The Manufacturers Association of Nigeria (MAN) has warned that Nigeria’s manufacturing sector is slipping deeper into financial distress, with companies resorting to below-cost sales to dispose of nearly N2 trillion worth of unsold inventory.
MAN said the strategy reflects deteriorating market conditions rather than improved demand, as weak consumer spending, escalating production costs and tight financing conditions continue to erode manufacturers’ margins.
Segun Ajayi-Kadir, director-general of MAN, said the increase in sales volumes is not being driven by stronger market demand but by aggressive price reductions undertaken by manufacturers facing mounting financial pressure.
“What has happened is that manufacturers have continued to sell more, not because demand has improved, but because they have taken a hit by lowering prices in order to sell more,” Ajayi-Kadir said.
According to him, manufacturers are carrying almost N2 trillion worth of unplanned inventory, compelling many businesses to dispose of products below profitable levels and, in some instances, below the actual cost of production.
The development underscores the severe liquidity strain confronting the manufacturing sector, where companies are prioritising cash generation over profit in order to sustain operations, meet wage obligations and avoid production shutdowns.
Analysts note that while discounting can temporarily ease inventory pressure, prolonged below-cost selling erodes profitability, weakens balance sheets and limits manufacturers’ capacity to reinvest, expand production or create jobs.
The inventory overhang has emerged against the backdrop of multiple structural challenges facing the sector. Manufacturers continue to grapple with elevated energy costs, foreign exchange volatility, inadequate infrastructure, insecurity and expensive logistics, all of which have significantly raised production expenses.
Although firms are increasingly sourcing raw materials locally and investing in value addition to reduce import dependence, Ajayi-Kadir said the benefits are being offset by high foreign exchange costs and import-duty benchmark pricing, which continue to undermine the competitiveness of locally manufactured goods, including within the African Continental Free Trade Area (AfCFTA).
Financing conditions have further compounded the industry’s difficulties.
With the Monetary Policy Rate (MPR) at about 26 per cent, commercial lending rates have climbed to between 30 and 35 per cent, levels manufacturers say make conventional bank borrowing commercially unsustainable.
“It is hardly possible for any manufacturer to borrow from commercial banks and still make a profit,” Ajayi-Kadir said.
While some firms have turned to the Bank of Industry (BoI) and offshore development finance, he noted that concessional funding has also become significantly more expensive. Facilities that previously carried single-digit interest rates now attract borrowing costs of up to 15 per cent, increasing debt servicing obligations and further tightening cash flow.
MAN is therefore urging the federal overnment to expedite the release of the proposed N1 trillion Manufacturing Stabilisation Fund, arguing that affordable financing is critical to restoring profitability, supporting production and preventing further deterioration in the sector.
