In 2024, Nigeria’s manufacturing sector, (the engine of the nation’s industrial growth) found itself running on fumes. Economic turbulence, soaring costs, and unreliable power supply significantly hindered growth, causing concern for industry leaders and stakeholders alike. With growth slowing to 1.38% from 1.40% in 2023, the seemingly small dip masks a much larger crisis of rising production expenses, shrinking consumer demand, and mounting financial pressures.
The Numbers: A Sector Under Pressure
Despite a slight year-on-year real GDP growth of 1.79% in Q4 2024, the manufacturing sector’s contribution to Nigeria’s GDP dropped to 8.21% from 8.64% the previous year. While these figures may seem modest, they reflect a sector grappling with severe macroeconomic headwinds. Rising production costs, foreign exchange volatility, and limited access to affordable capital have left manufacturers in a tight spot.
What’s Weighing Down Nigeria’s Manufacturing?
Industry experts, including the Manufacturers Association of Nigeria (MAN), had predicted a tough year for the sector. Francis Meshioye, MAN’s president, highlighted the impact of economic volatility, inflation, and high borrowing costs. A particularly severe blow came from the over 250% surge in electricity tariffs, which significantly increased production costs. With the national grid failing 12 times in 2024, manufacturers were forced to rely heavily on expensive diesel and petrol generators, pushing energy expenses to account for nearly 40% of production costs.
The unstable power supply remains a critical obstacle to Nigeria’s industrial ambitions. Frequent grid failures not only disrupted production but also led to an estimated N10 trillion loss to the economy. The reliance on costly alternative energy sources slashed profit margins and slowed down output, painting a grim picture for the sector’s immediate future.
A Sector in Decline: Key Indicators Tell the Story
The Manufacturers Association’s CEO Confidence Index for Q4 2024 exposed deeper cracks within the sector. Production and distribution costs surged by 18.2%, while key metrics like capacity utilization, investment, employment, and production volumes all recorded declines. Moreover, approximately 65% of manufacturing companies listed on the Nigerian Exchange (NGX) reported foreign exchange losses in the first half of 2024, emphasizing the financial strain caused by a depreciating currency and limited access to foreign capital.
The Way Forward: Is There Light at the End of the Tunnel?
Nigeria’s manufacturing sector, despite its struggles, holds significant potential for recovery; if the right reforms are implemented. Industry experts suggest that stabilizing the power supply, improving infrastructure, reducing interest rates, and providing access to foreign exchange are crucial steps toward revitalization. Targeted policies aimed at reducing energy costs and improving ease of doing business could help manufacturers regain momentum in 2025.
For now, manufacturers must navigate a challenging economic landscape with cautious optimism, hoping that government interventions will bring the much-needed relief and policy reforms.