Yemisi Izuora
Manufacturers in Nigeria have presented a gloomy outlook of activities showing the sector is facing severe economic slowdown.
The Manufacturers Association of Nigeria (MAN) is therefore calling for intervention in the sector to turn members fortune in order to keep jobs, secure investments and improve their contribution to national economy.
The Association to prove how bad the economy has impacted the sector, reported a rise in the amount of unsold finished goods in 2024, stating that it rose to N2.14tn and attributed this to weakened consumer demand, surging production costs, and eroded purchasing power.
The Director-General (DG) of the body Segun Ajayi-Kadir, made the disclosure on Monday in its latest economic review report for the second half of 2024.
“The inventory of unsold finished goods surged by 87.5 per cent to N2.14tn in 2024,” Ajayi-Kadir said, blaming “escalating production costs and declining consumer demand” for the development. However, he noted that a half-year decline of 27.9 per cent suggested some improvement in inventory clearance and pricing strategies.
Ajayi-Kadir stated that the food, beverage, and tobacco sector, along with the textile, apparel, and footwear sector, were the worst hit, recording the highest volume of unsold products.
The association linked the situation to the country’s broader economic challenges, including inflation, exchange rate volatility, and the impact of monetary tightening.
According to the report, inflation rose to 34.8 per cent in 2024, significantly squeezing consumer spending and increasing manufacturers’ operational expenses.
The MAN said the Central Bank of Nigeria’s increase of the Monetary Policy Rate to 27.5 per cent pushed lending rates to an average of 35.5 per cent, with total finance costs for manufacturers surging to N1.3tn.
“This monetary policy stance limited access to credit and restrained expansion plans across the industry,” Ajayi-Kadir said.
Notwithstanding a marginal improvement in capacity utilisation to 57 per cent, up from 55.1 per cent in 2023, the association lamented persistent structural issues, including unreliable power supply and high energy costs.
The Association reported that its total expenditure on alternative energy sources jumped by 42.3 per cent to N1.11tn in 2024, as industries struggle with erratic power supply and frequent national grid collapses.
“Although electricity supply improved to an average of 13.3 hours daily, power outages and surging Band A tariffs increased production costs significantly,” the report noted.
Real sector output grew modestly by 1.7 per cent to N7.78tn, but a half-year decline of 3.1 per cent highlighted constraints.
The MAN also reported a 35.3 per cent drop in real manufacturing investment to N658.81bn, citing heightened economic uncertainty.
Ajayi-Kadir said, “The Nigerian manufacturing sector faced significant headwinds in 2024. While we observed some resilience in local raw material sourcing and marginal output growth, overall performance was hampered by adverse macroeconomic conditions.”
The association called for urgent policy interventions to stabilise the macroeconomic environment, ease access to financing, and reduce the cost of doing business to avert further sectoral contraction.