MAN reviews H22  2024 manufacturing performance, mixed results amid rising costs

The Manufacturers Association of Nigeria (MAN) has assessed the country’s manufacturing performance for the second half of 2024, revealing mixed results across several key indicators.

The Director-General of MAN, Mr Segun Ajayi-Kadir, disclosed the findings during a report presentation titled “MAN Economic Review – Second Half 2024” on Monday in Lagos.

Key indicators reviewed in the report included capacity utilisation, production value, inventory levels, the utilisation of local raw materials, investment trends, and expenditure on alternative energy sources, among others.

Ajayi-Kadir reported a slight improvement in capacity utilisation within the manufacturing sector, which increased to 57.0 per cent in 2024, up from 55.1 per cent in 2023. A half-on-half analysis showed a 1.2 percentage point increase in the second half of 2024 compared to the first half.

In terms of real manufacturing output, the sector saw a modest year-on-year growth of 1.7 per cent, amounting to N7.78 trillion. This increase was attributed to heightened activity in sectors such as motor vehicles and miscellaneous assembly, non-metallic mineral products, and electrical and electronics. However, Ajayi-Kadir pointed out a 3.1 per cent decline in real production compared to the first half of the year, reflecting rising production costs and weak consumer demand.

“Nominal manufacturing output surged by 34.9 per cent to N33.43 trillion, driven primarily by inflationary pressures and rising domestic prices,” he explained.

The use of local raw materials in the manufacturing process also saw an increase, rising to 57.1 per cent in 2024 from 52.0 per cent the previous year. This shift was largely influenced by foreign exchange constraints, high import costs, and government incentives encouraging the use of local content.

Sectors such as wood and wood products, textiles, apparel and footwear, and chemicals and pharmaceuticals all saw positive developments in local sourcing, while the electrical and electronics sector continued to struggle due to reliance on imported components.

However, the sector also faced challenges, with the inventory of unsold finished goods skyrocketing by 87.5 per cent to N2.14 trillion in 2024. This was attributed to weakened consumer demand, escalating production costs, and declining purchasing power. Nevertheless, a half-on-half analysis showed a 27.9 per cent decrease in the second half of 2024, suggesting better inventory clearance efforts and price adjustments.

Ajayi-Kadir also noted a significant drop in real manufacturing investment, which fell by 35.3 per cent year-on-year to N658.81 billion in 2024, reflecting economic uncertainty and reduced expansion plans. On a positive note, investment showed a 19.4 per cent increase in the second half of 2024 compared to the first half, as manufacturers cautiously resumed capital expenditures.

The employment situation in the sector remained relatively stable, with 34,769 jobs added in 2024, marking a 1.8 per cent increase from 2023. However, there was also an uptick in employee turnover, with the number of workers leaving manufacturing companies rising from 17,364 in 2023 to 17,949 in 2024, indicating ongoing labour mobility driven by economic uncertainty, skill migration, and company restructuring.

Electricity supply to industries showed improvement in 2024, with the average daily supply increasing to 13.3 hours per day, up from 10.6 hours in 2023. On a half-on-half basis, the supply increased from 11.4 hours per day in the first half to 15.2 hours in the second half of 2024. However, Ajayi-Kadir highlighted that electricity tariffs for Band A consumers had risen by more than 200 per cent, significantly adding to manufacturing costs.

In response to unreliable grid power and rising fuel prices, manufacturers increased their expenditure on alternative energy sources to N1.11 trillion, a 42.3 per cent rise from the previous year. On a half-on-half basis, spending on alternative energy surged by 75.0 per cent from N404.80 billion in the first half of 2024 to N708.07 billion in the second half.

Ajayi-Kadir also pointed out that rising interest rates were putting considerable strain on the sector’s finances. Commercial bank lending rates for manufacturers rose to 35.5 per cent in 2024 from 28.06 per cent in 2023, leading to a total of N1.3 trillion in finance costs, which further constrained investment and expansion efforts.