Nigerian Manufacturers Sceptical About Sector’s Prospects in 2024

The Manufacturers Association of Nigeria (MAN) has declared that 2024 might not be a positive year for the Nigerian manufacturing sector, at least in the first half of the year.

The declaration was contained in its “Manufacturing Sector Outlook for 2024,” released on Tuesday by the Director General of MAN, Mr. Segun Ajayi-Kadir, which pleaded with the government to see the manufacturing as the key driver of sustained economic growth in the country and give the sector the priority that it deserved.

MAN stated: “Judging from the observed trend, it is obvious that the outlook for the manufacturing sector in 2024 may not be a positive one, at least in the first half of the year.

“The period will be challenging, with a subtle possibility of recovery from the third quarter. The envisaged recovery is highly dependent on the deployment of policy stimulus supported with a synthesis of domestic growth driven, export focused and offensive trade strategies.

“This will promote resilience, steady growth and ensure that the sector gains meaningful traction in the later part of the year.”

It added: “In broad terms, the year 2024 may start on a tough note for manufacturing but may end with some measured improvements because the envisaged policy reforms, improved commitment to domestic production and general positive outlook seems favourable for the sector.”

Ajayi-Kadir, noted that MAN’s projections for the manufacturing sector in 2024 were as follows:

“Average capacity utilization will still hover around the 50 percent threshold as the FX-related challenges and high inflation rate limiting manufacturing performance may linger until mid-year.

“The sector may experience a meagre improvement in manufacturing output as FX and interest rates-related challenges are expected to subside from the third quarter.

“Higher manufacturing output is envisaged from the beginning of the third quarter of the year as the government disburses capital provisions of the budget to abandoned, ongoing and new capital projects with expected special preference for locally made products.

“The ongoing concessions of seaports, airports and roads may also provide opportunities for the cement sub-sector and contribute to infrastructure upgrades needed to enhance manufacturing productivity.

“There will be clarity on the actual and specific policy direction and priority areas of the current administration, especially around deepening industrialization.”

The association added: “Hopefully, the government will see the manufacturing sector as the key driver of sustained economic growth and will give the sector the priority that it deserves.

“In 2024, sectoral real growth is expected to hit about 3.2 per cent; contribution to the economy will most likely exceed 10 per cent and the Manufacturers’ CEOs Confidence Index is predicted to rise above 55 points thresholds by the end of Q4 2023.”

He added that the results of the emerging upward surge in global oil prices, domestic oil and gas production, local refining of petroleum products and projected gains of exchange rate unification would promote stability in the FX market and impact manufacturing positively from the second half of the year.

This would lead to reduction in the pressure on demand for forex and improve the inflow of export proceeds from oil and gas.

In addition, “the ongoing tax reforms and the envisaged bank recapitalization will frontally address the challenges of multiple taxation and poor access to credits that have continued to limit manufacturing sector performance, if successfully implemented,” he said.

The MAN expected that dynamic implementation of the Electricity Act 2023 would increase private investment in renewable energy, enhance energy efficiency and improve electricity supply to the manufacturing sector.

It also demanded that the government should lead by example and give priority to patronage of made-in-Nigeria products in all its purchases and for all government contracts and projects.

“Government should mandatorily upscale patronage of made in Nigeria products by deliberately reducing the excessive reliance of the country on imported products. The three tiers of government should enforce the implementation of the Executive Order 003 in the same for their ministries, departments and agencies.

“Government should encourage local sourcing of raw materials through comprehensive and integrated incentives to address the challenges of low productivity and imported inflation.

“Utilize the 2024 Budget to sustain effort at improving infrastructural developments, especially in strategic industrial hubs to reduce operation and logistics cost and promote competitiveness,” MAN stated. 

It also advised the federal government to prioritize forex and credit allocation to manufacturers, “maintain all measures to boost the level of liquidity and degree of transparency in the official FX window” and recommended that the floating exchange rate system should be managed “within an acceptable lower and upper bound, pending the actualization of the nation’s net exporting economy aspiration.

“The Central Bank of Nigeria (CBN) should intensify its collaboration with the fiscal authority; Federal Ministry of Finance and by extension the Tariff Technical Committee (TTC) for proper policy alignment on the appropriate HS Codes for items that Nigeria has sufficient capacity to discourage importation and save scarce foreign exchange.

“The CBN should develop a sustainable framework to channel credit interventions into the manufacturing sector, outside the direct intervention. Additionally, it should mobilize commercial banks to intentionally provide long term single digit interest loans to the manufacturing sector to fast-track the actualization of a $1 trillion dollar economy,” MAN said.

Dike Onwuamaeze

Follow us on: