Nigeria’s manufacturing sector plunges as GDP contribution declines by 20.95% in 6 months

Nigeria’s manufacturing sector is facing an alarming decline, as its contribution to the nation’s Gross Domestic Product (GDP) has dropped by 20.95% over the first half of 2024. The sharp reduction, highlighted in recent reports from the National Bureau of Statistics (NBS), reveals the growing challenges that the sector is battling, further exacerbated by the country’s economic and infrastructural hurdles.

At the close of 2023, the manufacturing sector accounted for a robust 16.04% of Nigeria’s GDP, underscoring its vital role in the economy.

However, by the second quarter of 2024, this contribution had plunged to 12.68%, marking a significant contraction over just six months. The sector’s struggles became evident early in 2024, with its GDP share slipping to 14.79% in Q1, setting the stage for a continued downward spiral.

The nominal GDP growth rate for the manufacturing sector in Q2 2024 was a mere 1.91% year-on-year, a stark contrast to the 29.90% growth achieved in the same period in 2023. This drastic 27.99-percentage-point decline highlights the sector’s inability to sustain its output in the face of mounting economic pressures. Moreover, the sector saw an 11.25% contraction on a quarter-on-quarter basis, further illustrating the deepening crisis.

The declining nominal GDP growth signals more than just a reduction in the sector’s output; it points to underlying structural weaknesses that are hampering its ability to expand and thrive. These challenges are not only stalling growth but also threatening the broader economic stability of the nation, as the sector is a key driver of employment, investment, and industrial activity.

When examining real GDP growth, which accounts for inflation and offers a clearer picture of the sector’s actual production levels, the outlook is equally concerning. In Q1 2024, real GDP growth for the manufacturing sector stood at 1.49% year-on-year, contributing 9.98% to the overall GDP. However, by Q2 2024, this growth had dwindled to 1.28%, with the sector’s real contribution to GDP falling to 8.46%, down from 8.62% in the same quarter the previous year. The sector’s quarter-on-quarter growth rate also experienced a significant decline, dropping to -15.16%, compared to the modest 1.74% growth observed in Q1 2024.

These figures reflect the deepening struggles of Nigeria’s manufacturing sector, which is increasingly finding itself squeezed by both domestic and international challenges. The sector’s dwindling performance is a clear indicator of the urgent need for targeted interventions to address the underlying issues that are stifling its growth.

The declining contribution of the manufacturing sector to both nominal and real GDP underscores the need for comprehensive policy reforms and strategic investments. To arrest this decline, Nigeria must focus on improving infrastructure, enhancing access to finance, and creating a more conducive environment for manufacturing.

Without these critical steps, the sector’s downward trend could become entrenched, posing significant risks to the nation’s economic future.

As Nigeria continues to grapple with these challenges, the manufacturing sector’s plight serves as a stark reminder of the importance of strategic action. By addressing the root causes of the sector’s decline and implementing targeted reforms, there is still an opportunity to revitalize the manufacturing industry and restore its critical role in driving Nigeria’s economic growth and development.