In 2024, Nigeria’s ongoing foreign exchange (FX) difficulties significantly altered the landscape of the country’s manufacturing sector.
As import costs soared and access to foreign currencies dwindled, many local manufacturers turned inward, increasing their reliance on domestically sourced raw materials. This shift was driven by necessity but also created unexpected opportunities for growth and innovation.
According to the latest economic report by the Manufacturers Association of Nigeria (MAN), the average usage of local raw materials in the manufacturing sector climbed to 57.1% in 2024, compared to 52.0% in 2023. This 5.1% increase reflects how manufacturers have adapted their operations to reduce dependency on imported inputs and respond to rising operational costs.
MAN attributes this shift to several factors, including the scarcity of foreign exchange, high importation expenses, and government-backed incentives that promote the use of locally available materials. Specific sectors such as wood products, textiles, apparel, footwear, chemicals, and pharmaceuticals recorded significant progress in local input usage. However, industries like electronics continued to struggle due to their dependency on imported components and specialized materials that are not readily available locally.
The naira’s significant depreciation—losing 40.9% of its value against the U.S. dollar in 2024—exacerbated the problem. Although Nigeria saw an increase in its external reserves, the exchange rate volatility negatively impacted manufacturers who depend on foreign inputs and equipment.
On the positive side, capacity utilization in the sector edged up slightly from 55.1% in 2023 to 57% in 2024, indicating modest improvements in production activity. The second half of 2024 alone saw a 1.2% rise compared to the same period in the previous year. MAN’s sectoral breakdown revealed that non-metallic minerals, automobiles, and chemical manufacturing recorded the highest capacity gains.
Despite these strides, challenges remain. Rising energy costs, unstable exchange rates, and high interest rates continue to weigh heavily on the manufacturing landscape. These factors, in addition to weakened consumer demand, have led to a spike in unsold inventories. In 2024, unsold products reached a value of ₦2.14 trillion—a staggering 87.5% increase over the previous year. Sectors such as food, beverages, and clothing bore the brunt of this, driven by inflation, declining purchasing power, and high production costs.
In terms of employment, the manufacturing sector held steady. A total of 606 new jobs were created in 2024, reflecting a 1.8% rise from the previous year. However, staff turnover also increased. The number of employees who exited the sector climbed from 17,364 in 2023 to 17,949 in 2024. This points to continued workforce instability, driven by economic pressures, talent migration, and organizational restructuring. As a result, net new job creation remained nearly flat year-on-year.
One area of notable concern is investment. The report notes that total investments in the sector dropped by 35.3% year-on-year to ₦658.81 billion. Economic uncertainty and limited expansion strategies were cited as key reasons. Still, a silver lining emerged in the second half of 2024, which saw a 19.4% increase in investments over the first half of the year, suggesting a cautious return of confidence among manufacturers.
On production output, Nigeria’s manufacturing industry grew modestly, with real output rising by 1.7% year-on-year to ₦7.78 trillion. This increase was largely due to stronger performance in automobile assembly, non-metallic mineral processing, and electronic manufacturing. However, when compared to the first half of the year, the second half recorded a 3.1% decline, driven primarily by escalating costs and subdued consumer demand.
A bright spot in the report was the improvement in electricity supply. Average daily power availability increased from 10.6 hours in 2023 to 13.3 hours in 2024. The second half of the year saw even better supply, averaging 15.2 hours per day. However, this came with a trade-off. For Band A consumers—largely commercial and industrial users—tariffs surged by over 200%, significantly raising operational costs.
Even with improved electricity availability, reliability remains an issue. Nigeria experienced 12 national grid collapses in 2024, which interrupted operations and added unpredictability to an already strained manufacturing environment.
Nigeria’s manufacturing sector in 2024 reflected both resilience and vulnerability. Manufacturers adapted to FX constraints by sourcing more local materials and slightly improving capacity utilization. However, challenges such as inflation, high costs, and weak demand continue to affect growth. While some progress was made in areas like power supply and sector-specific gains, sustained improvement will require structural reforms, enhanced investment climate, and stronger consumer purchasing power.
