Nigeria’s manufacturing sector turns to native sourcing amid 1.66% decline in actual output
Nigeria’s manufacturing sector is navigating a difficult panorama in 2024, with a modest decline in actual output and capability utilization, based on the most recent report from the Producers Affiliation of Nigeria (MAN).
Regardless of pressures from inflation, international change constraints, and sluggish shopper demand, producers are more and more shifting to domestically sourced uncooked supplies to mitigate import challenges.
The report paints an image of a sector underneath pressure, going through excessive operational prices, waning shopper demand, and mounting inflation.
What they’re saying
The report, introduced by MAN President Otunba Francis Meshioye, revealed that capability utilization—a essential indicator of producing well being dipped marginally to 56.4% in H1 2024 from 56.5% in the identical interval final yr.
Nonetheless, the sector noticed a slight restoration from the second half of 2023, with a 2.8% enhance in capability utilization, hinting at gradual stabilization regardless of broader {economic} challenges.
In line with the MAN president, “Actual 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.”
- “Despite this decline, the sector noticed a 9.97 per cent enhance in comparison with H2 2023, pushed by a baseline impact.
- “In nominal phrases, the manufacturing sector’s output in Nigeria elevated by 30.38 per cent year-on-year, reaching N5.34 trillion in H1 2024.
Key highlights
When it comes to actual output, the manufacturing sector noticed a 1.66% year-on-year decline, falling to N1.34 trillion from N1.36 trillion in H1 2023.
- This drop is indicative of the sector’s struggles to keep up production ranges within the face of escalating prices and difficult market situations.
- Nevertheless, in comparison with H2 2023, the sector skilled a 9.97% increase, largely as a result of a baseline impact, which softened the general decline.
- Whereas actual output declined, nominal manufacturing output noticed a substantial surge, up 30.38% year-on-year to N5.34 trillion in H1 2024.
Meshioye attributed this sharp enhance to the speedy rise in home costs, with the Client Value Index (CPI) hovering to 34.19% as of June 2024, pushed by inflationary pressures.
Shift to native uncooked supplies faces challenges
On a optimistic word, native uncooked materials sourcing improved barely, growing to 56.03% in H1 2024 from 55.4% in H1 2023. MAN credit this shift to the growing difficulties producers face in acquiring international change, pushing corporations to discover native sourcing choices.
Nevertheless, the change has not been constant throughout sub-sectors.
Non-metallic mineral merchandise and textile, attire, and footwear, for instance, noticed declines in native sourcing as a result of reliance on imported uncooked supplies, underscoring the challenges of decreasing import dependency.
Hovering Stock ranges of unsold Items
The sector additionally confronted rising stock ranges of unsold items, which elevated by a staggering 357.57% year-on-year to N1.24 trillion in H1 2024.
- The surge in unsold completed merchandise factors to a slowdown in shopper buying energy as inflation, subsidy removing, and the weakening naira proceed to impression the common Nigerian’s disposable revenue.
- This rising stockpile alerts the necessity for focused interventions to stimulate demand and enhance the sector’s efficiency.
Funding is Up, however primarily because of the Naira depreciation
Manufacturing funding rose by 29.63% year-on-year to N250.13 billion in H1 2024.
- Nevertheless, this enhance was largely influenced by the depreciation of the naira, which inflated the price of importing equipment and important property.
- Meshioye defined that producers stay targeted on sustaining current production ranges quite than increasing, given the difficult {economic} surroundings.
- In actual phrases, funding spending hasn’t essentially elevated, highlighting the constraints on development throughout the sector.
Power prices and provide challenges persist
Electrical energy provide to the sector confirmed some enchancment, with common each day provide hours growing to 11.28 hours per day in H1 2024.
- Nevertheless, the price of different energy sources continues to rise, with producers spending N238.31 billion on vitality options—a 7.69% enhance from H2 2023.
- Excessive costs for diesel, gasoline, and different fuels, coupled with persistent instability within the nationwide grid, have compelled many producers to bear the {financial} burden of self-energy technology.
