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By Merit Ibe
The Manufacturers Association of Nigeria (MAN) has expressed serious doubts about Nigeria’s ability to achieve a $1 trillion economy by 2026, citing a confluence of challenges stacked on its path.
According to her, the growth rate of 2.18 percent of the manufacturing sector clearly falls short of the six percent average targeted by the Tinubu administration. The association made the remark following the GDP report for the third quarter of 2024 as released by the national bureau of statistics which showed that Nigeria’s economy recorded a significant improvement in the third quarter of 2024, with the manufacturing sector recording the least growth rate of 2.18 percent during the period under review.
Director General of MAN, Segun Ajayi-Kadir, explained that the growth rate points to the fact that the sector is being choked by interest rate hikes, high exchange rates, and escalated energy costs.
The NBS GDP report for the third quarter of 2024 showed that Nigeria’s economy recorded a significant improvement in the third quarter of 2024, with a growth rate of 3.46% compared to 2.54% in the same period of 2023 and 3.19% in the previous quarter.
However, the industrial sector recorded a growth of 2.18 percent, an improvement from the 0.46 percent recorded in the third quarter of 2023. This growth was largely due to sectors other than manufacturing.
Ajayi-Kadir viewed that apparently, from the report, the service sub-sectors dominate the composition of the country’s GDP and its pattern of growth, this he said poses a significant drawback for the industrialization agenda.
“In other words, as the services sector continually booms at the detriment of employment and production in the manufacturing sector, the economy is set to fail in its aspirations of reducing forex demand pressures, promoting value addition, generating mass employment, increasing export earnings, driving industrial-led growth, and ensuring sustainable development.
“By implication, achieving a $1 trillion economy by 2026 is apparently difficult, as the growth rate clearly falls short of the 6 percent average targeted by the present administration.”
In general, the report revealed that the manufacturing sector grew slowly year-on-year at 0.92 percent and decelerated quarter-on-quarter by 0.35 percent. Similarly, its contribution to GDP in the 2024 third quarter was 8.21%, lower than the 8.42% recorded in the third quarter of 2023 and lower than the 8.46% recorded in the second quarter of 2024. The MAN DG noted that the underperformance underscores the harsh effect of hostile economic policies which have largely constrained the country’s goal of rapid industrialisation and have left the economy struggling for survival.
He lamented that government has been characterized by its passive response towards the countless challenges battling the manufacturing sector.
On the implications of the decline in the real growth of the manufacturing sector, Ajayi -Kadir said it’s is a clear indication of the detrimental impact of the prevailing macroeconomic policies.
“ This is further evidenced by the significant drop in nominal growth from 36.59 percent to 32.97 percent year-on-year, driven by high inflationary pressure and the exit of major multinational manufacturing companies.
“It is evident that inflation has been a significant factor in undermining the growth of the manufacturing sector, as the sector has been particularly vulnerable to the unstable macroeconomic environment, exacerbated by recent economic reforms.
“Agriculture plays a crucial role in fueling the growth of the manufacturing sector by ensuring a steady supply of affordable local raw materials.
He noted that the agricultural and manufacturing sectors failed to rank among the top five growing sectors during this period, primarily due to security challenges in farming areas and their subsequent negative impact on agro-allied industries.
He said while the higher growth recorded in the reviewed period is laudable, it is still relatively modest, adding that given the prevalence of high unemployment and poverty, a double-digit GDP growth rate is necessary to achieve inclusive growth that benefits all segments of society.
He emphasized that a vibrant manufacturing sector is essential for driving economic growth and prosperity, noting however, that , the sector faces numerous challenges, including multiple taxation, limited access to credit, an unstable foreign exchange market, infrastructure deficits, and energy insecurity.
To address these challenges and unlock the potential of the manufacturing sector, he advised that the government must take decisive action.
To create special windows for providing single-digit interest rates to productive sectors and relax stringent conditions for SMEs to access funding.
“Recapitalize the Bank of Industry (BOI) to meet the growing credit demand of industries.
Enhance credit information systems and broaden the scope of assets for collateral.
Implement the recommendations of the Presidential Fiscal Policy and Tax Reforms Committee.” among others.
