The Nigeria Manufacturing sector’s contribution to the country’s non-oil Export earnings has dropped to its lowest level in five years as business owners struggle with growing costs in the face of high interest rates and weak consumer spending. According to data from the most recent foreign Trade report, between the first half of (H1) 2020 and H1 2024, Nigeria’s manufacturing exports’ share of overall exports decreased significantly. Manufacturing accounted for 1.9% of Nigeria’s overall exports in H1 2024 compared to 11.1% in H1 2020.
This dramatic drop is indicative of the structural issues and broader economic pressures that Nigeria’s manufacturing sector is facing, as it has failed to maintain its competitiveness in the international market. The industry’s share of total exports stood 5.8% in the first half (H1) of 2021 and dropped to 2.3 percent in H1 2022 reflecting a 2.5 percent decline. In 2023, the manufacturing sector’s share of total exports rose slightly to 2.5 percent. The sector’s share of total exports further increased to 2.48% in the second quarter of 2024 from 1.40% in the first quarter.
Deteriorating business climate affects the sector.
Also, this decline is noticeable considering the magnitude of the larger efforts to diversify the Economy and increase non-oil exports, which were meant to stabilize Nigeria’s economy in the face of volatile oil prices. Numerous issues, such as increased production costs, poor infrastructure, and high interest rates, have been blamed for the fall in the competitiveness of Nigerian manufactured goods. Additionally, manufacturers have bemoaned the deteriorating business climate, inconsistent government regulations, a plethora of levies, and a lack of skilled labor, among other factors that are stifling profitability, depleting shareholder capital, and rendering domestic products uncompetitive.
Further reducing manufacturers output have been disruptions in the supply chain and rising import raw material costs. The culmination of these escalating difficulties has played an influential part in the exodus of multinational companies from the country and the eventual closure of several local enterprises. As a result, the industry has seen a notable downturn in recent years. Despite these difficulties, the depreciation of the Naira led to an increase in the nominal value of Nigeria’s manufactured exports, inflating their currency value.
Goods exported were valued at ₦480bn in Q2 2024.
In Q2 2024, Nigeria’s manufactured goods exports reached a value of ₦480.82 billion, marking a 126.65% increase from Q2 2023 and a 78.95% rise from ₦268.70 billion in Q1 2024. Africa emerged as the top destination for these exports, with a total of ₦225.87 billion worth of goods shipped, reflecting Nigeria’s strong trade ties within the continent. Asia followed, with exports valued at ₦156.07 billion, while America accounted for ₦56.24 billion in exports, underscoring the diverse reach of Nigeria’s manufacturing sector in global markets.
Of the ₦480.82 billion of the total value of manufactured goods exported, Unwrought aluminum alloys were the sector’s main export, with values to China and Japan of ₦82.74 billion and $16.02 billion, respectively. Next in value to Namibia were Floating or submersible drilling or production platforms worth N81.69 billion, and “Vessels and other floating structures for breaking up worth $20.43 billion and $16.59 billion to Cameroon and Togo, respectively.
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Experts suggest that the current country needs to solve its Infrastructure deficiencies, provide access to reasonably priced finance, and establish more stable and encouraging policies for the manufacturing sector in order to reverse the declining trend in the sector. Nigeria may become more globally competitive in this industry if the nation’s industrial value chain is improved to concentrate on processed goods rather than raw materials. Addressing fundamental problems like bettering infrastructure, gaining access to reasonably priced financing, and enacting regulatory changes meant to enhance business conditions will be necessary for the sector to grow.