The first half of 2024 brought into sharp focus the resilience and vulnerabilities of Nigeria’s manufacturing sector as it navigated an increasingly challenging economic terrain. Despite global economic resilience, marked by modest growth in major economies like the United States, India, and Brazil, Nigeria’s economic challenges compounded, eroding its manufacturing output and stymying sectoral progress.
As the survey by the Manufacturers Association of Nigeria (MAN) for H1 2024 revealed, the sector grappled with severe headwinds, including forex scarcity, rising inflation, and exorbitant energy costs. Capacity utilization, a key metric of efficiency, showed a modest recovery of 2.8 percentage points from the latter half of 2023 but fell year-on-year to 56.4%. This reflected the industry’s constrained ability to harness its full potential amid worsening operational conditions.
The real manufacturing production value painted a sobering picture, declining by 1.66% year-on-year to N1.34 trillion. Manufacturers faced the twin burdens of surging electricity tariffs, up by over 200%, and heightened exchange rate volatility, further inflating production costs. Although nominal production values increased sharply due to inflationary pressures, this masked the underlying struggle to sustain real output.
Another striking trend was the alarming 357.57% surge in unsold inventory, which ballooned to N1.24 trillion. This spike underscored the stark decline in consumer purchasing power, exacerbated by the naira’s devaluation and subsidy removal. While local raw material sourcing showed a slight uptick to 56.03%, challenges in accessing forex continued to hinder a broader transition to local sourcing across subsectors like textiles and non-metallic minerals.
Manufacturing investments rose nominally by 29.63% year-on-year, reaching N250.13 billion, though this was largely a reflection of the depreciating naira inflating import costs rather than actual growth in capital deployment. Similarly, employment in the sector slumped by nearly 38% year-on-year, with only 2,606 jobs created—further evidence of the sector’s shrinking capacity to drive inclusive growth.
Energy costs remained a persistent burden, with manufacturers spending N238.31 billion on alternative energy sources in H1 2024, a 7.69% increase from H2 2023. The unreliability of grid power, despite an improvement in average daily supply hours to 11.28, drove industries to rely heavily on self-generated power, compounding their financial woes.
This period underscored the critical need for urgent reforms to bolster the manufacturing sector and the broader Nigerian economy. Strategic interventions to stabilize inflation, streamline forex access, and promote industrial policies are imperative. Improving infrastructure, particularly energy and transportation, alongside fostering a conducive business environment, will be essential to reversing the economic downturn.
The story of Nigeria’s manufacturing sector in H1 2024 is one of resilience amid adversity. While the challenges were formidable, the potential for growth remains within reach, contingent on deliberate and sustained economic reforms. The lessons from this turbulent period are a clarion call for policymakers and stakeholders to chart a new course toward industrial revival and economic stability.
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