The Manufacturers Association of Nigeria (MAN) has published its 2024 Mid-Year Report on Nigeria’s manufacturing sector, highlighting critical challenges, growth indicators, and emerging trends that impact the sector’s performance in the current macroeconomic landscape. The report, which surveys key manufacturing metrics such as capacity utilization, raw material sourcing, production values, inventory levels, investment, and energy expenditures, underscores the need for focused economic reforms to stabilize and strengthen Nigeria’s manufacturing landscape.
Global Economic Overview and Nigerian Context
In the first half of 2024, the global economy displayed resilience, avoiding a downturn despite challenges like high interest rates, debt sustainability issues, and climate risks. However, Nigeria’s economic conditions remained challenging, as high inflation, escalating borrowing costs, and currency pressures weighed heavily on businesses and households. Although the Central Bank of Nigeria’s (CBN) recent Monetary Policy Rate increase to 26.25% aimed to curb inflation, the sector struggled with elevated operational costs and a turbulent policy environment.
Key Findings in Nigeria’s Manufacturing Sector
- Capacity Utilization and Production
- Capacity utilization showed a modest year-on-year decline to 56.4% in H1 2024, reflecting rising costs for energy, raw materials, and operational expenses.
- Real manufacturing output fell by 1.66% year-on-year to N1.34 trillion, though a 9.97% rise was noted compared to H2 2023, largely due to baseline effects.
- Nominal Manufacturing Production Value
- The nominal value of manufacturing output rose by 30.38% to N5.34 trillion in H1 2024, driven by increased domestic prices, with inflation peaking at 34.19% in June.
- Local Raw Material Sourcing
- Local raw material sourcing improved slightly to 56.03%, reflecting manufacturers’ gradual pivot to domestic materials due to forex scarcity. However, sectors such as Non-Metallic Mineral Products and Textiles saw declines in local sourcing.
- Inventory of Unsold Goods
- The inventory of unsold finished products surged by 357.57% year-on-year, reaching N1.24 trillion. Diminishing consumer purchasing power, subsidy removal, and currency devaluation contributed to lower demand.
- Investment and Employment
- Investment spending in the sector grew by 29.63% to N250.13 billion due to currency depreciation, which increased import costs. However, real investment in expansion was limited.
- Employment generation in the sector declined, with only 2,606 jobs created in H1 2024—a 29.99% reduction from the previous half-year, driven by economic uncertainties and high operating costs.
- Energy Supply and Costs
- Despite improvements in electricity supply, with industries receiving an average of 11.28 hours daily, electricity tariffs increased by over 200%, leading manufacturers to spend N238.31 billion on alternative power solutions in H1 2024.
Conclusion and Call for Reforms
The first half of 2024 posed considerable challenges for Nigeria’s manufacturing sector, marked by rising operational costs, declining consumer demand, and inflationary pressures. The report emphasizes the urgent need for coherent economic reforms aimed at enhancing policy consistency, supporting economic diversification, and fostering a stable business environment to aid recovery.
As Nigeria navigates these challenges, MAN remains committed to working with the government to strengthen the sector and enable long-term economic growth, job creation, and improved welfare for Nigerians.
