Manufacturers stuck with N1.24tn in unsold goods as consumers’ buying power weaken

Onome Amuge

The Manufacturers Association of Nigeria (MAN) has disclosed that its unsold inventory has increased  357.57 percent in the first half of 2024, with the value of unsold manufactured goods reaching a record high of N1.24 trillion.

MAN, in its latest report on the country’s economic performance, attributed the record-high value of unsold to the deteriorating purchasing power of Nigerians in the first half of 2024.

The association identified escalating inflation, the removal of fuel subsidies, and a devaluation of the naira as key factors contributing to this decline in consumer spending power.

The Manufacturers Association of Nigeria’s report also revealed a slowdown in job creation within the sector in the first half of 2024. 

According to the data, only 2,606 jobs were created during this period, representing a 37.83 percent decline from the previous year.

Moreover, the report showed that while the nominal value of production increased by 30.38 percent to N5.34 trillion due to rising prices, real manufacturing output actually contracted by 1.66 percent year-on-year, falling to N1.34 trillion in the first half of 2024.

The manufacturers attributed the decline in real manufacturing output to several factors, including elevated energy costs, currency scarcity, and reduced consumer demand.

These challenges increased production costs and impeded growth within the sector, with electricity tariffs rising 200 percent, representing a significant increase in operational expenses for manufacturers.

The report further showed that unreliability of the national power grid, coupled with increasing diesel and gas prices, compelled manufacturers to invest more heavily in alternative energy sources, leading to a 7.69 percent jump in spending to N238.31 billion in H1 2024.

The manufacturing sector also experienced a slight dip in capacity utilisation, falling from 56.5 percent in H1 2023 to 56.4 percent in H1 2024.

Commenting on the report, Francis Meshioye, MAN’s President, explained that the increase in the inventory of unsold finished goods in the manufacturing sector is a result of the deteriorating purchasing power of consumers, fuelled by rising inflation, removal of fuel subsidies, and devaluation of the naira, all of which have negatively affected consumer spending power.

“The high levels of unsold inventories reflect the challenges faced by consumers and the need for interventions to stimulate demand and improve the sector’s performance,” he stated.

Further amplifying the challenges facing the manufacturing sector, Meshioye highlighted that alongside the alarming rise in unsold goods, employment generation within the manufacturing sector suffered a steep decline.

He attributed this downturn to the prevailing economic uncertainties, the pressure of persistent inflation, and an unsupportive business environment that has made it increasingly difficult for manufacturers to operate efficiently and effectively

Reiterating the challenges that manufacturers face in the current business environment, Meshioye stated that high energy costs, scarcity of foreign exchange, and a sluggish economy have all contributed to an increasingly challenging business environment for manufacturers.

The MAN president underscored the need for swift and consistent economic reforms” to revitalise the manufacturing sector and stimulate growth.

In conclusion, Meshioye emphasised that improving the overall business environment and reducing the rate of inflation are essential to reversing the current economic downturn.