By Merit Ibe
The raging inflation that characterised 2024 has taken its toll on manufacturing companies as they recorded approximately N1.4 trillion worth of unsold inventories last year.
The President of the Manufacturers Association of Nigeria, Mr. Francis Meshioye, who shared the data at a Press briefing on Wednesday, said the mounting stockpile highlights the severe impact of inflation on production, sales and erosion of the purchasing power of consumers.
He said the worrisome development has once again called for urgent economic reforms to support the manufacturing sector.
Meshioye acknowledged that the sector faced significant struggles last year, with its contribution to the GDP substantially affected by a range of challenges, including soaring energy costs, rampant inflation, fluctuating exchange rates, and a heavy burden of multiple taxes.
He said: “In 2024, Nigeria’s manufacturing sector encountered a myriad of macroeconomic and infrastructural challenges that severely impacted its performance.
“The sector faced mounting pressure from high inflation, a depreciating naira, rising interest rates, escalating electricity tariffs, record low sales, the multiplicity of taxes and levies, and militating security concerns. These factors collectively strained the sector’s profitability and curtailed its contribution to the nation’s GDP.
“Inflation in Nigeria reached an alarming 34.6% by November 2024, diminishing consumers’ purchasing power and causing a decline in demand for manufactured goods. This inflationary burden also led to an accumulation of unsold inventory, which rose to N1.4 trillion across the manufacturing industries.”
Mr. Meshioye itemised the various challenges that impeded the growth of the manufacturing sector in 2024.
First off, he explained that the devaluation of the naira stifled the profitability of manufactured goods as the cost of importing raw materials skyrocketed.
“At the same time, the floating of the exchange rate resulted in a steep depreciation of the Naira, which fell from N666/$ in mid-2023 to over N1700/$ by mid-2024. This depreciation inflated the costs of imported raw materials and machinery, worsening the already strained profitability of manufacturers.”
MAN’s President stressed the impact of high interest rates on the growth of the sector, lamenting that it was hard for manufacturers to access credit.
“Interest rates reached unprecedented levels, climbing to 27.7% by November 2024. This increase substantially raised borrowing costs, making it harder for manufacturers to access financing for expansion and modernization.”
The President also lamented the high cost of energy and its impact on the industry.
“Manufacturers were hit hard with a drastic rise in electricity tariffs, with rates increasing by over 250%. This surge in energy costs became one of the highest operating expenses for businesses in the sector in 2024. As a result, many manufacturers sought alternative energy sources, further straining their financial resources and complicating their ability to remain competitive.”
Speaking on the consequence of the sector’s contracted growth on the economy, the President noted that Manufacturing’s share of the GDP dropped significantly from 16.04% in Q4 2023 to 12.68% in Q2 2024,
“The combination of high operational costs, reduced consumer demand, and limited access to finance contributed majorly to this decline,” he said.
“The rising interest rates, combined with inflation, severely limited the potential for investment in the sector, impeding long-term growth prospects,” he added.