MAN reports 357% surge in unsold inventories

The inventory of unsold finished goods in Nigeria’s manufacturing sector skyrocketed by 357.57% year-on-year, reaching a staggering N1.24 trillion in the first half of 2024, according to the Manufacturers Association of Nigeria (MAN). This alarming increase, MAN explained, is primarily due to weakened consumer purchasing power, which has been severely impacted by inflation, the removal of subsidies, and the devaluation of the naira

Segun Ajayi-Kadir, the Director-General of MAN, stated that the growing inventory levels reflect the broader economic challenges, underscoring the need for interventions to stimulate consumer demand and bolster the sector’s performance. “The high levels of unsold inventories show the challenges faced by consumers and the need for economic interventions to revive the sector,” he said.

The report, released as part of MAN’s mid-year survey, also highlighted a continued rise in costs for alternative power solutions, with manufacturers spending N238.31 billion on energy sources in the first half of 2024—an increase of 7.69% from the previous half-year. This surge was driven by rising fuel prices, including diesel and gas, and the need for manufacturers to invest in self-generated energy due to unreliable national grid supply.

In addition to rising energy costs, the survey revealed a slight dip in capacity utilization, which fell to 56.4% in H1 2024, from 56.5% during the same period in 2023. The decline was attributed to a combination of factors, including skyrocketing electricity tariffs (which saw a 200% increase), foreign exchange shortages, and reduced consumer demand. These elements resulted in heightened operational costs and a strained business environment.

Manufacturing production value also saw a year-on-year decrease of 1.66%, dropping to N1.34 trillion from N1.36 trillion in H1 2023. However, compared to the second half of 2023, production value grew by 9.97%, reflecting a recovery from a low baseline.

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Ajayi-Kadir emphasized that the sector faced compounding challenges, including inflationary pressures, fluctuating exchange rates, and rising interest rates by the Central Bank of Nigeria (CBN), which further strained manufacturers. Employment in the sector also took a hit, with only 2,606 jobs created in H1 2024, representing a 29.99% decline from the previous half-year and a 37.83% drop year-on-year.

Despite these difficulties, the manufacturing sector showed some resilience, with local sourcing of raw materials improving slightly to 56.03% in H1 2024, up from 55.4% in H1 2023. This modest increase was driven by challenges in sourcing foreign exchange. However, some sectors, such as Non-Metallic Mineral Products and Textile, Apparel & Footwear, experienced setbacks in local sourcing.

Investment in the sector continued to rise, reaching N250.13 billion in the first half of 2024, a 29.63% increase from the previous year. However, this increase was largely attributed to the depreciation of the naira, which inflated the cost of importing machinery and materials, rather than real growth in investments aimed at expanding production.

Ajayi-Kadir concluded that the first half of 2024 had been marked by significant challenges, including high operational costs, reduced consumer demand, and rising inflation. While some sectors showed growth, others struggled with declining production values and job losses. He called for urgent economic reforms to address these challenges, focusing on improving policy consistency, enhancing the business environment, and fostering economic diversification.

“The success of these reforms will be crucial in reversing the current economic downturn, creating jobs, reducing inflation, and improving the overall welfare of Nigerian citizens,” Ajayi-Kadir stated.