- Manufacturing sector in Nigeria grew by 30.38% to N5.34 trillion in H1 2024, but rising inflation and energy costs continue to strain operations.
- Unsold goods surged by 357.57% to N1.24 trillion, while job creation within the sector dropped by nearly 30% amid economic challenges.
Manufacturing sector in Nigeria recorded a significant 30.38% increase in output year-on-year, reaching N5.34 trillion in the first half of 2024, according to the latest economic report from the Manufacturers Association of Nigeria (MAN), released on Monday, November 11, 2024. However, despite the growth in nominal output, manufacturers are grappling with several economic challenges, including inflation, subsidy removal, and the devaluation of the naira.
The surge in nominal output is primarily attributed to rising domestic prices, as inflation continues to affect the sector. The Consumer Price Index (CPI) reached 34.19% in June 2024, significantly raising manufacturing costs and affecting absolute production levels. As a result, while nominal growth is robust, manufacturers face increasing difficulties in maintaining production efficiency and profitability.
The report highlights a key concern: the sharp rise in unsold finished goods, which soared by 357.57% compared to the previous year. By the end of H1 2024, unsold inventory was valued at N1.24 trillion, up from N271 billion in the same period in 2023. The surge in unsold goods is attributed to a reduction in consumer purchasing power, driven by the broader economic uncertainties affecting the nation.
Operational costs, particularly in energy, are another significant burden for manufacturers. The report reveals that spending on alternative power sources, including diesel and gas, reached N238.31 billion in the first half of 2024, reflecting a 7.69% increase from the second half of 2023.
This increase is driven by rising energy costs and the need for manufacturers to rely on self-generated power due to the unreliable national grid. The sector has also been hit by increasing electricity tariffs imposed by Distribution Companies (DisCos), further escalating operational costs.
Employment within the manufacturing sector has also been adversely affected. Only 2,606 new jobs were created in the first half of 2024, a 29.99% drop compared to the second half of 2023. On a year-on-year basis, job creation in the sector has declined by 37.83%. The Chemical and Pharmaceuticals sector has led job creation, while the Motor Vehicle and miscellaneous Assembly sector has seen the weakest performance.
Given these challenges, MAN has called for urgent economic reforms to stabilise the business environment and reverse the negative trends. Among the key recommendations are enhancing policy consistency, promoting economic diversification, and introducing measures to boost consumer demand. Addressing these critical issues is essential to fostering sustainable growth, improving employment prospects, and enhancing the overall economic welfare of Nigerians.