By Merit Ibe [email protected]
With 2024 nearing its end, local manufacturers find little cause for celebration.
For them, the outgoing year will be listed as one where they endured unceasing hardships.
No thanks to mounting costs, crippling infrastructure deficits, insecurity, poor electricity supply, forex shortages, multiple taxation and a generally unstable economic environment that pushed many to their breaking point.
With inflation soaring and critical policies failing to alleviate the pressure, the manufacturing sector, like many others, was left reeling, with numerous businesses either shuttering their operations or struggling to keep up.
Foreign manufacturing companies were not spared.
Those that could not stand the heat relocated to softer climes.
Between January to October this year, a lot of companies exited Nigeria. They include- Microsoft Nigeria, Total Energies Nigeria (impacted by divestment
strategies), PZ Cussons Nigeria PLC, Kimberly-Clark Nigeria, Diageo PLC.
On December 1, Holcim, a Swiss building materials company, agreed to sell its Nigerian business to Huaxin Cement Ltd., a Chinese firm.
Being an economy characterized by high operating costs accentuated by the effects of fuel subsidy removal, exchange rate liberalisation, rising inflation and monetary policy tightening, the business terrain became toxic, tossing many firms into the intensive care unit, literally speaking.
At the heart of the economic turmoil were obvious contradictions in monetary and fiscal policies that compounded the prevailing structural challenges.
The Manufacturers Association of Nigeria (MAN) pointed out in its 2024 third-quarter report that Nigerian policymakers embarked on bold economic reforms that ignited macroeconomic crises, with inflation, unemployment, poverty and hunger rising at alarming rates.
According to the association, though necessary, the reforms were bereft of proper planning and policy coordination, as evident in the negative ripple effects on the populace, especially vulnerable individuals and Small and Medium Industries (SMIs).
Following the MAN survey report, which painted a grim picture of the country’s manufacturing sector in 2024, the association explained that fuel subsidy removal and exchange rate liberalisation resulted in high borrowing costs, exorbitant exchange rates, and escalated energy prices that have taken a heavy toll on households and businesses, especially manufacturers who have been worst hit.
President of MAN, Francis Meshioye, observed that the Monetary Policy Committee (MPC) and the Central Bank of Nigeria (CBN) have been implementing policies that exacerbated macroeconomic instability and paralysed manufacturing activities over time.
He emphasised the need for a thorough assessment of the impact of monetary policy decisions on the real sector and the economy as a whole.
For the Director General of MAN, Segun Ajayi-Kadir, despite resilience in some sectors, the industry faced significant headwinds, including high operational costs, declining consumer demand and rising inflation, among others.
The government’s policy prompting the removal of subsidies on petroleum products during the year led to an increase in fuel prices, with ripple effects across the value chain, adding to production costs.
Ajayi-Kadir also noted the deteriorating state of insecurity in Nigeria, which is a cause of concern for manufacturers.
“The association has consistently expressed fears that if the current state of insecurity is not promptly tackled, investor confidence in the country would wane, posing a significant threat to businesses and the overall economic development of Nigeria.”
In 2024, the CBN hiked the benchmark interest rate six consecutive times from 22.75 percent to 27.5 percent. However, inflation remained elevated. Ignited by a further rise in PMS prices, headline inflation resumed its upward trajectory, reaching a 28-year high of 34.60 percent in November 2024. The high inflationary pressure and continuous interest rate hikes constrained GDP growth.
The MAN DG said major stoking factors of the high inflation were the rising exchange rate, energy prices, food prices, and money supply growth.
“Insecurity, poor storage facilities, and high transport costs caused food inflation to resume its upward trajectory.
“This underscores the harsh effect of hostile economic policies, which have largely constrained the country’s goal of rapid industrialization and have left the economy struggling for survival.
“All current indices recorded a decline and stood below the 50-point standard due to the prevailing harsh business-operating environment occasioned by high energy prices, exorbitant exchange rates, soaring interest rates, persistent inflation, and unstable fuel supply.”
No doubt, the CBN’s efforts to curb inflation and stabilise the naira are commendable. However, the prevailing macroeconomic headwinds clearly prove that monetary policy instruments offer limited scope when confronting Nigeria’s broader economic challenges of high energy prices, infrastructure deficits, insecurity, low industrial productivity, and limited export diversification.
On GDP growth, he said given the enormity of the macroeconomic headwinds and the numerous fiscal and monetary policy shocks, the Nigerian economy could be adjudged to have demonstrated remarkable resilience in 2024.
“The fragile growth performance was a reflection of the diverse headwinds bedeviling the Nigerian economy. These include macroeconomic instability, shrinking fiscal space, soaring public debt, heightened inflationary pressures, currency depreciation, foreign exchange illiquidity, surging energy costs, weakening purchasing power, legacy structural constraints, lingering insecurity, and crippling trade facilitation issues.”
For Daniel Dickson-Okezie, an MSMEs expert, the depression experienced by the manufacturing sector as well as the economy in past years worsened in 2024.
“The manufacturing sector, as well as the economy, experienced a deepening of the depression which has been there for quite some years. Running a business is still a herculean task in Nigeria. Manufacturers and SMEs still struggle. Most of the sectors did not do well, and the real sector is not exempted.
“The performance of the real sector in 2024, like the performance of the Nigerian economy as a whole, was really low.”
Dickson-Okezie decried that the manufacturing sector’s contribution to GDP was just about 9.98 percent in Q1 of 2024, and the trend continued downward to Q4 of 2024, adducing the reasons to rising interest rates and exchange rates, which did not improve.
“Another thing was the threat to business survival posed by the sudden increase in electricity tariffs, which have been on the increase.
“Also, energy costs continued to rise despite a small drop in the cost of diesel, which wasn’t enough to make any difference or positive impact on the real sector.”
He emphasized that the volatility of supply and prices continued to make life difficult for real sector operators.
President of the Calabar Chamber of Commerce and Industry (CALCCIMA), David Etim, agreed that the outgoing year has been rough for manufacturers and other businesses, expressing hope for a better tomorrow in 2025.
“You know transitioning is never an easy thing, let’s be clear.
“The economy has been in transition, and when you transition an economy, it’s always very difficult and challenging to turn things around for a positive change.
“It requires a lot of skillful processes, and not everybody has the same skill.”
He was hopeful that the new year will be favorable and the economy will be better off.