The cost of production and distribution in Nigeria’s manufacturing sector rose by 18.2 per cent in the fourth quarter of 2024, reflecting the worsening impact of the macroeconomic environment on manufacturers, according to the Manufacturers Association of Nigeria (MAN).
Director-general of MAN, Segun Ajayi-Kadir, disclosed this in the Q4 2024 Manufacturers CEO Confidence Index (MCCI) report, which highlighted the industry’s struggles with high costs, policy inconsistencies, and economic instability.
“The findings show that production and distribution costs surged further by 18.2 per cent in the quarter under review, compared to the 20.1 per cent increase recorded in the previous quarter,” the report stated.
While the report noted a slight improvement in sales volume by 1.1 per cent, other key indicators such as capacity utilisation, manufacturing investment, and employment continued to decline.
MAN’s MCCI measures quarterly changes in manufacturing activity concerning macroeconomic trends and government policies. A reading above 50 points indicates increased confidence in the economy, while a figure below 50 suggests declining confidence.
Ajayi-Kadir revealed that capacity utilisation declined by 0.8 per cent in Q4 2024, while manufacturing investment dropped by 1.2 per cent. Employment in the sector also contracted by 0.7 per cent, though this was less severe than the 3.5 per cent decline recorded in Q3 2024.
The cost of shipment rose by 11.6 per cent in Q4 2024, compared to the 17 per cent increase in the previous quarter.
“A close look at the data shows that only sales volume recorded a favourable change during the period,” Ajayi-Kadir noted. “However, the analysis also suggests that the adverse effects of macroeconomic reforms are beginning to ease, as production costs, capacity utilisation, investment, employment, and shipment costs recorded smaller negative changes compared to Q3.”
Manufacturers identified high energy costs, forex scarcity, multiple taxation, and poor infrastructure as the biggest threats to their survival. High electricity tariffs and the cost of alternative energy remained major burdens on production.
Industry leaders also flagged the high exchange rate, rising interest rates, and inconsistent government policies as key factors crippling business operations.
“Manufacturing operations have been directly impacted by high raw material costs, energy expenses, and logistics challenges. The persistent issues of forex volatility, high interest rates, and inflation continue to create an unfavourable business environment,” the report stated.
Despite these challenges, the MCCI edged up by 0.5 points to 50.7 in Q4 from 50.2 in Q3, indicating marginal optimism among manufacturers. However, projections for the first quarter of 2025 point to a downward trend, with expected business conditions dropping from 56 to 53.2 points, projected employment sliding to 53 points, and anticipated production levels falling from 54.3 to 54 points.
Optimism remains largely tied to hopes for exchange rate stability, an end to interest rate hikes, lower energy costs, and tax reforms.
Manufacturers urged the federal government to take immediate steps to ease financial and operational burdens on the sector. Key recommendations include suspending further electricity tariff hikes, pausing interest rate increases, directing banks to offer single-digit loans to manufacturers, and expanding the Bank of Industry’s capital base to improve access to industrial credit.
Ajayi-Kadir also called for the clearance of the outstanding $2.4 billion forex forward contract to restore confidence in the currency market, halting the 15 per cent increase in port charges, and fast-tracking the implementation of the National Single Window project to reduce trade costs.
Additionally, he advocated for tax reforms and a more transparent exchange rate mechanism for customs duties, stressing that addressing these challenges would stabilise the manufacturing sector, boost production, and drive economic growth.
“Nigerian manufacturing is on its last breath. The future of the country will remain uncertain unless the plight of manufacturers is urgently addressed with appropriate interventions,” he warned.
