December 2, 2024/CSL Research
The recently released GDP report reveals that the manufacturing sector grew by 0.92% year-on-
year (y/y) in Q3 2024. This marks a slowdown compared to the 1.28% growth recorded in Q2 2024 but shows an improvement over the 0.48% y/y growth in Q3 2023. The report, which measures the monetary value of all goods and services produced in the economy over a specific period, also highlighted a slight decline in the manufacturing sector’s contribution to total GDP.
The sector accounted for 8.7% of GDP in the first nine months of 2024, down from 8.8% during the same period in 2023. The Manufacturing sector is comprised of thirteen activities: oil refining; cement; food, beverages and tobacco; textile, apparel, and footwear; wood and wood products; pulp paper and paper products; chemical and pharmaceutical products; non-metallic products, plastic and rubber products; electrical and electronic; basic metal and iron and steel; motor vehicles and assembly; and other manufacturing.
The growth in Nigeria’s manufacturing sector has been extremely modest in the past two years,
reflecting the negative impact of the Central Bank of Nigeria’s (CBN) hawkish monetary policy stance. In 2024, interest rates have reached unprecedented levels, leading to elevated finance costs for numerous manufacturing companies. Additionally, the high borrowing costs has significantly constrained the expansion of manufacturing activities. Also, inflation has added an
additional layer of pressure, as diminished purchasing power has resulted in lower sales volumes and output.
The persistent currency devaluation by the CBN and FX scarcity have continued to dampen the import capacity of the manufacturing sector. Notably, FMCGs (over half of the manufacturing sector) were severely affected, with many listed players recording a negative equity position after the devaluation. The tough macroeconomic conditions have led to several companies leaving Nigeria. In the first six months of this year, some manufacturing companies including PZ Cussons Nigeria PLC, Kimberly-Clark Nigeria, and Diageo Plc. have all exited the country, adding to the several multinationals that left in 2023. In our view, the Federal Government must effectively implement feasible and proactive measures to encourage and boost production activities in the 13 subsectors, especially food, beverage and tobacco, cement, and textile apparel & footwear (the top 3 drivers).
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