A report by the Manufacturers Association of Nigeria has revealed that investments in the manufacturing sector contracted by 35.3 per cent in 2024.
The sector endured a sharp contraction in real investment in the past year, as finance costs of N1.3tn elevated by the country’s harsh macroeconomic environment forced manufacturers to scale back expansion plans.
According to the MAN Economic Review for the second half of 2024, the sector’s real investment plunged by 35.3 per cent year-on-year to N658.81 billion, marking a significant setback for industrial growth.
“Real manufacturing investment fell by 35.3 per cent year-on-year to N658.81bn in 2024, reflecting economic uncertainty and reduced expansion plans,” Director-General of MAN Segun Ajayi-Kadir stated.
“However, H2 2024 witnessed a 19.4 per cent increase compared to H1 2024, as manufacturers cautiously resumed capital expenditures. In nominal terms, total investment declined by 11.3 per cent to N2.85tn, with Land and Buildings and Furniture and Equipment seeing the most significant declines.”
A surge in the cost of financing to N1.3tn in 2024, fueled by a steep hike in interest rates, accelerated the contraction.
According to the DG, lending rates to manufacturers hit an average of 35.5 per cent, up from 28.06 per cent in 2023, following the Central Bank of Nigeria’s aggressive monetary tightening, which pushed the Monetary Policy Rate to 27.5 per cent.
“Manufacturers are being priced out of credit,” Ajayi-Kadir stated. “The cost of borrowing has simply become unsustainable for many players in the industry, leading to frozen expansion plans, halted projects, and ultimately, a drop in real sector investments.”
While nominal investment stood at N2.85tn, a modest 11.3 per cent decline, the inflationary environment masked the severity of the real downturn.
The impact was most visible in key investment areas which suffered the deepest cuts like Land and Buildings, and Furniture and Equipment.
Notably, the sector recorded a modest half-year recovery with a 19.4 per cent increase in real investment between H1 and H2 2024. However, confidence remains fragile.
The sector’s total expenditure on alternative energy sources ballooned by 42.3 per cent to N1.11tn, as grid unreliability and diesel price shocks deepened.
The investment crisis also comes at a time when Nigeria’s manufacturing sector is contending with an 87.5 per cent rise in unsold inventory, underscoring the pressure from waning consumer demand.
“The danger here is long-term deindustrialisation,” Ajayi-Kadir warned. “Without affordable credit, stable power, and supportive macroeconomic policies, manufacturers will continue to retreat, with implications for jobs, output, and national development.”
Manufacturers’ hopes for a better future seem unguaranteed when present economic indices, including a 24.23 per cent inflation rate, high energy costs and an unpredictable foreign exchange rate are considered.
In an earlier PUNCH report, the Chairman of the Manufacturers Association of Nigeria, Ogun State Chapter, George Onafowokan, expressed hope in the sector’s resilience, stating that his chapter experienced some improvement in the mid-first quarter of 2025 as new manufacturing companies opened up and old ones found their balance.
In an exclusive interview, Onafowokan told The PUNCH: “We have moved away from the one and a half years of a bad situation into a more stable situation, as the same market started moving upwards.
“From the manufacturer’s perspective, yes, there is a little bit of positive optimism because there is stability, and that has meant better decisions in the long term have started coming into play. New factories are coming in.”