The inventory of unsold finished goods in Nigeria’s manufacturing sector has surged by 357.57% year-on-year, reaching N1.24 trillion in the first half of 2024, up from N271 billion in the same period last year. The Manufacturers Association of Nigeria (MAN) attributed this sharp increase to declining consumer purchasing power, escalating inflation, the removal of fuel subsidies, and the devaluation of the naira.
In its H1 2024 Economic Review, MAN emphasized that high inflation has weakened consumer demand, leaving manufacturers with excess stock and prompting calls for economic reforms to revive the sector. Additionally, the report highlighted the impact of increased electricity tariffs, noting that a 200% rise in tariffs has significantly raised operating costs for manufacturers, who already face frequent power outages. This has forced many to spend an additional N238.31 billion on alternative energy sources, a 7.69% increase from the second half of 2023, driven by rising costs of diesel, gas, and other fuels.
Despite the challenges, MAN noted a slight recovery in capacity utilization in the sector, which rose by 2.8 percentage points compared to the previous period, and investment in the sector increased by 29.63% to N250.13 billion. This rise in investment, however, was largely attributed to naira depreciation, which has inflated the cost of imported machinery and essential assets.
Segun Ajayi-Kadir, Director-General of MAN, underscored the urgency of addressing these issues, stating, “The first half of 2024 was challenging for Nigeria’s manufacturing sector, with high operational costs, reduced consumer demand, and inflationary pressures. The report highlights the need for immediate, coherent economic reforms to stabilize and revitalize the sector.”
The Nigeria Employers’ Consultative Association (NECA) also expressed concern, warning that if these issues persist, they could lead to further business closures, higher unemployment rates, and increased social instability. NECA’s Director-General, Wale-Smatt Oyerinde, highlighted the strain on local businesses due to high energy costs and power supply issues, suggesting that the country’s current economic climate may also deter foreign investors.
Adding to the concerns, the Association of Small Business Owners of Nigeria (ASBON) pointed to the removal of import bans as a key factor, which has allowed an influx of imported goods, reducing competitiveness for locally produced items. ASBON President Dr. Femi Egbesola noted, “The market is flooded with imports, and high production costs for local goods reduce their price competitiveness. Rising transportation costs, economic instability, and consumer demand for cheaper, lower-quality items also contribute to the large volume of unsold goods.”
The Chemical and Non-Metallic Products Employers’ Federation (CANMPEF) echoed these concerns, noting that the decline in consumers’ disposable income has led to a surge in unsold goods, particularly in the non-essential products category. The group’s Executive Secretary, Olorunfemi Oke, pointed out that the high costs of diesel, petrol, and electricity are pushing manufacturers to seek alternative power sources like gas and solar, which remain inconsistent.
Amid these mounting challenges, stakeholders are calling on the government to prioritize economic stabilization measures that will stimulate consumer demand and lower production costs, helping Nigerian manufacturers regain competitiveness and prevent further economic decline.
