According to the Manufacturers Association of Nigeria (MAN), Nigeria’s manufacturing sector saw a 30.38% year-on-year increase in output, reaching N5.34 trillion in the first half of 2024 (H1 2024),Daily Trust reports.
However, declining consumer purchasing power contributed to a sharp rise in unsold inventory, with manufacturers recording a 357.57% increase to N1.24 trillion in unsold finished products in H1 2024, up from N271 billion in H1 2023. MAN revealed this in its H1 2024 Economic Review, which was made available on Monday.
“In nominal terms, the manufacturing sector’s output increased by 30.38% year-on-year, reaching N5.34 trillion in H1 2024,” MAN stated. “This growth was largely driven by a significant rise in domestic prices, as reflected by the 34.19% Consumer Price Index (CPI) increase in June 2024. However, inflationary pressures have impacted real output levels, presenting challenges for manufacturers in sustaining production.”
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MAN attributed the surge in unsold inventory to reduced consumer spending power due to inflation, subsidy removal, and naira devaluation.
“Unsold finished product inventory in the manufacturing sector rose 357.57% year-on-year to N1.24 trillion in H1 2024. This reflects consumers’ challenges and highlights the need for initiatives to boost demand and support the sector,” MAN reported.
Additionally, the report highlighted that electricity tariffs imposed by distribution companies (DisCos) have surged by over 200%, significantly increasing electricity costs for manufacturers. To mitigate unreliable power from the national grid, manufacturers spent N238.31 billion on alternative energy in H1 2024, a 7.69% increase from H2 2023, driven by rising costs of diesel, gas, and self-generated power.
The sector’s capacity to generate employment continued to decline, with only 2,606 jobs created in H1 2024, a 29.99% drop from H2 2023, and a 37.83% decrease year-on-year. The Chemical and Pharmaceuticals industry led in job creation, while the Motor Vehicle & Miscellaneous Assembly industry created the least jobs.
The report outlined that H1 2024 posed significant challenges for Nigeria’s manufacturing sector, including high operational costs, declining consumer demand, and rising inflation. While some industries managed growth, others struggled with declining production values, rising inventories, and reduced employment.
MAN emphasized the urgent need for Nigeria to enact robust economic reforms to tackle these challenges. “Priorities include policy consistency, an improved business environment, and economic diversification. These measures are essential to reversing the economic downturn, fostering job creation, reducing inflation, and enhancing citizens’ welfare,” the report concluded.
