The Manufacturers Association of Nigeria (MAN) says the manufacturing reports of the first half of 2024 (H1’2024) have underscored the urgent need for implementation of decisive and coherent economic reforms to save the tottering Nigerian economy.
Otunba Francis Meshioye, President, MAN, said this in the association’s first half economic report on Monday in Lagos.
Meshioye said the reforms were to address the challenges being faced by manufacturers.
He said the report focused on manufacturing indicators such as capacity utilisation, production value, inventory, local raw materials utilisation, investment and expenditure on alternative energy sources, among others.
Meshioye noted that the first half of 2024 was marked by significant challenges for Nigeria’s manufacturing sector, including high operational costs, declining consumer demand, and rising inflation.
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He said that while some sectors showed resilience and growth, others struggled with declining production values, rising inventories, and reduced employment.
He identified key areas of focus as enhancing policy consistency, improving the business environment, and fostering economic diversification.
“The success of these reforms will be crucial in reversing the current economic downturn, creating jobs, reducing inflation, and improving the overall welfare of Nigerian citizens.
“As the country navigates through these turbulent times, the resilience of its policy framework and the effectiveness of its economic management will determine the path forward,” he said.
Meshioye said the global economy was resilient during the period with major economies avoiding a severe downturn, bringing down inflation without increasing unemployment.
He, however, noted that lingering impact of high interest rates, debt sustainability challenges, continuing geopolitical tensions and ever-worsening climate risks continued to pose challenges to growth.
This, he said, threatened decades of development gains, especially for developing and small island developing states.
Meshioye said the economic outlook for many African countries had deteriorated because of high inflation, elevated borrowing costs, persistent exchange rate pressures and lingering political instability.
He added that Nigeria’s economy continued to grapple with formidable challenges that have stymied its growth potential and eroded economic stability.
He noted that in spite of efforts to stabilise the economy, including aggressive monetary tightening by the Central Bank of Nigeria, the desired outcomes in terms of curbing inflation and stimulating growth remained elusive.
The MAN president said in Nigeria’s manufacturing sector, 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.
He, however, revealed a 2.8 per cent increase compared to H2 2023, reflecting some recovery.
“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.
“In spite of this decline, the sector saw a 9.97 per cent increase compared to H2 2023, driven by a baseline effect.
“In nominal terms, the manufacturing sector’s output in Nigeria increased by 30.38 per cent year-on-year, reaching N5.34 trillion in H1 2024.
“This growth was primarily driven by the sharp rise in domestic prices, as reflected in the Consumer Price Index, which surged to 34.19 per cent in June 2024,” he said.
Meshioye said manufacturing sector’s local raw material sourcing improved slightly to 56.03 per cent in H1 2024, up from 55.4 per cent in H1 2023.
According to him, the modest increase indicates a gradual shift towards local sourcing, driven by difficulties in obtaining foreign exchange.
He, however, noted that some sectors, such as non-metallic mineral products and textile, apparel & footwear, faced declines in local sourcing, reflecting the challenges of shifting away from imported raw materials.
He added that the inventory of unsold finished products in the manufacturing sector surged by 357.57 per cent year-on-year, reaching N1.24 trillion in H1 2024.
He attributed the alarming increase to declining consumer purchasing power due to escalating inflation, subsidy removal, and the devaluation of the naira.
He said the high levels of unsold inventories reflect the challenges faced by consumers and the need for interventions to stimulate demand and improve the sector’s performance.
Meshioye stated that investments in the manufacturing sector continued to rise, reaching N250.13 billion in H1 2024, a 29.63 per cent year-on-year increase.
“However, this increase is primarily due to the depreciation of the naira, which inflated the cost of importing machinery and other essential assets.
“In real terms, investment spending did not increase, as manufacturers focused on maintaining current production levels rather than expansion due to the challenging economic environment.
“Also, electricity supply to industries showed some improvement in H1 2024, with average daily supply hours increasing to 11.28 hours per day.
“However, the cost of providing alternative power continued to rise, with manufacturers spending N238.31 billion on alternative energy sources in H1 2024, a 7.69 per cent increase from H2 2023.
“The surge in costs was driven by higher prices for diesel, gas, and other energy sources, as well as the need for manufacturers to invest in self-energy generation due to unreliable power supply from the national grid,” he said.
