…unsold inventory hits N2.1trn
…investments shrink by 35.3%
The lingering foreign exchange volatility in Africa’s most populous country has surged manufacturers’ local sourcing of raw materials by 9 percent in 2024, according to the Manufacturers Association of Nigeria (MAN).
In MAN’s latest 2024 second -half economic review, local raw materials utilisation in the manufacturing sector rose to an average of 57.1 percent in 2024 from 52.0 percent in 2023.
“This shift was largely driven by forex scarcity, high import costs, and government incentives promoting local content,” the report said.
“Notable improvements were observed in wood & wood products, textile, apparel & footwear, and chemical & pharmaceuticals, while electrical & electronics continued to lag due to dependency on imported components,” the report added.
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Nigerian manufacturers suffered from a long-running shortage of foreign exchange and a sharp devaluation in 2024 which made doing business in the country complicated.
In 2024, the naira lost 40.9 percent of its value against the dollar in the official market despite notable growth in external reserves within the period, according to BusinessDay analysis.
Capacity utilisation in Nigeria’s manufacturing sector showed a slight improvement to 57 percent in 2024 from 55.1 in 2023 and year-on-year there was a 1.2 percent increase in H2 2024 compared to H1 2021, reflecting some recovery.
“However, persistent challenges such as rising energy costs, forex volatility, and high interest rates constrained further growth.”
“Sectoral analysis revealed that non-metallic mineral products, motor vehicle & miscellaneous assembly, and chemical & pharmaceuticals sectors recorded the highest improvements.”
According to the report, inventory of unsold products in the manufacturing sector rose by 87.5 percent to N2.14 trillion in 2024.
The manufacturers association attributed the rising unsold products to low consumer spending, weaker naira, and escalating production costs.
The report noted that the food, beverage & tobacco and textile, apparel & footwear sectors faced the most significant increases in unsold stock for the period.
The manufacturing sector employment generation remained stable in 2024, with only 606 jobs created in 2024, a 1.8 percent increase from 2023 figures.
However, the number of employees leaving manufacturing companies also increased from 17,364 in 2023 to 17,949 in 2024, indicating ongoing labour mobility due to economic uncertainties, skill migration, and company restructuring, the report said.
This resulted in 16,820 net new jobs in 2024, nearly unchanged from 16,799 in 2023.
Investments into the manufacturing sector fell by 35.3 percent year-on-year to N658.81 billion in 2024, reflecting economic uncertainty and reduced expansion plans, according to the report.
However, H2 2024 witnessed a 19.4 percent increase compared to H1 2024, as manufacturers cautiously resumed capital expenditures.
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In real manufacturing production value, Nigeria’s output increased by 1.7 percent to N7.78 trillion year-on-year, buoyed by increased activity in motor vehicle & miscellaneous assembly, non-metallic mineral products, and electrical & electronics.
Despite the yearly increase, the sector saw a decline of 3.1 percent compared to H1 2024, fueled by rising costs and weak consumer demand.
According to the report, the electricity supply situation for industries improved in 2024, with the average daily supply increasing to 13.3 hours per day, up from 10.6 hours in 2023.
On a half-on-half basis, electricity supply rose from 11.4 hours per day in H1 2024 to 15.2 hours in H2 2024.
However, electricity tariffs surged by over 200 percent for Band A consumers, significantly increasing manufacturing costs.
While power availability improved, many manufacturers still faced frequent outages, and costs as the country witnessed 12 national grid collapses and this remained a major concern, the report said.
