July 21, 2023/CSL Research
According to the Nigerian Bureau of Statistics (NBS), foreign investments to the manufacturing sector dropped by 35% to US$256m in the first quarter of 2023 from US$392.5m in the fourth quarter of 2022. According to the report, the total capital imported into Nigeria in Q1 2023 was US$1.1bn down by 28% compared with US$1.5bn recorded in Q1 2022. Despite the decrease, capital importation into the production sector ranked second with a 22% share of total investments while the banking sector recorded the highest inflow of US$304.5m, representing 26.89% of total capital imported in Q1 2023.The manufacturing sector in recent years has been struggling with several cost pressures like high energy and transport costs.
The Manufacturers Association of Nigeria recently cautioned that the increasingly difficult business environment caused by high energy costs, a lack of access to capital, and multiple taxes, among other factors has contributed to reduced investment in the sector. According to the Manufacturers Association of Nigeria’s bi-annual economic review, investment in the manufacturing sector fell to N145.59bn in the second half of 2022 from N160.88bn in the same period in 2021 and down by 18% when compared to N178.39bn in the first half of 2022.
Investment in the manufacturing sector totalled N323.98bn in 2022, up from N305.02bn in 2021. The manufacturing sector grew modestly by 2.4% in 2022, reflecting the negative impact of CBN’s hawkish rendition, especially in the second half of the year. In fact, the sector contracted by 1.91% in Q3 2022, the first contraction since covid hit in 2020. Though at a slower pace, the CBN has maintained its hawkish stance and the fortunes of the sector appeared to have worsened with the latest reforms of the new administration such as the fuel subsidy removal and the unification of the exchange rates at the various windows. In Q1 2023, the growth rate reduced to 1.61% compared with 2.83% in Q4 2022 and we believe conditions will worsen in H2.
Click here to read full PDF copy of report
