Declining manufacturing tax signals weakening industrial activity — Oye
By Yinka Kolawole
The Alliance for Economic Research and Ethics (AERE) has warned that the decline in manufacturing tax revenue in the first quarter of 2026 reflects weakening industrial activity, urging the Federal Government and the Central Bank of Nigeria (CBN) to implement far-reaching reforms to revive the productive sector.
In a policy brief, Chairman of AERE, Dele Oye, acknowledged the Bank of Industry’s (BoI) record N644.9 billion loan disbursement in 2025 but argued that the intervention, though commendable, is inadequate to transform Nigeria’s manufacturing sector.
The manufacturing sector recorded a 31 per cent year-on-year decline in Company Income Tax (CIT) revenue to N74.48 billion in the first quarter of 2026 (Q1’26) compared to N107.90 billion in the corresponding period of 2025 (Q1’25), and N141.84 billion in the fourth quarter of 2025 Q4’25), reflecting the impact of rising production costs and weakening profit margins.
He praised BoI for supporting 1.68 million jobs and financing projects across 14 strategic sectors, describing the bank’s maiden Development Impact Report as a landmark shift from measuring success by loan volumes to assessing development impact.
Oye also commended CBN for policies supporting productive sectors and lauded President Bola Tinubu for placing manufacturing at the centre of the Renewed Hope Agenda and the 2025 Nigeria Industrial Policy. Despite these efforts, he lamented that manufacturers continue to face severe structural constraints, including chronic power shortages, commercial lending rates above 35 per cent, unresolved $2.4 billion foreign exchange forward obligations, rising government domestic borrowing and the lack of affordable long-term financing.
“The manufacturing sector, which should be the engine of this transformation, is gasping. Q1 2026 has delivered a decline in manufacturing tax revenue. When manufacturers pay less tax, it is because they are producing less, selling less and slowly suffocating,” Oye stated in the report.
He described BoI’s intervention as “a drop of water in a desert of industrial thirst,” noting that Nigeria must create at least four million jobs annually to keep pace with population growth while many factories operate below 50 per cent of installed capacity.
Oye called for accelerated implementation of the Nigeria Industrial Policy, restoration of tax incentives for firms in Free Trade Zones, strengthening of the National Credit Guarantee Company, reduction in fiscal deficits and domestic borrowing, a cap of 15 per cent on lending rates to manufacturing, agriculture and technology, deeper capital market funding and the establishment of industrial clusters with dedicated power supply.