Growth in Nigeria’s industrial sector has come under scrutiny as the country’s economy has faltered. Many different sectors fall within this category, such as mining, manufacturing, and construction, among others. Stakeholders are concerned that the industrial sector will continue to diminish in the near future, given the Central Bank of Nigeria’s (CBN) contractionary monetary policy measures in response to the rising inflation. Concerns have also been raised over the possibility of long-lasting effects on the industrial sector and the subsequent rise in inflation.
Stakeholders further noted that the steady diminution in the sector, which pose a hindrance to the manufacturing sector, calls for an exigent efficacious resolution and intervention from the government. According to a report released by the National Bureau of Statistics (NBS), Nigeria’s industrial sector has diminished drastically to the barest in its contribution to the GDP in seven years. In the third quarter of 2022, the GDP growth number fell drastically to 2.25 percent from 3.54 percent in the second quarter. This exemplifies the myriad of challenges besetting the Nigerian economy.
The GDP from the industrial sector declined by 8 percent.
Notable in the GDP data for the third quarter was the 1.91 percent decline in productivity in the manufacturing sector. Since the Economic Crisis of 2020, when the economy hit a downward spiral, this is the first quarter that manufacturing has contracted. The food and beverage industry declined by 4.05 percent, making it the first industry to decline since the recession of the second quarter of 2020 and the sixth consecutive quarterly recession to be recorded.
Nigeria’s industrial sector showed a -8% GDP decrease in quarter three of 2022, according to NBS data. Service-oriented enterprises have an advantage in the Nigerian economy, given that they depend less on the nation’s road network to generate production. Stakeholders claim that Nigeria’s food and beverage industry is still the country’s manufacturing sector’s shining beacon and a favorite among stock market investors. In the third quarter of 2022, the industry contributed N2.2 trillion to the country’s GDP.
Restructuring and intervention may revitalize the economy and industries.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), warned that a slowdown in the manufacturing sector would have severe consequences for food security, employment, and inflation. He asserts that the food processing industry has the most significant impact on employment because of its high backward integration content and multiplier effect in the agricultural value chain. In his view, the sluggish economy and afflicted industries may be revitalized with the appropriate form of restructuring and intervention measures.
Furthermore, Dr. Yusuf highlighted some of these intervention measures, among which are fixing the macroeconomic headwinds of high inflation and currency volatility, addressing the structural impediments to production and other economic activities, reforming the foreign exchange market to inspire investors’ confidence, addressing the challenges of insecurity and logistics, taking urgent steps to tame inflation and boost the purchasing power of the citizens and deploying fiscal reforms which prioritize infrastructural development and transparency in the budgetary process.
Energy crisis and short exchange hindered industrial expansion.
In addition, the Manufacturers Association of Nigeria (MAN) solicit the Nigerian government to devise a resolution to address the factors fueling impediment towards the manufacturing indicators. Segun Ajayi-Kadir, MAN Director-General, who disclosed this, emphasized the adverse effect of the inadequate foreign exchange and the energy crisis has hindered the manufacturing growth output from 5.8% in the first quarter of 2022 to 3.0%. He noted that the rising energy cost adds to the string of woes affecting the manufacturers and the country’s importation.