Investment in manufacturing dips 35% amid declining purchasing power, inflationary pressures, policy-driven disruptions
By Jeph Ajobaju, Chief Copy Editor
Investment in manufacturing dipped 35.3 per cent from N1.018 trillion in 2023 to N658.81 billion in 2024, according to the Manufacturers Association of Nigeria (MAN), which listed the drawbacks to include the high cost of finance reflected in high interest rates plus foreign exchange volatility, declining purchasing power, among others.
However, MAN Economic Review for the second half of 2024 (H2 2024) noted an increase in manufacturing investment in H2 2024 versus H1 2024.
The report said in nominal terms, total investment declined 11.3 per cent to N2.85 trillion, with Land & Buildings and Furniture & Equipment seeing the most significant declines.
“Rising interest rates posed a major financial burden, with commercial bank lending rates to manufacturers surging to 35.5 percent in 2024 from 28.06 percent in 2023,” MAN lamented.
It stressed that this was driven by continuous Central Bank of Nigeria (CBN) rate hikes, which raised Monetary Policy Rate (MPR) to 27.50 per cent.
“Consequently, manufacturers’ finance costs totalled N1.3 trillion, constraining investment and expansion plans.”
MAN disclosed that real manufacturing output increased 1.7 per cent year-on-year (YoY) to N7.78 trillion, buoyed by increased activity in Motor Vehicle & Miscellaneous Assembly, Non-Metallic Mineral Products, and Electrical & Electronics.
Also, it added, nominal manufacturing output rose 34.9 per cent to N33.43 trillion, primarily due to inflationary pressures and rising domestic prices.
“The Nigerian manufacturing sector faced a challenging but resilient economy in 2024, navigating macroeconomic instability, inflationary pressures, and policy-driven disruptions,” said MAN Director General Segun Ajayi-Kadir.
“The real GDP growth remained subdued, reflecting the economy’s struggle with rising production costs, exchange rate volatility, and declining consumer demand.
“Inflation surged to 34.8 percent by the end of 2024, significantly eroding purchasing power and increasing operational expenses.
“Meanwhile, aggressive monetary tightening by the CBN, which raised the Monetary Policy Rate (MPR) to 27.50 percent, further exacerbated borrowing costs for manufacturers, limiting expansion and new investments.”
Ajayi-Kadir stressed that while some resilience was observed in sectoral performance and increased local sourcing of raw materials, real output remained subdued.
“Moving forward, stabilizing macroeconomic conditions, improving energy supply, and ensuring access to affordable financing will be critical for sustaining growth and enhancing industrial productivity.”
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