FX Volatility Forces 9% Rise In Local Raw Materials Sourcing — MAN
The Manufacturers Association of Nigeria (MAN) has reported a 9 percent surge in the local sourcing of raw materials in Nigeria’s manufacturing sector in 2024, buoyed by the lingering foreign exchange (FX) volatility, high import costs, and government incentives promoting local content.
This is even as investment in the manufacturing sector contracted by 35.3 percent in 2024. In its Second Half 2024 (H2’24) Economic Review, MAN reported that local sourcing of raw materials rose to 57.1% in 2024 from 52.0% in 2023. “The manufacturing sector’s local raw material sourcing increased to 57.1 percent in 2024, up from 52.0 percent in 2023. “This shift was largely driven by forex scarcity, high import costs, and government incentives promoting local content.
“Notable improvements were observed in Wood & Wood Products, Textile, Apparel & Footwear, and Chemical & Pharmaceuticals, while Electrical & Electronics continued to lag due to dependency on imported components,” the report stated. MAN however noted that despite some resilience observed in sectoral performance and increased local sourcing of raw materials, real output remained subdued.
“The sector’s real manufacturing output increased modestly by 1.7 percent year-on-year to N7.78 trillion, buoyed by increased activity in Motor Vehicle & Miscellaneous Assembly, Non-Metallic Mineral Products, and Electrical & Electronics. “However, a half-on-half decline of 3.1 percent in real production reflected rising costs and weak consumer demand. “Nominal manufacturing output rose sharply by 34.9 percent to N33.43 trillion, primarily due to inflationary pressures and rising domestic prices,” MAN reported.
On investments in the sector, the report stated: “Real manufacturing investment fell by 35.3 percent year-on year to N658.81 billion in 2024, reflecting economic uncertainty and reduced expansion plans. “However, H2 2024 witnessed a 19.4 percent increase compared to H1 2024, as manufacturers cautiously resumed capital expenditures. “In nominal terms, total investment declined by 11.3 percent to N2.85 trillion, with Land & Buildings and Furniture & Equipment seeing the most significant declines.”
Commenting on the report, Director General of MAN, Segun Ajayi-Kadir, said: “The Nigerian manufacturing sector faced significant hurdles in 2024, including high inflation, forex volatility, surging production costs, and declining consumer demand. “Moving forward, stabilizing macroeconomic conditions, improving energy supply, and ensuring access to affordable financing will be critical for sustaining growth and enhancing industrial productivity.”