• MAN seeks intervention to stimulate local consumption
• Only 2,606 jobs were created in H1, says MAN
The harsh economic condition is taking a serious toll on consumption as inventories in the manufacturing sector surged by 357.57 per cent year-on-year to N1.24 trillion in the first half (H1) of the year, the Manufacturing Association of Nigeria (MAN) has said.
In its H1 survey recommendations, MAN called for the government’s intervention to stimulate consumption, saying the business and manufacturing environment is endangered.
According to the survey, major manufacturing indicators, including capacity utilisation, production value, inventory, local capacity utilisation, investment, and expenditure on alternative energy sources recorded a decline.
The report said that Nigeria’s economy continued to grapple with formidable challenges that stymied growth potential and eroded economic stability.
“The real GDP growth rate was sluggish, reflecting the country’s struggle to regain momentum amidst persistent economic and policy headwinds. Inflationary pressures intensified, significantly diminishing the purchasing power of Nigerians, with millions more being pushed into poverty due to the combined effects of soaring prices and stagnant wages. The policy environment in H1 was marked by uncertainty and turbulence.
“Despite efforts to stabilise the economy, including aggressive monetary tightening by the Central Bank of Nigeria (CBN), which continually raised the Monetary Policy Rate (MPR), the desired outcomes in terms of curbing inflation and stimulating growth remained elusive. The higher interest rates exacerbated borrowing costs, placing further strain on businesses across various sectors, particularly manufacturing, which already faced significant challenges such as FX scarcity, high operational costs and unreliable electricity supply,” the report said.
It added that capacity utilisation showed a slight year-on-year decline to 56.4 per cent in H1 2024, from 56.5 per cent in H1 2023.
The sector, it said, faced significant challenges, including high energy costs due to a 200 per cent increase in electricity tariffs, foreign exchange (FX) scarcity and declining consumer demand. The factors, it said, collectively resulted in elevated operational costs and a difficult business environment for manufacturers.
The real manufacturing output in Nigeria declined by 1.66 per cent year-on-year in H1 2024, falling to N1.34 trillion from N1.36 trillion in H1 2023, it stated, adding that persistent increase in interest rates by the CBN strained the sector.
In nominal terms, the sector’s output in Nigeria increased by 30.38 per cent, reaching N5.34 trillion, which it said, was primarily driven by the sharp rise in domestic prices as reflected in the consumer price index (CPI).
“Despite a gradual shift towards local sourcing, driven by difficulties in obtaining FX, sectors, like non-metallic mineral products and textile, apparel and footwear, faced declines in local sourcing, reflecting the challenges of shifting away from imported raw materials,” it noted.
It attributed the surge in inventory to declining consumers’ purchasing power due to escalating inflation, subsidy removal and depreciation of naira.
The high levels of unsold goods, it stated, reflected the challenges consumers face and the need for interventions to stimulate demand and improve the sector’s performance.
The employment generation capacity of the manufacturing sector also declined, with only 2,606 jobs created, a 29.99 per cent reduction from H2 2023.
“Year-on-year job creation fell by 37.83 per cent, reflecting the ongoing challenges within the sector, including economic uncertainties, inflationary pressures and an unfavourable business environment,” it stated.
The cost of providing alternative power continued to rise with the manufacturers spending N238.31 billion on alternative energy sources in H1, a 7.69 per cent increase from what they spent in H2.
