In response to unreliable grid power and increases in prices of diesel and PMS, manufacturers’ total expenditure on alternative energy sources surged to N1.11 trillion in 2024, which represented a 42.3 per cent increase from N781.68 billion in 2023.
This was revealed by the Manufacturers Association of Nigeria (MAN) in its, “MAN Economic Review Second Half 2024,” which also showed that real manufacturing investment fell by 35.3 percent year-on-year to N658.81 billion in 2024.
The economic review also showed that the Nigerian manufacturing sector recorded 57 per cent capacity utilisation, 1.7 per cent increase in real manufacturing output, 57.1 per cent local raw material sourcing and a surge in unsold finished goods by 87.5 per cent in 2024.
The review, which was issued by the Director General of MAN, Mr. Segun Ajayi-Kadir, showed that electricity supply situation for industries improved in 2024, with average daily supply increasing to 13.3 hours per day, up from 10.6 hours in 2023.
However, electricity tariffs surged by over 200 percent for Band “A” consumers, significantly increasing manufacturing costs as “manufacturers spent N404.80 billion in H1 2024, which increased by 75.0 percent to N708.07 billion in H2 2024.
He said, “The Food, Beverage & Tobacco sector recorded N229.41 billion in alternative energy spending, up from N182.76 billion in 2023, while Chemical & Pharmaceutical energy costs doubled to N208.68 billion.
“The Non-Metallic Mineral Products sector’s energy costs increased by 33.7 percent to N118.49 billion, and the Textile, Apparel & Footwear industry saw a fourfold increase, reaching N26.45 billion in 2024, compared to N6.97 billion in 2023.”
The review also said that the “capacity utilisation in Nigeria’s manufacturing sector improved marginally to 57.0 percent in 2024, up from 55.1 percent in 2023.
He said, “A half-on-half analysis showed a 1.2 percentage point increase in H2 2024 compared to H1 2024. However, persistent challenges such as rising energy costs, forex volatility, and high interest rates constrained further growth.”
The report said sectoral analysis revealed that Non-Metallic Mineral Products, Motor Vehicle & Miscellaneous Assembly, and Chemical & Pharmaceuticals sectors recorded the highest improvements.
It stated that manufacturing output increased modestly by 1.7 per cent year-on-year to N7.78 trillion, and was “buoyed by increased activity in Motor Vehicle & Miscellaneous Assembly, Non-Metallic Mineral Products, and Electrical & Electronics.
“However, a half-on-half decline of 3.1 percent in real production reflected rising costs and weak consumer demand. Nominal manufacturing output rose sharply by 34.9 percent to N33.43 trillion, primarily due to inflationary pressures and rising domestic prices.”
According to the report, the manufacturing sector’s local sourcing of raw material increased to 57.1 per cent in 2024, up from 52.0 per cent in 2023.
This shift was largely driven by foreign exchange scarcity, high import costs, and government incentives promoting local content.
Notable improvements were observed in Wood & Wood Products, Textile, Apparel & Footwear, and Chemical & Pharmaceuticals, while Electrical & Electronics continued to lag due to dependency on imported components.
But the inventory of unsold finished goods surged by 87.5 per cent to N2.14 trillion in 2024, driven by weakened consumer demand, escalating production costs, and declining purchasing power.
However, a half-on-half decrease of 27.9 percent in H2 2024 suggests improved clearance efforts and price adjustments. The Food, Beverage & Tobacco and Textile, Apparel & Footwear sectors faced the most significant increases in unsold stock.
According to the report, real manufacturing investment fell by 35.3 per cent year-on-year to N658.81 billion in 2024, reflecting economic uncertainty and reduced expansion plans.
It said: “In nominal terms, total investment declined by 11.3 per cent to N2.85 trillion, with land and buildings, furniture and equipment seeing the most significant declines.
The report also said that the manufacturing sector crated 34,769 jobs in 2024. “However, the number of employees leaving manufacturing companies also increased from 17,364 in 2023 to 17,949 in 2024, indicating ongoing labour mobility due to economic uncertainties, skill migration, and company restructuring.
“This resulted in 16,820 net new jobs in 2024, nearly unchanged from 16,799 in 2023”
The economic review said that rising interest rates posed a major financial burden, with commercial bank lending rates to manufacturers surging to 35.5 percent in 2024 from 28.06 percent in 2023.
This was driven by continuous CBN rate hikes, which raised the MPR to 27.50 percent. Consequently, manufacturers’ finance costs totaled N1.3 trillion, constraining investment and expansion plans.
“The Nigerian manufacturing sector faced significant hurdles in 2024, including high inflation, forex volatility, surging production costs, and declining consumer demand. While some resilience was observed in sectoral performance and increased local sourcing of raw materials, real output remained subdued. Moving forward, stabilizing macroeconomic conditions, improving energy supply, and ensuring access to affordable financing will be critical for sustaining growth and enhancing industrial productivity,” Ajayi-Kadir said.
