Manufacturers seek tax relief to fund cleaner energy
Nigeria’s manufacturers have called on the Federal Government to introduce a 30 per cent Green Investment Tax Credit for companies investing in renewable energy and hybrid power systems, arguing that the rising cost of supplying electricity independently is undermining industrial productivity and increasing the cost of locally produced goods.
The proposal was presented by the Director-General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, in the association’s 2025 annual report, reported on October 19, 2026. It is intended to encourage manufacturers to invest in alternatives such as solar power, liquefied natural gas (LNG) and hybrid energy systems rather than depend heavily on expensive and unreliable electricity supplies. <Cite refs={["turn751611search0","turn751611search15"]}/>
The request comes as manufacturers’ annual spending on alternative energy reportedly increased by 20.72 per cent to ₦1.34 trillion in 2025, compared with ₦1.11 trillion in 2024. The figures highlight the financial burden faced by factories that must secure their own power to maintain production when public electricity supply is insufficient or unreliable. <Cite refs={["turn751611search0"]}/>
However, the proposed tax credit remains an industry recommendation. No government approval or implementation timetable was established in the reporting, and manufacturers cannot yet treat the suggested 30 per cent incentive as an available benefit.
Why energy costs matter to Nigerian businesses
Electricity is a major operating expense for manufacturers because it powers machinery, production lines, refrigeration, processing equipment, lighting, ventilation and other essential industrial systems.
When grid electricity is unreliable, companies often turn to diesel generators, gas-powered systems, solar installations or a combination of these options. Although alternative power can keep production moving, installing and operating such systems requires substantial capital and ongoing expenditure.
MAN’s reported figures suggest that the burden has grown considerably. The ₦1.34 trillion spent on alternative energy in 2025 was ₦230 billion higher than the previous year’s reported total.
That additional expenditure represents money businesses may otherwise have invested in expanding production, maintaining equipment, developing new products, improving worker training or hiring more staff.
The financial consequences can extend beyond factory owners. Where companies cannot absorb higher energy costs, some may raise prices, reduce output, delay expansion or reconsider whether particular production lines remain commercially viable.
Consumers can ultimately bear part of the burden through higher prices for manufactured goods. Businesses that cannot pass the full increase to customers may instead experience narrower profit margins.
The effects are not identical across the manufacturing sector. Energy requirements vary widely between industries, depending on production methods, equipment, location, access to gas and electricity, and the amount of power needed throughout the day.
Nevertheless, manufacturers’ latest appeal places energy affordability at the centre of the debate about Nigeria’s industrial competitiveness.
How the proposed 30% tax credit could work
A Green Investment Tax Credit would generally allow eligible businesses to offset an approved portion of qualifying investment costs against their tax liabilities, subject to the rules established by government.
Under MAN’s proposal, a 30 per cent credit could make investments in renewable energy and hybrid power infrastructure more financially attractive to manufacturers.
For example, if a company invested ₦100 million in an eligible energy project, a credit calculated at 30 per cent would amount to ₦30 million. This is an illustration of the proposed rate, not a confirmation that any manufacturer is currently entitled to such a credit or that the government has adopted this calculation method.
The actual benefit would depend on the final policy design, including which technologies qualify, what costs are eligible, whether the credit is refundable or carried forward, and how businesses would claim it.
The government would also need to determine whether the incentive applies to new installations only or covers upgrades to existing systems. Rules would be required to prevent duplicate claims and establish how investments are verified.
If properly designed, such an incentive could reduce the effective cost of installing cleaner energy systems and improve the business case for long-term investment.
But the benefit would not necessarily be equal for every company. Firms with substantial taxable profits might be better positioned to use a non-refundable tax credit than smaller businesses with limited tax liabilities. The structure of the scheme would therefore matter as much as its headline percentage.
Solar, gas and hybrid power in focus
MAN’s proposal includes investment in renewable and hybrid captive power systems, with solar and LNG among the energy options identified in the report. <Cite refs={["turn751611search0"]}/>
Solar installations could help factories generate some of their electricity during daylight hours. Depending on the system’s design, battery storage and production schedules, they could reduce the amount of electricity purchased from the grid or generated with diesel.
Hybrid systems combine different sources of energy to improve reliability. A factory might use solar power when conditions permit and rely on another source to meet demand when solar output falls or production needs increase.
LNG-powered generation can also provide industrial electricity, although its affordability depends on gas prices, supply reliability, infrastructure, equipment and operating costs. It should not automatically be treated as cheaper or cleaner in every situation.
