The Manufacturers Association of Nigeria (MAN) has reported a decline in the value of manufacturing production due to a challenging economic environment. Manufacturing production value dropped from N7.39 trillion in 2021 to N6.67 trillion in 2022, marking a decrease of N720 billion.
Frank Onyebu, Chairman of MAN’s Apapa branch, highlighted the difficulties faced by the manufacturing sector in 2022, including high inflation, elevated interest rates, multiple taxes, energy cost challenges, forex scarcity, and raw material shortages. These factors, along with supply shortages and rising material prices, hindered the sector’s growth.
The decline was even more pronounced in the second half of 2022, with manufacturing output falling from N3.73 trillion in the corresponding period of 2021 to N2.68 trillion. This represented a 28% decline. There was also a 32% drop when compared to the preceding half, which recorded N3.99 trillion.
The absence of new capital projects by the government due to the focus on elections significantly impacted manufacturing production in the latter half of 2022. Onyebu also noted that many manufacturers chose to relocate to neighboring countries in response to the challenging operating environment, and more were considering such a move while waiting for potential improvements under the new administration.
Despite the hardships, there was a slight increase in the utilization of local raw materials within the sector, with a 52.8% average in 2022 compared to 51.5% in 2021. This shift was driven by the difficulties in sourcing foreign exchange, prompting manufacturers to rely more on domestic resources, despite the associated higher costs.
My Opinion: The decline in Nigeria’s manufacturing production value underscores the significant challenges that businesses face in a difficult economic environment. Multiple factors, including inflation, energy costs, and forex scarcity, can erode the competitiveness of the manufacturing sector. Policymakers need to address these issues to create an enabling environment that encourages production and investment. The reported increase in local raw material sourcing could signal a step towards more self-reliance, but this also highlights the importance of domestic supply chains’ resilience. The manufacturing sector plays a pivotal role in economic growth and job creation, making it crucial to address these challenges to foster sustainable development.