By Adedapo Adesanya
Local producers are not happy about the current economic situation in Nigeria as it is affecting their businesses, causing them to incur losses.
In the first half of 2024, the inventory of unsold finished products in the manufacturing sector surged by 357.57 per cent year-on-year to N1.24 trillion.
At the unveiling of its first half economic report on Monday in Lagos, the Manufacturers Association of Nigeria (MAN), through its chairman, Mr Francis Meshioye, the group called for the implementation of decisive and coherent economic reforms.
The association listed key areas of focus as enhancing policy consistency, improving the business environment, and fostering economic diversification.
The organisation 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, adding that the reforms were needed to address the challenges being faced by manufacturers.
Mr 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, stressing that while some sectors showed resilience and growth, others struggled with declining production values, rising inventories, and reduced employment.
The group noted that the lingering impact of high interest rates, debt sustainability challenges, continuing geopolitical tensions and ever-worsening climate risks continued to pose challenges to growth in the sector, emphasising that this threatened decades of development gains, especially for developing and small island developing states.
The MAN report 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.
It was revealed that there was 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 (CPI), which surged to 34.19 per cent in June 2024,” MAN said.
Also, the 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 the MAN president, 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.
Despite this, Mr 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.