Manufacturing investments crash by 35% amid rising cost of finance,
Stories by Yinka Kolawole
High cost of finance occasioned by rising interest rates, among other factors, led to a 35.3 percent crash in investments in the manufacturing sector to N658.81 billion in 2024 from N1.018 trillion in 2023.
This was reflected in the Second Half of 2024 (H2’24) Economic Review of the Manufacturers Association of Nigeria (MAN).
It however noted that there was an increase in manufacturing investments in H2’24 compared to H1’24.
“Real manufacturing investment fell by 35.3 percent year-on-year to N658.81 billion in 2024, reflecting economic uncertainty and reduced expansion plans.
“However, H2 2024 witnessed a 19.4 percent increase compared to H1 2024, as manufacturers cautiously resumed capital expenditures,” the report stated.
In nominal terms, the report noted that total investment declined by 11.3 percent to N2.85 trillion, with Land & Buildings and Furniture & Equipment seeing the most significant declines.
On the escalating cost of finance, MAN said: “Rising interest rates posed a major financial burden, with commercial bank lending rates to manufacturers surging to 35.5 percent in 2024 from 28.06 percent in 2023.
This was driven by continuous Central Bank of Nigeria (CBN) rate hikes, which raised the MPR to 27.50 percent. “Consequently, manufacturers’ finance costs totaled N1.3 trillion, constraining investment and expansion plans.”
MAN, however, revealed that the sector’s real manufacturing output increased modestly by 1.7 percent year-on-year to N7.78 trillion, buoyed by increased activity in Motor Vehicle & Miscellaneous Assembly, Non-Metallic Mineral Products, and Electrical & Electronics.
Also, Nominal manufacturing output rose sharply by 34.9 percent to N33.43 trillion, primarily due to inflationary pressures and rising domestic prices.
Reviewing the performance of the sector over the period under review, Director General of MAN, Segun Ajayi-Kadir, said: “The Nigerian manufacturing sector faced a challenging but resilient economy in 2024, navigating macroeconomic instability, inflationary pressures, and policy-driven disruptions.
“The real GDP growth remained subdued, reflecting the economy’s struggle with rising production costs, exchange rate volatility, and declining consumer demand. “Inflation surged to 34.8 percent by the end of 2024, significantly eroding purchasing power and increasing operational expenses.
“Meanwhile, aggressive monetary tightening by the CBN, which raised the Monetary Policy Rate (MPR) to 27.50 percent, further exacerbated borrowing costs for manufacturers, limiting expansion and new investments.”
Ajayi-Kadir concluded by noting that while some resilience was observed in sectoral performance and increased local sourcing of raw materials, real output remained subdued. “Moving forward, stabilizing macroeconomic conditions, improving energy supply, and ensuring access to affordable financing will be critical for sustaining growth and enhancing industrial productivity,” he added.
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Stories by Yinka Kolawole High cost of finance occasioned by rising interest rates, among other factors, led to a 35.3 percent crash in investments in the manufacturing sector to N658.81 billion in 2024 from N1.018 trillion in 2023. This was reflected in the Second Half of 2024 (H2’24) Economic Review of the Manufacturers Association of Nigeria […]
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