Latest Headlines
MAN: Why Manufacturing Contribution to GDP Declined in 2024, Unsold Inventory Rose to N1.4trn
![MAN: Why Manufacturing Contribution to GDP Declined in 2024, Unsold Inventory Rose to N1.4trn](https://global.ariseplay.com/amg/www.thisdaylive.com/uploads/MAN-5.jpg)
Dike Onwuamaeze
The President of Manufacturers Association of Nigeria, Mr. Francis Meshioye, has blamed the low contribution of the manufacturing sector to the Nigeria’s gross domestic product (GDP) in 2024 on a myriad of macro-economic and infrastructural challenges that severely impacted its performance, strained the sector’s profitability.
Meshioye also said that the outlook for the manufacturing sector in 2025 largely depends on the success of ongoing economic reforms, especially the implementation of the proposed tax reforms, stabilisation of critical macroeconomic indicators, and targeted investments in infrastructure and technology.
In a chat with newsmen in Lagos he said: “In 2024, Nigeria’s manufacturing sector encountered a myriad of macroeconomic and infrastructural challenges that severely impacted its performance. The sector faced mounting pressure from high inflation, a depreciating Naira, rising interest rates, escalating electricity tariffs, and record low sales, multiplicity of taxes and levies and militating security concerns. These factors collectively strained the sector’s profitability and curtailed its contribution to the nation’s GDP.”
He added that inflation in Nigeria, which reached an alarming 34.6 per cent by November 2024, diminished consumers’ purchasing power and causing a decline in demand for manufactured goods and, “led to an accumulation of unsold inventory, which rose to N1.4 trillion across the manufacturing industries.”
According to him, the floating of the exchange rate resulted in a steep depreciation of the Naira, which fell from N666/$ in mid-2023 to over N1700/$ by mid-2024.
This depreciation, he noted, inflated the costs of imported raw materials and machinery and worsened the already strained profitability of manufacturers.
He said: “Interest rates reached unprecedented levels, climbing to 27.7 per cent by November 2024. This increase substantially raised borrowing costs, making it harder for manufacturers to access financing for expansion and modernisation. The rising interest rates, combined with inflation, severely limited the potential for investment in the sector, impeding long-term growth prospects.”
Meshioye further noted that manufacturers were hit hard with a drastic rise in electricity tariffs by over 250 per cent, which made energy costs to become one of the highest operating expenses for businesses in the sector in 2024.
“As a result, many manufacturers sought alternative energy sources, further straining their financial resources and complicating their ability to remain competitive. Consequently, it cannot be far-fetched that the sector’s struggles were reflected in its decreasing contribution to Nigeria’s GDP. Manufacturing’s share of the economy dropped significantly from 16.04 per cent in Q4 2023 to 12.68 per cent in Q2 2024, indicating a contraction in economic activity within the sector. The combination of high operational costs, reduced consumer demand, and limited access to finance contributed majorly to this decline,” he said.
The MAN boss, however, was optimistic that interest rate would begin to ease in 2025 because only a favorable interest rate environment would help manufacturers to access the necessary financing to reinvest and drive productivity.
He also said that the contraction of economy is expected to ease and experience some growth this year with stability in the exchange rate regime in 2025, adding that the efficient adoption Artificial Intelligence (AI) will be a game changer for the manufacturing sector in 2025 and the nearest future.
According to him, the Nigerian manufacturers “are gearing up and ready to embark on this interesting journey on the path of growth.”
He, however, said that the current efforts to improve productivity and enhance competitiveness must be sustained because they are crucial in helping Nigerian manufacturers navigate the challenges they face.