Manufacturers will need to evaluate the technical and financial suitability of each option for their facilities. A system that works for a warehouse or small processing plant may not be sufficient for an energy-intensive industrial operation.
For some companies, the biggest savings may come from combining power generation with energy-efficiency improvements, better equipment maintenance, improved load management and reduced wastage.
A tax incentive could help fund these investments, but it would not remove the need for reliable fuel supply, technical expertise, maintenance services and predictable energy-sector regulation.
MAN calls for a more predictable gas-pricing framework
Alongside the proposed tax credit, Ajayi-Kadir urged the government to establish a stable and transparent gas-pricing framework and recognise manufacturers as strategic users of gas. He also called for domestic supply to receive priority before exports. <Cite refs={["turn751611search0"]}/>
Gas is an important input for businesses that use it directly in industrial processes or to generate electricity. Changes in price or supply can affect production budgets, particularly where factories cannot easily switch to another energy source.
A predictable pricing framework could help businesses plan operating expenses and assess the financial returns on new equipment.
However, prioritising domestic supply would require careful consideration of producers’ investment incentives, contractual obligations, infrastructure capacity and the needs of other consumers. A policy that improves access for one group should also avoid creating unnecessary uncertainty elsewhere in the energy market.
The challenge for policymakers is to make energy available at competitive prices while supporting investment in the infrastructure required to produce, process, transport and distribute it.
Direct electricity purchases for industrial clusters
The manufacturers’ association also called on the Nigerian Electricity Regulatory Commission (NERC) to prioritise Eligible Customer status for industrial clusters. The arrangement can allow qualifying large electricity users to purchase power directly from generation companies under applicable regulatory conditions, potentially through dedicated feeders. <Cite refs={["turn751611search0"]}/>
The proposal is aimed at reducing manufacturers’ dependence on costly self-generation and improving access to more reliable electricity.
Direct supply arrangements can create opportunities for power generators and large users to negotiate commercial terms suited to industrial demand. But the results depend on the availability of generation, transmission or dedicated distribution infrastructure, contractual arrangements and the relevant regulatory approvals.
Such a system would not automatically solve electricity problems for every factory. Smaller firms may lack the demand, infrastructure or financial capacity needed to participate individually, making industrial clusters and shared power arrangements potentially important.
The wider policy question is how to improve electricity reliability for businesses of different sizes while ensuring that reforms are financially sustainable.
Potential implications for prices, investment and jobs
If energy costs remain high, manufacturers may find it harder to expand output, compete with imported products or commit to new investments.
For businesses that operate on thin margins, a sudden rise in power expenditure can force difficult decisions about prices, staffing, production schedules and capital spending.
A well-designed tax credit could encourage firms to invest in energy systems that reduce exposure to fuel-price volatility and improve the reliability of their operations. Over time, lower energy costs per unit of output could strengthen competitiveness.
But these benefits are not guaranteed. Savings would depend on the initial cost of equipment, financing rates, maintenance requirements, operating conditions and how effectively each system meets a factory’s power needs.
There is also a fiscal consideration. A tax credit could reduce government revenue in the short term, although policymakers may expect wider economic benefits from additional investment, higher productivity and business growth. The scale of those benefits would need to be assessed rather than assumed.
To evaluate the proposal, the government could establish clear eligibility criteria, reporting requirements and a review period to measure whether supported investments actually reduce energy costs and increase industrial output.
Smaller manufacturers may also require access to affordable financing and technical assistance. Tax relief alone may not help firms that cannot raise the initial capital needed to install a new power system.
What happens next?
The immediate next step is for the Federal Government to consider MAN’s recommendation and determine whether a green investment tax credit fits its wider tax, industrial and energy policies.
Any implementation would require an official policy decision and clear rules governing eligible businesses, qualifying investments, application procedures, verification and compliance.
Manufacturers will also be watching for progress on gas pricing and access to industrial electricity, two areas the association identified alongside the proposed incentive.
Until the government announces a decision, the 30 per cent tax credit should be understood as a proposal, not an approved concession.
The wider issue is whether Nigeria can reduce the cost and uncertainty of industrial power sufficiently to make local production more competitive. For manufacturers, a combination of targeted incentives, reliable electricity, predictable gas supply and better access to financing could help ease the pressure on factory operations. The extent of any improvement will depend on the policies adopted and how effectively they are implemented.
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