Nigerian Manufacturing Sector ShowsResilience Amid Economic Challenges in 2024 – MAN DG, Ajayi-Kadir

Nigeria’s Manufacturing Sector Shows Cautious Resilience Amid Economic Headwinds in 2024.

Nigeria’s manufacturing sector demonstrated cautious resilience in 2024, despite facing significant economic headwinds, according to the annual manufacturing sector review released today by the Manufacturers Association of Nigeria (MAN).

The comprehensive report highlights modest growth in capacity utilisation and output amid persistent challenges, including high inflation, currency volatility, and elevated production costs.

“The Nigerian manufacturing sector faced a challenging but resilient year in 2024, navigating macroeconomic instability, inflationary pressures, and policy-driven disruptions,” said Segun Ajayi-Kadir, Director General of MAN, during the presentation of the report.

The report places Nigeria’s manufacturing performance in a global context where growth was largely uneven.

“The global manufacturing sector experienced uneven growth in 2024, with Q3 data showing a modest 0.4 per cent increase in output,” Ajayi-Kadir noted. “Africa’s manufacturing sector showed signs of improvement, growing by 0.6 per cent, albeit with uneven performance across key economies, including Nigeria.”

Capacity utilisation in Nigeria’s manufacturing sector improved marginally to 57.0 per cent in 2024, up from 55.1 per cent in 2023, with the Non-Metallic Mineral Products, Motor Vehicle & Miscellaneous Assembly, and Chemical & Pharmaceuticals sectors recording the highest improvements.

While real manufacturing output increased by 1.7 per cent year-on-year to N7.78 trillion, the sector experienced a half-year decline of 3.1 per cent in real production, reflecting rising costs and weak consumer demand.

“Nominal manufacturing output rose sharply by 34.9 per cent to N33.43 trillion, primarily due to inflationary pressures and rising domestic prices,” Ajayi-Kadir explained, noting that the apparent growth in nominal terms masked underlying challenges.

The manufacturing sector struggled under the weight of significant inflation, which the report indicates surged to 34.8 per cent by the end of 2024.

“Inflation surged to 34.8 per cent by the end of 2024, significantly eroding purchasing power and increasing operational expenses,” said Ajayi-Kadir. “Meanwhile, aggressive monetary tightening by the Central Bank of Nigeria (CBN), which raised the Monetary Policy Rate (MPR) to 27.50 per cent, further exacerbated borrowing costs for manufacturers, limiting expansion and new investments.”

Commercial bank lending rates to manufacturers reached 35.5 per cent in 2024, up from 28.06 per cent in 2023, resulting in total finance costs of N1.3 trillion for the sector.

One bright spot in the report was the increase in local raw material sourcing, which rose to 57.1 per cent in 2024 from 52.0 percent in 2023.

“This shift was largely driven by forex scarcity, high import costs, and government incentives promoting local content,” the MAN Director General stated. Notable improvements were observed in the Wood & Wood Products, Textile, Apparel & Footwear, and Chemical & Pharmaceuticals sectors.

However, the report reveals a concerning trend in unsold finished goods, which surged by 87.5 per cent to N2.14 trillion in 2024.

“The inventory of unsold finished goods surged by 87.5 per cent to N2.14 trillion in 2024, driven by weakened consumer demand, escalating production costs, and declining purchasing power,” Ajayi-Kadir reported. He noted, however, a 27.9 per cent half-year decline in H2 2024, suggesting “improved clearance efforts and price adjustments.”

Real manufacturing investment fell by 35.3 per cent year-on-year to N658.81 billion in 2024, though there was a modest recovery in the second half of the year.

“H2 2024 witnessed a 19.4 per cent increase compared to H1 2024, as manufacturers cautiously resumed capital expenditures,” according to the report.

The employment situation in Nigeria’s manufacturing sector remained relatively stable, with 34,769 jobs added—a 1.8 per cent increase from 2023. However, employee turnover also rose, resulting in 16,820 net new jobs in 2024, nearly unchanged from 16,799 in 2023.

While electricity supply improved to an average of 13.3 hours per day in 2024, up from 10.6 hours in 2023, manufacturers faced substantial increases in energy costs.

“Electricity tariffs surged by over 200 per cent for Band A consumers, significantly increasing manufacturing costs,” Ajayi-Kadir explained. “In response to unreliable grid power and increases in diesel and PMS prices, manufacturers’ total expenditure on alternative energy sources surged to N1.11 trillion, a 42.3 per cent increase from N781.68 billion in 2023.”

The report also noted that Nigeria experienced 12 national grid collapses during the year, forcing continued reliance on expensive alternative energy sources.

Looking ahead, Ajayi-Kadir emphasised the need for targeted policy interventions to support the sector.

“The Nigerian manufacturing sector faced significant hurdles in 2024, including high inflation, forex volatility, surging production costs, and declining consumer demand,” he concluded. “Moving forward, stabilising macroeconomic conditions, improving energy supply, and ensuring access to affordable financing will be critical for sustaining growth and enhancing industrial productivity.”

Industry analysts suggest that the government’s response to these challenges will be crucial in determining whether the manufacturing sector can build on the modest gains seen in some areas during 2024 or face further constraints in the coming year.