Declining Consumer Demand Pushes Unsold Inventory To ₦2.14trn
… Manufacturers Spent ₦1.11trn On Alternative Energy
The Manufacturers Association of Nigeria (MAN) has reported a significant surge in unsold finished goods across the manufacturing sector, with inventory levels climbing to ₦2.14trn in 2024.
This development, which reflects declining consumer demand and rising production costs, was detailed in MAN’s Economic Review for the second half of 2024.
The report also revealed that manufacturers spent a record ₦1.11trn on alternative energy sources, driven by persistent electricity supply challenges and surging energy costs.
According to the report, the 87.5 per cent year-on-year increase in unsold inventory signals the intensifying strain on manufacturers’ ability to clear stock amidst eroding consumer purchasing power and inflationary pressures.
Although the second half of the year showed some signs of relief—with inventory declining by 27.9 per cent compared to the first half—the cumulative figure underscores a difficult operating environment marked by weak demand and high input costs.
The review paints a mixed picture of the Nigerian manufacturing landscape in 2024.
On one hand, the sector showed resilience in areas such as local raw material sourcing, which improved to 57.1 per cent from 52.0 per cent in 2023.
On the other, it grappled with macroeconomic instability, exchange rate volatility, and surging inflation, which peaked at 34.8 per cent by year-end. These conditions drove operational expenses higher and constrained new investments, despite a slight half-year improvement in some indicators.
It stated that the energy supply was among the most pressing issues. Though average daily electricity supply to manufacturers increased from 10.6 hours in 2023 to 13.3 hours in 2024—and rose to 15.2 hours in the second half of the year—the improvement came at a steep cost.
Tariff hikes exceeding 200 per cent for Band A consumers, alongside 12 national grid collapses, forced manufacturers to ramp up expenditure on alternative energy sources.
Total spending on diesel, petrol, gas, and other alternatives rose by 42.3 per cent from ₦781.68bn in 2023 to ₦1.11trn in 2024.
A sectoral breakdown of energy spending revealed that the Food, Beverage & Tobacco industry led the pack with ₦229.41bn in alternative energy expenditure, up from ₦182.76bn the previous year.
The Chemical & Pharmaceuticals sector doubled its energy spending to ₦208.68bn, while the Non-Metallic Mineral Products sector recorded ₦118.49bn—a 33.7 per cent increase.
The Textile, Apparel & Footwear sector saw the most dramatic rise, with energy expenses increasing fourfold to ₦26.45bn from just ₦6.97bn in 2023.
The high cost of energy was compounded by rising finance costs. The Central Bank of Nigeria’s aggressive monetary tightening drove up the Monetary Policy Rate (MPR) to 27.5 per cent, pushing average commercial lending rates for manufacturers to 35.5 per cent—up from 28.06 per cent in 2023.
As a result, total finance costs for the sector reached ₦1.3trn, severely limiting capacity for expansion and capital investment.
Manufacturing investment also contracted significantly in real terms, falling by 35.3 per cent to ₦658.81bn.
In nominal terms, investment declined by 11.3 per cent to ₦2.85trn, as companies paused or scaled down expansion plans in response to mounting economic uncertainties.
The most significant reductions were observed in the Land & Buildings and Furniture & Equipment categories.
According to the report, despite these headwinds, capacity utilisation in the sector edged up slightly to 57.0 per cent in 2024, compared to 55.1 per cent in 2023.
This modest improvement was supported by gains in key sub-sectors, including non-metallic mineral products, motor vehicles & miscellaneous assembly, and chemicals & pharmaceuticals. However, this progress was tempered by persistent challenges such as forex scarcity, inflation, and energy disruptions.
Manufacturing production also followed a dual trend. Real output increased by 1.7 per cent year-on-year to ₦7.78trn, driven by improved activity in select sub-sectors. Yet, production declined by 3.1 per cent when comparing the second half of 2024 with the first, reflecting the impact of rising operational costs and weakening consumer demand.
In nominal terms, output soared by 34.9 per cent to ₦33.43trn, largely due to inflationary effects.
The report noted that employment in the sector remained relatively stable. A total of 34,769 jobs were created in 2024, representing a 1.8 per cent increase from 34,163 jobs in 2023.
However, employee exits also rose slightly to 17,949, compared to 17,364 in the previous year. The net result was 16,820 new jobs, virtually unchanged from the net 16,799 recorded in 2023, indicating that employment gains were mostly offset by high labour mobility and restructuring.
MAN’s Director General, Segun Ajayi-Kadir, noted that while the sector demonstrated a degree of resilience, more decisive policy support is needed to ensure sustainable growth.
He emphasised the importance of stabilising macroeconomic conditions, ensuring a reliable energy supply, and expanding access to affordable financing for manufacturers.
“The challenges are real, but so are the opportunities,” he said. “If we can address the structural constraints—particularly energy and finance—we can unlock far greater productivity and industrial contribution to national growth.”
The report concludes with a call for urgent reforms to ease manufacturers’ cost burdens and stimulate investment, as the sector remains a critical driver of employment, economic diversification, and inclusive growth in Nigeria.
Declining Consumer Demand Pushes Unsold Inventory To ₦2.14trn is first published on The Whistler Newspaper
