COMFORT EKELEME
As the 2024 financial year is gradually ending, the Manufacturers Association of Nigeria (MAN) has revealed that the fastest-growing manufacturing sub-sectors were Chemical & Pharmaceutical Products with 3.97per cent.
Also, MAN noted that the Food, Beverage & Tobacco recorded 1.76per cent, Wood & Wood Products, 2.16 per cent, Cement 2.30per cent, Pulp, Paper and Paper Products 2.09per cent, Electrical and Electronics 2.61per cent, and Non-Metallic Products 1.75per cent.
MAN revealed this while giving the breakdown of manufacturing sector performance for the third quarter of 2024.
Also, MAN noted that the top five contributors to manufacturing output were Food, Beverage & Tobacco, 6.78 per cent, Cement 3.73per cent, Electrical and Electronics 6.03 per cent, Non-Metallic Products 2.87per cent and Chemical & Pharmaceutical Products 6.92 per cent.
Interestingly, the Food, Beverage & Tobacco, Chemical & Pharmaceutical Products and Cement were the only sub-sectors that made the list of both the top five growing and contributing sub-sectors in the second quarter of 2024.
In general, the report revealed that the growth of the Manufacturing Sector grew slowly year-on-year at 0.92 per cent and decelerated quarter-on-quarter by 0.35 per cent.
Similarly, its contribution to Goss Domestic Product (GDP) in the 2024 third quarter was 8.21per cent, lower than the 8.42per cent recorded in the third quarter of 2023 and lower than the 8.46per cent recorded in the second quarter of 2024.
Undoubtedly, the report noted that this underperformance underscores the harsh effect of hostile economic policies, which have largely constrained the country’s goal of rapid industrialisation and have left the economy struggling for survival.
Unfortunately, the Nigerian government has been characterized by its passive response towards the countless challenges battling the Manufacturing Sector.
On the implication for the nation’s manufacturing sector MAN stated that the decline in the real growth of the Manufacturing Sector is a clear indication of the detrimental impact of the prevailing macroeconomic policies.
According to the Association, this is further evidenced by the significant drop in nominal growth from 36.59 per cent to 32.97 per cent year-on-year, driven by high inflationary pressure and the exit of major multinational manufacturing companies.
“It is evident that inflation has been a significant factor in undermining the growth of the manufacturing sector, as the sector has been particularly vulnerable to the unstable macroeconomic environment, exacerbated by recent economic reforms.
“Agriculture plays a crucial role in fueling the growth of the manufacturing sector by ensuring a steady supply of affordable local raw materials.
“However, both the agricultural and manufacturing sectors failed to rank among the top five growing sectors during this period, primarily due to security challenges in farming areas and their subsequent negative impact on agro-allied industries,” MAN said.
Meanwhile, MAN maintained that the limited growth in these sectors will lead to the deteriorating state of the agricultural sector has led to increased costs for local raw materials, high cost of living, characterized by high unemployment and inflation, has reduced consumer purchasing power, leading to increased unsold inventory for manufacturers.
However, the report noted that manufacturers’ negative outlook on the economy has resulted in decreased production and employment, while foreign investors are hesitant to invest in a weak economy and the scarcity of foreign exchange further hinders manufacturing operations.
Interestingly, MAN recalled that the Nigeria’s economy recorded a significant improvement in the third quarter of 2024, with a growth rate of 3.46per cent compared to 2.54per cent in the same period of 2023 and 3.19per cent in the previous quarter.
The National Bureau of Statistics attributed this growth primarily to the performance of the services sector.
Based on sectoral performance, the report revealed that the agriculture sector grew by 1.14 per cent, down from the 1.30 per cent recorded in the third quarter of 2023.
Meanwhile, the services sector grew by 5.19 per cent and contributed 53.58 per cent to the GDP during the same period.
The industrial sector recorded a growth of 2.18 per cent, an improvement from the 0.46 per cent recorded in the third quarter of 2023.
This growth was largely due to sectors other than manufacturing, including water supply, sewerage, waste management, and remediation; mining and quarrying; and electricity, gas, steam, and air conditioning supply, which grew by 12.73 per cent, 8.75 per cent, and 5.23 per cent, respectively.
A further breakdown showed that the mining and quarrying sector was particularly boosted by the metal ores and crude petroleum and natural gas sub-sectors, which grew by 55.37 per cent and 14.87 per cent, respectively.
The report also revealed that the oil sector grew by 5.17 per cent year-on-year in Q3 2024, indicating an increase of 6.02 percentage points relative to the rate recorded in the corresponding quarter of 2023.
The non-oil sector grew by 3.37 per cent, up by 0.62 percentage points from the 2.75 per cent recorded in the same quarter of 2023.
According to the report, the non-oil sector accounted for 94.43 percent of the economy, while the oil sector contributed 5.57 per cent, despite the country’s heavy reliance on oil revenue.
The report further showed that the economy remains dominated by the services sector, which accounted for 53.58 per cent of GDP, while agriculture and industry contributed 28.65 per cent and 17.77 per cent, respectively.
The dominant contribution of the services sector was mainly driven by sectors such as information and communication (14.51 per cent), trade (12.67 per cent), and financial and insurance (4.72 per cent).
The financial and insurance sector recorded a massive growth of 30.83 per cent, primarily due to gains from naira devaluation and monetary policy tightening.
Unfortunately, the manufacturing sector was one of the least growing sectors during the period under review, with a growth rate of 2.18 percent.
This meager growth highlights that the sector is being choked by interest rate hikes, high exchange rates, and escalated energy costs.
Apparently, the service sub-sectors dominate the composition of the country’s GDP and its pattern of growth.
This poses a significant drawback for the industrialization agenda. In other words, as the services sector continually booms at the detriment of employment and production in the manufacturing sector, the economy is set to fail in its aspirations of reducing forex demand pressures, promoting value addition, generating mass employment, increasing export earnings, driving industrial-led growth, and ensuring sustainable development.
MAN however, maintained that achieving a $1 trillion economy by 2026 is apparently difficult, as the growth rate clearly falls short of the 6 per cent average targeted by the present administration.
