Inflation and Rising Raw Material Costs Challenge Confidence in Food, Beverage, and Textile Manufacturing
The Nigerian manufacturing sector is facing significant challenges, including inflation, high raw material costs, low government support, and a surge in imported products. These issues are beginning to affect the confidence of manufacturers, as reflected in the recent Manufacturers’ CEO Confidence Index (MCCI) released by the Manufacturers Association of Nigeria (MAN). The index revealed that confidence levels in five sectoral groups—Food, Beverage & Tobacco; Textile, Apparel & Footwear; Domestic/Industrial Plastic & Rubber; Motor Vehicle & Misc. Assembly; and Wood & Wood Products—fell below the 50-point benchmark in the third quarter of 2024. Additionally, several regions, such as Kaduna, Kano, Anambra/Enugu, and Bauchi/Benue/Plateau, also showed low confidence levels during the same period.
Despite efforts by the Central Bank of Nigeria (CBN), including a series of interest rate hikes and Forex reforms, inflation continues to rise, and foreign exchange inflows have dropped significantly. The manufacturers’ association has called on the CBN to pause further interest rate hikes and reassess the impacts of its monetary policies. They also urged the government to honor a $2.4 billion unsettled Forex forward contract to boost market confidence and Foreign Direct Investment (FDI). Additionally, the group recommended revising the electricity tariff increase to a 100% hike and introduced measures to improve electricity access, such as an outage compensation mechanism.
The performance of the manufacturing sector in the third quarter of 2024, which saw only a 2.18% growth rate, poses a threat to the federal government’s industrialization plans and its target of achieving a $1 trillion economy by 2030. The association expressed concern that the services sector’s continued growth is outpacing manufacturing, potentially hindering efforts to reduce foreign exchange demand, promote value-added production, and create employment. With the manufacturing sector’s underperformance, the goal of achieving sustainable economic growth, increasing export earnings, and fostering industrial-led development appears increasingly difficult.