FX Volatility Drives 9% Increase in Local Inputs Sourcing by Nigerian Manufacturers in 2024
In 2024, the ongoing foreign exchange (FX) volatility in Nigeria caused a significant shift in the manufacturing sector, leading to a 9% increase in the local sourcing of raw materials. According to the Manufacturers Association of Nigeria (MAN), local raw materials utilization rose from 52% in 2023 to 57.1% in 2024. The surge was largely driven by a shortage of foreign exchange, soaring import costs, and government incentives promoting local content. Sectors such as wood & wood products, textiles, apparel & footwear, and chemicals showed notable improvements, while the electrical & electronics sector struggled due to its dependency on imported components.
The year also saw a sharp devaluation of the naira, which lost 40.9% of its value against the dollar, further complicating the business environment. Despite some improvements in capacity utilization, rising energy costs, high interest rates, and ongoing FX volatility continued to constrain growth within the manufacturing sector. In particular, the food, beverage & tobacco and textile sectors saw significant increases in unsold inventory, which rose by 87.5% to N2.14 trillion due to weak consumer spending, the devalued naira, and escalating production costs.
Additionally, the manufacturing sector faced challenges in terms of employment stability. While job creation was marginal, with only a 1.8% increase from 2023, labor mobility remained high, reflecting the broader economic uncertainty. The manufacturing sector’s investment also shrank by 35.3% in 2024, with manufacturers opting for cautious capital expenditures due to the prevailing economic instability. However, there was a slight recovery in investment in the second half of the year, rising by 19.4% compared to the first half.
In terms of production, Nigeria’s real manufacturing output saw a modest 1.7% increase, reaching N7.78 trillion, driven by the motor vehicle, non-metallic mineral products, and electrical & electronics sectors. However, this growth was overshadowed by a 3.1% decline in production compared to the first half of 2024, largely due to rising costs and weak consumer demand. Meanwhile, while electricity supply to industries improved, manufacturers continued to face high costs due to tariff hikes and frequent power outages, which remained a major challenge despite better availability in the latter part of the year.
Source: Business day