Investors say funding is available for manufacturing and industrial projects in West Africa, but persistent policy uncertainty and structural risks continue to limit how much of that funding reaches businesses.
Discussions at the West Africa Industrialization, Manufacturing and Trade Forum on Tuesday revealed a consensus among financial stakeholders that the region’s industrial finance gap is not due to a lack of funding, but rather the risks associated with investment.
Fabrice Mpolo, senior investment manager at Norfund, said governance and policy clarity remained the most important factor shaping investment decisions in manufacturing across the region.
“Compared to Asia and Latin America, the laws in these regions are a reality for infrastructure projects to fail,” Mpolo said. “The risk exists, but it depends on how you look at it. In our view as investors in manufacturing, governance is key. We forget things like financial engineering. Governance is what makes it work.”
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He noted that while in other regions a predictable policy environment helps attract long-term industrial investment, in West Africa uncertainty drives up costs and discourages investors.
“Countries with thriving economies have established governance and discipline. We need to have confidence in the environment in which we operate,” he said.
Mpolo said operational challenges such as port congestion and logistics delays pose additional risks to manufacturers, often leading to significant financial losses that investors must take into account when making decisions.
He cited examples of manufacturers facing unexpected costs due to supply chain disruptions, noting that companies are often forced to absorb these losses without government support.
“When the ports get congested, companies lose the protection of having to pay rent. They go back to shareholders and say it cost them $2 million last year. This money should be used for other things,” he said.
He emphasized that policy clarity is important for investors seeking to assess risk exposure.
“It is important to be clear: If the ports become congested, will we get a cushion from the government?” Mpolo said.
As a result of this uncertainty, investors typically demand higher returns to compensate for the risks of operating in this region.
“Capital demands higher returns,” he says. “Money is everywhere, but it has nowhere to go here.”
Despite these challenges, Mpolo said Norfund remains committed to increasing industrial investment in Nigeria due to the country’s large market and long-term growth potential.
“We are doubling down on Nigeria. We understand that, so we are committed to taking risks,” he said. “Nigeria is a big market. We want to do more industrial work, double down on family businesses and help them grow.”
Other financial stakeholders at the forum pointed to structural gaps in the types of financing available to manufacturers, noting that concessional and blended financing structures are often directed toward infrastructure projects rather than industrial enterprises.
Ufuoma Adasen, African Finance Corporation vice president for heavy industry, communications and technology, said long-term concessional loans tend to favor infrastructure projects, while manufacturing industries tend to rely more on commercial loans.
“Equity, debt is good, but we are targeting longer-term infrastructure projects,” Adasen said.
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He noted that even with financing structures available, projects must compete in a tough market environment where imported products often have a cost advantage.
“The way the world is right now, you’re literally competing against imports all the time,” she says. “You might have a project that’s not competitive, and even a first-time sponsor with no leverage is going to have a hard time.”
Adasen added that many projects fail to obtain financing because they are not deemed bankable, adding to the challenge of increasing the time needed to close a deal and increasing the overall risk of the project.
“We do not have bankable projects because we recognize the long time it takes to fund projects on the continent,” she said.
To address these challenges, African Finance Corporation has been considering mixed financing structures and credit enhancement mechanisms aimed at attracting institutional investors to African projects. But he noted that financial innovation alone will not solve the problem without broader policy support.
“Even if you have all the blended finance, it all needs to work together, and a lot of that needs to come from the government side,” Adasen said. “Policy coherence and the overall economic environment need to work together.”
Access to working capital in local currency also emerged as a key concern for manufacturers, especially small and medium-sized enterprises that rely on short-term funds for day-to-day operations.
Industry stakeholders said improving access to affordable local financing could expand investment potential and support industry growth across the region.
Emerging financing trends such as climate finance are also beginning to influence manufacturing investment decisions, although access remains limited.
Investors are increasingly encouraging manufacturers to implement renewable energy solutions and improve environmental compliance, but many companies still struggle to secure green financing for manufacturing in West Africa.
