Nigeria’s manufacturing sector is navigating a challenging landscape in 2024, with a modest decline in real output and capacity utilization, according to the latest report from the Manufacturers Association of Nigeria (MAN).
Despite pressures from inflation, foreign exchange constraints, and sluggish consumer demand, manufacturers are increasingly shifting to locally sourced raw materials to mitigate import challenges.
The report paints a picture of a sector under strain, facing high operational costs, waning consumer demand, and mounting inflation.
The report, presented by MAN President Otunba Francis Meshioye, revealed that capacity utilization—a critical indicator of manufacturing health dipped marginally to 56.4% in H1 2024 from 56.5% in the same period last year.
Nevertheless, the sector saw a slight recovery from the second half of 2023, with a 2.8% increase in capacity utilization, hinting at gradual stabilization despite broader economic challenges.
According to the MAN president, “Real manufacturing output in Nigeria declined by 1.66 per cent year-on-year in H1 2024, falling to N1.34 trillion from N1.36 trillion in H1 2023.”
Key highlights
In terms of real output, the manufacturing sector saw a 1.66% year-on-year decline, falling to N1.34 trillion from N1.36 trillion in H1 2023.
Meshioye attributed this sharp increase to the rapid rise in domestic prices, with the Consumer Price Index (CPI) soaring to 34.19% as of June 2024, driven by inflationary pressures.
On a positive note, local raw material sourcing improved slightly, increasing to 56.03% in H1 2024 from 55.4% in H1 2023. MAN credits this shift to the increasing difficulties manufacturers face in obtaining foreign exchange, pushing companies to explore local sourcing options.
However, the change has not been consistent across sub-sectors.
Non-metallic mineral products and textile, apparel, and footwear, for example, saw declines in local sourcing due to reliance on imported raw materials, underscoring the challenges of reducing import dependency.
The sector also faced rising inventory levels of unsold goods, which increased by a staggering 357.57% year-on-year to N1.24 trillion in H1 2024.
Investment is Up, but primarily due to the Naira depreciation
Manufacturing investment rose by 29.63% year-on-year to N250.13 billion in H1 2024.
Electricity supply to the sector showed some improvement, with average daily supply hours increasing to 11.28 hours per day in H1 2024.
Electricity supply to the sector showed some improvement, with average daily supply hours increasing to 11.28 hours per day in H1 2024.