“Navigating Turbulence: Reflections on Nigeria’s Manufacturing Sector in H1 2024 Amid Global and Local Challenges”

In the first half of 2024, Nigeria’s manufacturing sector released recently stood as a testament to resilience amid adversity. According to the report, the Manufacturers Association of Nigeria (MAN) conducted a comprehensive survey, shedding light on the sector’s performance indicators against the backdrop of a turbulent global and domestic economic environment. The findings revealed a complex narrative of modest recovery overshadowed by formidable challenges.

Globally, the economic terrain showed resilience. Major economies like the United States, India, and Brazil experienced stability, while geopolitical tensions and climate shocks continued to exert pressure on less developed and landlocked nations. Unfortunately, Africa, particularly Nigeria, struggled under the weight of inflation, elevated borrowing costs, and political instability.

At home, the report stressed out that the manufacturing sector grappled with an economic environment marked by soaring inflation, a record-high Monetary Policy Rate (MPR) of 26.25%, and the compounding effects of subsidy removal and naira devaluation. These challenges resulted in significant shifts across key performance metrics:

Capacity Utilization: While showing a marginal recovery from H2 2023, capacity utilization declined year-on-year to 56.4%. High energy costs and forex scarcity impeded production efficiency.

Production Value: A nominal increase in manufacturing output masked a real decline, emphasizing inflation’s corrosive impact.

Unsold Inventory: Unsold finished goods surged by an alarming 357.57% year-on-year, reflecting the erosion of consumer purchasing power.

Employment: Job creation fell drastically, with only 2,606 jobs generated—a 37.83% year-on-year decline.

Not all the data painted a bleak picture, the report stated adding the sector demonstrated pockets of resilience:

Local sourcing of raw materials improved slightly, a sign of gradual adaptation to forex constraints.

Investments increased nominally, although largely driven by currency depreciation inflating import costs.

However, the report further shared that these bright spots were overshadowed by mounting operational costs, unreliable electricity, and the escalating expense of alternative power sources, which reached ₦238.31 billion in H1 2024.

This narrative calls for decisive action. To secure the future of Nigeria’s manufacturing sector, reforms must prioritize:

1. Enhancing policy consistency to foster a stable business environment.

2. Reducing dependence on imported raw materials through strategic incentives.

3. Addressing inflationary pressures with effective monetary and fiscal policies.

4. Supporting manufacturers in mitigating energy costs and improving power reliability.

The first half of 2024 underscores a critical inflection point for Nigeria. As manufacturers strive to navigate the headwinds, the effectiveness of government policies will determine whether the sector can rise as a beacon of recovery or falter under the weight of unaddressed challenges.