The Manufacturers Association of Nigeria (MAN) has reported an 18.2% increase in production and distribution costs in the fourth quarter of 2024, highlighting the growing economic challenges facing manufacturers.
Segun Ajayi-Kadir, Director-General of MAN, revealed these findings in the Q4 2024 Manufacturers CEO Confidence Index (MCCI) report, released on Monday. The report underscores persistent issues such as rising costs, forex instability, multiple taxation, and poor infrastructure, which continue to threaten the sector.
Key Highlights from the Report
- Production and distribution costs rose 18.2% in Q4 2024, following a 20.1% increase in Q3.
- Employment declined by 0.7%, though lower than the 3.5% drop in the previous quarter.
- Shipment costs rose 11.6%, compared to a 17% increase in Q3.
- Capacity utilisation fell by 0.8%, reflecting reduced production levels.
- Manufacturing investment dropped by 1.2%, signaling weak investor confidence.
- Sales volume showed a slight 1.1% increase, the only positive shift recorded.
Ajayi-Kadir noted that while some economic pressures eased slightly, manufacturers remain burdened by high energy costs, forex scarcity, multiple taxation, and infrastructural challenges.
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Macroeconomic Challenges Stifling Growth
The report pointed to high electricity tariffs and rising alternative energy costs as major constraints on production efficiency.
Additionally, unstable exchange rates, soaring interest rates, and inflationary pressures were cited as key barriers stifling manufacturing growth.
"Manufacturing operations were directly impacted by the lingering effects of high raw material costs, energy, and logistics challenges. The continued existence of high exchange rates, interest rates, and inflation rates remains unfavourable to the overall business environment," the report stated.
Manufacturers' Confidence and Projections for 2025
Despite the tough conditions, the MCCI saw a marginal increase of 0.5 points, rising to 50.7 points in Q4 from 50.2 points in Q3, reflecting cautious optimism among industry players.
However, projections for Q1 2025 indicate a downward trend:
- Expected business conditions dropped from 56 points to 53.2 points.
- Projected employment conditions declined to 53 points.
- Anticipated production levels fell from 54.3 to 54 points, indicating fears of further economic downturns.
The report suggested that hopes for exchange rate stability, lower energy costs, and tax reforms were keeping optimism afloat.
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Urgent Recommendations to Avert Sector Collapse
Manufacturers called on the Federal Government to implement urgent interventions, including:
- Suspending further electricity tariff hikes and reviewing previous increases.
- Halting interest rate hikes and directing banks to provide single-digit loans for manufacturers.
- Expanding the Bank of Industry's capital base to improve access to industrial credit.
- Clearing the $2.4 billion forex backlog to restore confidence in the currency market.
- Reversing the 15% increase in port charges and fast-tracking the implementation of the National Single Window project to reduce trade costs.
- Implementing transparent exchange rate mechanisms for customs duties.
Ajayi-Kadir warned that Nigeria's manufacturing sector is at a breaking point, stressing the need for decisive policy actions to prevent further decline.
"The future of the country will continue to hang in the balance unless the plight of manufacturers is adequately addressed with appropriate interventions," he cautioned.
