Stakeholders urge policy action as Nigeria’s manufacturing sector struggles

Stakeholders and other economists have expressed concern over the ongoing economic challenges affecting the manufacturing sector in the country which recorded a weak business performance in January 2025.

They urge the government to implement structural economic reforms, improve credit facilities, and provide policy support to enhance business confidence and foster long-term stability in the manufacturing sector.

According to the Business Confidence Monitor (BCM) report compiled by the Nigeria Economic Summit Group (NESG) and Stanbic IBTC, the sector scored -0.66 on the BCM Index for January 2025, reflecting a mildly negative outlook, though showing notable recovery from its December 2024 score of -2.43.

Alongside manufacturing, other sectors also faced negative performance, including Non-Manufacturing (-4.64), Services (-1.40), and Trade (-0.84).

However, the report noted relative improvements compared to December 2024 figures. In contrast, the agriculture sector demonstrated resilience, recording a positive BCM index of +10.86.

The report highlighted that four manufacturing sub-sectors recorded mildly negative outcomes, while others underperformed significantly. 

Among the worst-performing sub-sectors were Textile, Apparel, and Footwear; Chemical and Pharmaceutical Products; Plastic and Rubber Products; and Motor Vehicles and Assembly.

The Motor Vehicles and Assembly sub-sector, in particular, experienced a severe downturn, with analysts attributing the decline to high production costs, weak consumer demand, and persistent supply chain disruptions.

The manufacturing sector’s key sub-indices presented a mixed picture. The Business Situation Index dropped from +24.44 in December to +21.55 in January, reflecting lower confidence among business operators. 

Similarly, the sector’s Investment Index saw a steep decline from +20.79 to -5.77, signaling reduced capital expenditure and business expansion plans.

On a positive note, the Production Index surged significantly from +10.96 in December to +46.56 in January, indicating increased output. The Operating Cash Flow Index also improved to +21.13 from +17.49, reflecting better liquidity conditions.

However, high operating costs remained a concern, with the Cost of Doing Business Index at +41.57 and the Price Index at -40.82, indicating persistent inflationary pressures and high interest rates.

Dr. Adewale Ogundipe, an economist at NESG, noted that “the decline in investment and rising production costs highlight the urgent need for policy interventions. Without strategic reforms, the manufacturing sector’s recovery could remain sluggish.”

He said without these interventions, the sector’s recovery may remain uncertain in the face of persistent economic pressures.

Similarly, financial analyst Grace Uche observed that limited credit access (-5.62), weak exports (-3.55), and declining operating profits (-17.41) pose significant risks.

“Manufacturers need improved access to financing, lower interest rates, and a stable exchange rate to drive sustainable growth,” she stated.

Challenges such as high financing costs, frequent power shortages, limited foreign exchange availability, and restricted access to capital continue to dampen business expansion and economic recovery.

Reduced investment (-27.50) and declining price levels (-26.62) further exacerbated business activity and demand.