Kehinde Fajobi
The volume of unsold finished products by Nigerian manufacturers has risen sharply, reaching ₦1.24 trillion in the first half of 2024 (H1’24), a 357.57 per cent increase compared to ₦271 billion in H1’23.
The Manufacturers Association of Nigeria (MAN) attributed this alarming rise to consumers’ weakened purchasing power amid high inflation, subsidy removal, and naira devaluation, according to its latest economic report.
“The high levels of unsold inventories reflect the challenges faced by consumers and the need for interventions to stimulate demand and improve the sector’s performance,” MAN stated.
The report highlighted that electricity tariffs, raised by over 200 per cent, have significantly increased manufacturers’ costs.
Persistent power outages have forced companies to rely on costly alternative energy sources, pushing spending on alternative power up 7.69 per cent to ₦238.31 billion in H1’24.
Increased costs were driven by soaring diesel and gas prices, alongside manufacturers’ investment in self-generated energy due to unreliable national grid power.
While capacity utilisation rose by 2.8 percentage points compared to the second half of 2023, costs have escalated due to the naira’s depreciation, inflating machinery and asset imports.
Segun Ajayi-Kadir, Director-General of MAN, said, “H1’24 was marked by significant challenges for Nigeria’s manufacturing sector, including high operational costs, declining consumer demand, and rising inflation.
The report underscores the urgent need for Nigeria to implement decisive and coherent economic reforms to address these challenges.”
The Nigeria Employers’ Consultative Association (NECA) warned that, if left unaddressed, these difficulties could lead to more business closures, job losses, and greater social instability.
“While local businesses continue to struggle under the weight of these malaises, there are also unintended consequences for the country as potential foreign investors will be wary of an environment characterised by uncertainty,” said NECA’s Director-General, Wale-Smatt Oyerinde.
He added that unreliable power and high production costs could result in “another wave of business closures, higher unemployment rates and greater social dysfunction.”
Meanwhile, Dr. Femi Egbesola, President of the Association of Small Business Owners of Nigeria (ASBON), pointed to the removal of import restrictions as a cause for the surge in imported products, reducing the competitiveness of local goods.
“High costs of transportation, inflation, and policy instability have driven consumer demand toward cheaper, lower-quality imports,” he said.
Olorunfemi Oke, Executive Secretary of the Chemical and Non-Metallic Products Employers’ Federation (CANMPEF), noted that reduced consumer disposable income has led to unsold goods, while increased production costs continue to drive up prices.
“The high cost of diesel, PMS, and electricity tariffs is making manufacturers consider alternative sources like gas and solar, though gas supply remains inconsistent,” he said.