CEM REPORT, MANUFACTURING | The manufacturing sector in Nigeria is expected to face a tough start in 2024, according to the Manufacturers Association of Nigeria (MAN). The group’s Director General, Mr. Segun Ajayi-Kadir, said this in an interview with the News Agency of Nigeria (NAN) on the outlook for the sector in 2024.
Policy Stimuli and Trade Strategies
Ajayi-Kadir explained that the prospect of recovery for the sector relies heavily on implementing policy stimuli and a synthesis of domestic growth through export-focused and offensive trade strategies. He said this approach would enhance resilience, foster steady growth, and ensure the sector gains significant traction in the latter part of the year.
He stated, “In broad terms, the year 2024 may start on a tough note for manufacturing but may end with some measured improvements because the envisaged policy reforms, improved commitment to domestic production and general positive outlook seem favourable for the sector.”
Growth and contribution
He noted that growth for the sector may hit 3.2% while the contribution to the Gross Domestic Product (GDP) is expected to reach 10% this year.
He said, “In 2024, sectoral real growth is expected to hit about 3.2%; contribution to the economy will most likely exceed 10% and the Manufacturers’ CEOs Confidence Index is predicted to rise above 55 points threshold by the end of Q4 2023.”
Challenges and Solutions
Speaking further, Ajayi-Kadir noted that foreign exchange problems and inflation coupled with challenges with interest rates will curtail capacity utilization for the sector’s output. However, he expects the effects of these challenges to subside from the third quarter. He mentioned that the current concessions involving seaports, airports, and roads could offer opportunities for the cement sub-sector, contributing to necessary infrastructure upgrades for improved manufacturing productivity.
Furthermore, he highlighted that the potential rise in global oil prices, increased domestic oil and gas production, local petroleum product refining, and anticipated gains from exchange rate unification would collectively foster stability in the foreign exchange market.
One of the biggest challenges facing the sector is policy uncertainty. The Nigerian government has made a number of changes to its economic policies in recent years, and manufacturers are struggling to keep up with the pace of change. For example, the recent devaluation of the naira has made it more expensive for manufacturers to import raw materials and equipment.
Weak domestic demand is another challenge facing the sector. The nation’s economy has weakened the spending power of consumer, making it difficult for manufacturers to sell their products.
High production costs are also making it difficult for Nigerian manufacturers to compete. The cost of electricity, fuel, and transportation is all high in Nigeria, which makes it difficult for manufacturers to keep their prices competitive.
MAN Optimism
Despite these challenges, the MAN is cautiously optimistic about the future of Nigerian manufacturing. The association expects some improvement later in the year, driven by factors such as policy changes, domestic growth, and export strategies.
[READ ALSO] Naira Leads African Currencies Hit Hard by Economic Turmoil in 2023
In addition, the MAN is encouraging manufacturers to focus on export markets. Nigeria has a large and growing domestic market, but there is also significant potential for exports. MAN is working with the Nigerian government to develop export strategies for manufacturers.
“We believe that the Nigerian manufacturing sector has the potential to grow significantly in the coming years,” said Ahmed. “We are working with the government to create an enabling environment for the sector, and we are encouraging manufacturers to focus on export markets. We are confident that the sector can make a significant contribution to the Nigerian economy.”
“The Nigerian government has recently made a number of policy changes that could benefit the manufacturing sector.
“For example, the government has introduced a new export-oriented industrial policy. We believe that these policy changes could help to boost the sector’s growth,” Ahmed added.
The MAN also expects domestic growth to pick up in the second half of the year. This would lead to increased demand for manufactured goods, which would benefit the sector.
It is still too early to say for sure how the Nigerian manufacturing sector will perform in 2024. However, the MAN’s cautious optimism is a sign that the sector has the potential to recover from its current challenges.
Background
The manufacturing sector has been grappling with diverse problems in recent years leading to notable exits. These problems include; rising foreign exchange rates, high energy costs occasioned by epileptic power supply, multiple taxation, inflation, etc. However, these problems became more pronounced in 2023 with the removal of fuel subsidies and the unification of the foreign exchange market.
The Chairperson of the Export Promotion Group within the Manufacturers Association of Nigeria (MAN), Oddiri Erewa-Meggison stated in October that “the current economic situation is the worst in the nation’s history for manufacturers.” To stimulate growth, the President has promised an N75 billion credit to manufacturers at a 9% interest rate.
