Stakeholders seek urgent reforms in manufacturing sector

Stakeholders have observed that Nigeria’s manufacturing sector, vital to the nation’s economic advancement and diversification, is beset by entrenched obstacles that call for immediate and transformative reforms.

Despite its potential to drive industrialisation and reduce dependence on imports, the sector continues to grapple with policy inconsistencies, inadequate infrastructure, and persistent energy crises.

Industrial policy inconsistencies have been a significant barrier to growth. Analysts contend that weak regulatory frameworks and frequent policy reversals discourage long-term investments. The inability to access affordable credit due to high interest rates and stringent lending conditions further complicates the outlook for manufacturers.

Manufacturers have voiced serious concerns for their financial stability, as recent data reveals a troubling rise in unsold finished goods inventory. In the first half of 2024, the value of unsold goods surged by 42.93 per cent points, reaching N1.24tn, up from N869.37bn in 2023. This represents a staggering increase of N370.63bn.

The data highlights the growing inventory buildup, reflecting broader issues within the sector, such as reduced consumer demand and supply chain inefficiencies.

Experts warn that this rising inventory, coupled with high production costs, could further strain manufacturers’ cash flow and profitability. The situation demands urgent action to mitigate the negative financial impact on the sector.

“Industrial policy in Nigeria often lacks coherence. We need sustainable strategies to foster local production rather than short-term fixes,” said economist Musa Adeyemi.

He added that energy constraints remain another critical bottleneck, especially with the unreliable power supply compelling many manufacturing companies to rely on costly diesel generators.

According to the Manufacturers Association of Nigeria, energy expenses account for over 40 per cent of production costs, making locally produced goods less competitive compared to imports.

“The power sector remains a bottleneck. Unless we address this issue, achieving import substitution will remain a distant dream,” said Segun Akande, a factory owner in Ikotun.

He highlighted that the lack of consistent and affordable electricity continues to cripple manufacturing activities, forcing businesses to depend on costly diesel generators, which significantly increase production costs.

Akande pointed out that this ongoing energy crisis not only hampers the competitiveness of local goods but also discourages foreign and local investment in the sector. He called on the government to prioritise energy reforms, emphasising that sustainable solutions are essential for reducing reliance on imports and driving long-term industrial growth in Nigeria.

The Deputy Executive of the Nigerian Association of Small and Medium Enterprises, Mr. Samson Gbadamosi, said, “The depreciation of the naira further undermines the sector. Imported machinery and raw materials have become prohibitively expensive, forcing many factories to operate below capacity. This has slowed efforts to boost local production and strengthen the sector’s competitiveness.

“To address these hurdles, stakeholders have called for urgent reforms. Recommendations include revising industrial policies to provide clear and consistent incentives, tackling the energy crisis through investments in renewable energy and grid expansion, and improving infrastructure to ease logistical challenges.”

“Nigeria has the potential to become a manufacturing hub in Africa, but we need targeted interventions. It is time for the government to prioritise industrialisation as a cornerstone of economic growth,” he noted.

Currently, the manufacturing sector contributes less than 10 per cent to Nigeria’s Gross Domestic Product. Revitalising the sector is essential for economic diversification, job creation, and reducing reliance on imports. A coordinated effort from both the public and private sectors is imperative to unlock the potential of Nigeria’s manufacturing industry and pave the way for sustained growth.

Also, the Director-General of MAN, Segun Ajayi-Kadir, expressed that the government’s reforms and policies have had a substantial negative impact on the manufacturing sector. He pointed to several key measures, including the removal of fuel subsidies, the floating of the naira, exchange rate policies, and the rise in monetary policy rates, as major contributing factors.

Ajayi-Kadir remarked, “The challenges facing the manufacturing sector have severely hindered its growth. Our discussions are vital in strengthening our advocacy and pointing out the direction the government must take. By engaging in these talks, we aim to steer the government towards implementing the right policies that will tackle the obstacles affecting the sector.”

He added that it is only through collective action that we can overcome the challenges that are stifling the progress and potential of the manufacturing industry.

He further called on the government to take proactive steps in combating inflation, specifically by tackling high logistics costs, and to enhance the alignment between fiscal and monetary policies in order to drive long-term, sustainable economic growth.