Nigeria’s manufacturing sector’s output has increased by 30.38 per cent year-on-year, reaching N5.34 trillion in H1 2024, the Manufacturers Association of Nigeria (MAN) said on Monday.
Besides, the declining purchasing power of consumers led to a 357.57 per cent surge in the inventory of unsold finished products of manufacturers to N1.24 trillion in the second half of 2924 (H1’24) compared to N271 billion recorded in the same period last year (H1’23).
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The MAN disclosed this in its H1’24 Economic Review made available to our correspondent on Monday.
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“In nominal terms, the manufacturing sector’s output in Nigeria increased by 30.38 per cent year-on-year, reaching N5.34 trillion in H1 2024.
“This growth was primarily driven by the sharp rise in domestic prices, as reflected in the Consumer Price Index (CPI), which surged to 34.19 per cent in June 2024.
“The increase in nominal output masked the underlying difficulties faced by manufacturers in maintaining real output levels, highlighting the impact of inflationary pressures on the sector,” the association said.
In the report, MAN attributed the “alarming increase” in the unsold inventories to declining consumer purchasing power due to escalating inflation, subsidy removal, and the devaluation of the naira.
“The inventory of unsold finished products in the manufacturing sector surged by 357.57 percent year-on-year, reaching N1.24 trillion in H1 2024.
“The high levels of unsold inventories reflect the challenges faced by consumers and the need for interventions to stimulate demand and improve the sector’s performance,” it stated.
In the report, MAN expressed over 200 per cent increase in electricity tariffs imposed by DisCos significantly raised the cost of electricity for manufacturers.
“The cost of providing alternative power continued to rise, with manufacturers spending N238.31 billion on alternative energy sources in H1 2024, a 7.69 percent increase from H2 2023. The surge in costs was driven by higher prices for diesel, gas, and other energy sources, as well as the need for manufacturers to invest in self-energy generation due to unreliable power supply from the national grid.”
The report also indicated that the employment generation capacity of the manufacturing sector continued to decline, with only 2,606 jobs created in H1 2024, a 29.99 per cent reduction from H2 2023.
“Year-on-year, job creation fell by 37.83 per cent, reflecting the ongoing challenges within the sector, including economic uncertainties, inflationary pressures, and an unfavourable business environment.
“The Chemical and Pharmaceuticals industry remained the highest job creator, while the Motor Vehicle & Miscellaneous Assembly industry created the fewest jobs,” it said.
According to the report, the first half of 2024 was marked by significant challenges for Nigeria’s manufacturing sector, including high operational costs, declining consumer demand, and rising inflation.
The report noted that while some sectors showed resilience and growth, others struggled with declining production values, rising inventories, and reduced employment.
“The report underscores the urgent need for Nigeria to implement decisive and coherent economic reforms to address these challenges. Key areas of focus include enhancing policy consistency, improving the business environment, and fostering economic diversification. The success of these reforms will be crucial in reversing the current economic downturn, creating jobs, reducing inflation, and improving the overall welfare of Nigerian citizens.
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