Nigeria’s manufacturing sector is facing mounting pressure as companies increasingly sell goods below production cost to reduce nearly ₦2 trillion worth of unsold inventory. According to the Manufacturers Association of Nigeria (MAN), the rise in sales recorded by many firms has come at the expense of lower prices and shrinking profit margins rather than stronger consumer demand.
Speaking in an interview, MAN Director General Segun Ajayi-Kadir said manufacturers are accepting losses to keep factories running and clear excess stock. “What has happened is that manufacturers have continued to sell more, not because demand has improved, but because they have taken a hit by lowering prices in order to sell more,” he said. The Nigeria manufacturing crisis has forced many businesses to sell finished products below profitable levels and, in some cases, below the actual cost of production.
Ajayi-Kadir explained that the sector continues to struggle with rising production costs, weak consumer purchasing power, expensive loans, foreign exchange volatility, poor infrastructure, insecurity and logistics challenges. To reduce dependence on imports, many companies are increasing local sourcing of raw materials and investing in value addition. However, he said high foreign exchange costs and import-duty benchmark pricing continue to weaken the competitiveness of locally made products and limit opportunities under the African Continental Free Trade Area (AfCFTA).
The Nigeria manufacturing crisis has also been worsened by the high cost of financing. With the monetary policy rate at about 26 per cent, commercial bank lending rates have climbed to between 30 and 35 per cent, making borrowing unprofitable for most manufacturers.
“It is hardly possible for any manufacturer to borrow from commercial banks and still make a profit,” Ajayi-Kadir said.
He added that even Bank of Industry (BoI) loans have become more expensive, with lending rates rising to 15 per cent. MAN has therefore urged the Federal Government to immediately release the promised ₦1 trillion Manufacturing Stabilisation Fund to provide affordable financing and help businesses recover from the Nigeria manufacturing crisis.
What steps do you think would most effectively revive Nigeria’s manufacturing sector?
