The Manufacturers Association of Nigeria (MAN) has revealed that Nigeria’s nominal manufacturing output rose significantly by 34.9% to N33.43 trillion in the second half of 2024. The increase was largely due to mounting inflation and higher domestic prices.
This was made known by the Director-General of MAN, Segun Ajayi-Kadir, during the official release of the association’s “MAN Economic Review – Second Half 2024” report on Monday in Lagos, as reported by the News Agency of Nigeria (NAN).
“Nominal manufacturing output rose sharply by 34.9 per cent to N33.43 trillion, primarily due to inflationary pressures and rising domestic prices,” he said.
Ajayi-Kadir explained that the report covers key performance indicators within Nigeria’s manufacturing sector, including capacity utilisation, production output, inventory levels, use of local raw materials, investments, energy costs, and employment trends.
The report revealed that capacity utilisation in Nigeria’s manufacturing sector improved slightly to 57.0 per cent in 2024, up from 55.1 per cent in 2023. A comparison of the two halves of the year showed a 1.2 percentage point increase in H2 2024 compared to H1 2024.
Ajayi-Kadir also stated that real manufacturing output increased by 1.7% year-on-year, reaching N7.78 trillion. This growth was attributed to increased activities in the production of motor vehicles, non-metallic mineral products, and electrical and electronics goods.
However, when comparing the two halves of the year, real output declined by 3.1%, highlighting the continued difficulties faced by manufacturers such as rising costs, weak demand, and price instability.
Increased Use of Local Raw Materials
Local sourcing of raw materials showed noticeable improvement, rising from 52.0% in 2023 to 57.1% in 2024. This was driven by the persistent scarcity of foreign exchange, the high cost of imported inputs, and government incentives to promote domestic resource use.
Sectors that made significant progress include wood and wood products, textiles and apparel, footwear, and pharmaceuticals. However, the electrical and electronics sector continues to struggle due to heavy reliance on imported parts.
Drop in Manufacturing Investment
Despite the rise in output, the report noted a sharp decline in real manufacturing investment, which dropped by 35.3% year-on-year to N658.81 billion. This decline reflected investor uncertainty and reduced confidence in the business environment.
Interestingly, investment showed some recovery in the second half of the year, increasing by 19.4% compared to H1 2024. This suggests that some manufacturers cautiously resumed spending amid signs of stabilisation.
Inventory and Labour Trends
The report also showed a significant rise in unsold goods. The inventory of unsold finished goods increased by 87.5% to N2.14 trillion in 2024. This was attributed to sluggish consumer demand, high inflation, and increasing production costs.
However, there was a 27.9% decline in unsold inventory in H2 compared to H1 2024, suggesting improved sales clearance and pricing strategies.
On the employment front, 34,769 new jobs were created in the manufacturing sector in 2024, reflecting a 1.8% increase from 34,163 in 2023. However, employee exits also rose to 17,949, compared to 17,364 in 2023. This increase in job turnover signals continued labour migration and restructuring within companies.
Power Supply Improves, but Energy Costs Remain High
The report indicated that power supply to manufacturers improved. Average daily electricity supply increased to 13.3 hours in 2024, up from 10.6 hours in 2023. When comparing H2 with H1, supply jumped from 11.4 hours to 15.2 hours per day.
Despite the improvement, electricity costs remained a major concern. The report noted that Band A electricity tariffs increased by over 200%, significantly raising operating expenses.
As a result, manufacturers’ spending on alternative energy sources such as diesel, fuel, and generators rose sharply. Total expenditure hit N1.11 trillion, a 42.3% increase from N781.68 billion in 2023. Energy costs rose dramatically between the halves of the year, from N404.80 billion in H1 to N708.07 billion in H2 2024, marking a 75% increase.
Finance Costs Rise Due to High Interest Rates
One of the biggest challenges for Nigeria’s manufacturing sector in 2024 was the rising cost of borrowing. The average lending rate from commercial banks increased to 35.5%, up from 28.06% in 2023.
This pushed total finance costs for manufacturers to a staggering N1.3 trillion, making it difficult for many companies to expand or invest in capital projects.
MAN Urges Government Support
Ajayi-Kadir called on the government to urgently address the sector’s key challenges, especially inflation, exchange rate instability, and high energy and borrowing costs. He stressed the importance of a stable policy environment and better access to financing.
“We need policies that will support manufacturers, boost investor confidence, and ensure a more predictable business climate,” he said.
He added that tackling these issues head-on would help unlock the full potential of Nigeria’s manufacturing sector and support economic growth and job creation across the country.
As Nigeria’s manufacturing sector navigates tough economic terrain, the hope is that with the right policies, it can remain a vital engine for national development.
