become a competitive manufacturing and export hub, government agencies must work together, simplify procedures and provide businesses with clear information about the requirements for accessing regional markets.

The challenge, therefore, is not simply to sign trade agreements but to create the infrastructure, policies and institutional arrangements that make those agreements beneficial to businesses.

Turning AfCFTA into a practical industrial opportunity

The concerns raised by manufacturers and trade experts point to a fundamental issue confronting Africa’s industrialisation drive: the continent cannot build a competitive manufacturing sector if the cost of producing and moving goods remains unnecessarily high.

AfCFTA offers an opportunity to expand trade, attract investment, encourage industrial specialisation and develop regional supply chains. However, its success will depend largely on how effectively governments address the practical obstacles preventing businesses from accessing markets.

For Nigeria, the opportunity is enormous. Its large consumer market, natural resources, agricultural potential and established manufacturing base provide a foundation for developing industries capable of supplying products across Africa.

But these advantages can only translate into meaningful economic growth if manufacturers have access to reliable electricity, affordable financing, efficient transportation and predictable regulatory systems.

Governments must also prioritise the development of export corridors, modern border facilities, efficient ports and coordinated customs procedures.

Equally important is the need to strengthen cooperation among African countries on product standards, documentation, payment systems and trade regulations.

Reducing these barriers would make it easier for manufacturers to source inputs from different countries, establish regional production partnerships and distribute finished products across the continent.

The private sector must also be involved in developing trade policies so that government decisions reflect the actual challenges confronting manufacturers, exporters and other businesses.

Ultimately, Africa’s industrial future will depend on its ability to turn the promise of a single continental market into an efficient network of factories, suppliers, transport operators and consumers.

For Nigeria, the task is to move beyond the ambition of becoming a manufacturing powerhouse and create the conditions that will make that ambition achievable.

As Ajayi-Kadir warned, the continent’s manufacturing ambitions will remain constrained if governments focus on trade agreements without addressing the cost of doing business.

Until African manufacturers can obtain raw materials, finance production, transport goods and access neighbouring markets at competitive costs, the promise of AfCFTA will remain far below its potential.

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