Despite navigating a turbulent economic environment in 2024, Nigeria’s manufacturing sector showed resilience, with modest gains in capacity utilization and increased use of local raw materials. However, rising inflation, forex volatility, and surging energy and finance costs remained major headwinds, according to the Manufacturers Association of Nigeria (MAN) in its Second Half 2024 Economic Review.

The biannual survey tracks key performance indicators such as production output, investment, employment, inventory, and energy expenditure. It also assesses how macroeconomic and policy shifts impact industrial performance.

Global Manufacturing: Mixed Fortunes

Globally, the manufacturing sector experienced uneven performance in 2024. While Latin America and the Caribbean posted the strongest gains with a 1.7% growth rate, Europe and North America suffered due to elevated production costs and weak consumer demand. Africa, including Nigeria, managed modest growth at 0.6%, though the continent’s performance was mixed across different economies.

Nigerian Manufacturing: Weathering a Perfect Storm

The Nigerian manufacturing sector was hit by a “perfect storm” of inflation, monetary tightening, and weak consumer spending. Inflation soared to 34.8%, eroding consumer purchasing power and raising operating costs. The Central Bank of Nigeria (CBN) intensified its monetary tightening stance, raising the Monetary Policy Rate to 27.5%, which pushed lending rates to a daunting 35.5%, thereby limiting expansion plans.

Key Sectoral Indicators

1. Capacity Utilization

Capacity utilization edged up to 57.0% in 2024 from 55.1% in 2023. The improvement was led by sectors like Motor Vehicle & Miscellaneous Assembly, Non-Metallic Mineral Products, and Chemicals & Pharmaceuticals, though overall progress was slowed by high energy and borrowing costs.

2. Production Output

Real manufacturing output increased by 1.7% year-on-year, reaching N7.78 trillion, with nominal output rising a staggering 34.9% to N33.43 trillion due to inflationary pressures. However, output dipped by 3.1% in the second half compared to the first, underscoring persistent structural challenges.

3. Raw Material Sourcing

Local sourcing of raw materials rose to 57.1%, up from 52% the previous year, thanks to forex constraints and government incentives. Significant improvements came from the Wood & Wood Products, Textile, and Chemical sectors.

4. Unsold Inventory

Inventory of unsold goods skyrocketed by 87.5% to N2.14 trillion, as inflation and falling consumer demand slowed product uptake. However, manufacturers managed to reduce unsold stock by 27.9% in H2 through better clearance efforts and price adjustments.

5. Investment Trends

Real investment in manufacturing fell by 35.3% to N658.81 billion, reflecting a cautious business environment. Nominal investment also dropped by 11.3%. Yet, a 19.4% rebound in H2 signals cautious optimism among manufacturers.

Jobs and Labour Mobility

The sector added 34,769 jobs in 2024—a 1.8% rise—though labour exits also increased slightly. Net job creation was 16,820, nearly unchanged from 2023. The data highlights a fragile employment climate impacted by economic restructuring and skills migration.

Electricity & Alternative Energy: High Cost, Mixed Gains

Manufacturers experienced improved electricity supply, averaging 13.3 hours/day, but were hit by over 200% tariff hikes for Band A customers. Despite better supply, grid unreliability and 12 national collapses forced companies to ramp up alternative energy spending.

Total expenditure on diesel, petrol, and renewable energy sources surged 42.3% to N1.11 trillion. Food, Beverages & Tobacco led with N229.41 billion, while the Textile industry saw a fourfold jump in energy spending.

Cost of Financing: An Uphill Climb

With lending rates at 35.5%, manufacturers incurred N1.3 trillion in finance costs—further tightening their ability to invest and expand. The sustained interest rate hikes by the CBN made access to affordable capital a major constraint.

Conclusion: A Call for Policy Support

Despite economic headwinds, the manufacturing sector displayed resilience, with improved local sourcing, increased job creation, and marginal output growth. However, high costs of finance, erratic power supply, and volatile macroeconomic conditions continue to hamper progress.

Going forward, MAN recommends urgent policy interventions to stabilize inflation, ensure affordable financing, and improve energy infrastructure.

“Sustaining growth in Nigeria’s manufacturing sector will depend on bold policy choices and targeted support for industrial productivity,” said Segun Ajayi-Kadir, mni, Director General of MAN.