Nigeria’s manufacturers are facing huge losses due to the Federal Government’s ongoing macroeconomic policies and financial instability.

The sharp rise in cost of sales has reached 90.6% in 2024, causing significant challenges for major manufacturers.

Cost of sales includes expenses such as raw materials, logistics, energy, and other direct costs incurred in production processes.

Analysts link the cost increase to inflation, foreign exchange volatility, and escalating expenses in the manufacturing sector.

Experts predict a more stable outlook for 2025 if key macroeconomic conditions remain steady throughout the business year.

Manufacturers Cut Costs to Survive Harsh Economic Conditions

Findings by Financial Vanguard reveal that many companies have adopted aggressive cost-cutting strategies to remain financially stable. Some companies implemented layoffs and price increases to offset their rising expenses and operational burdens.

Despite backward integration efforts by Nigeria’s leading 12 consumer goods manufacturers, challenges persist across all financial and economic sectors. The total cost of sales for these companies rose 88.5% to ₦3.91 trillion in 2024.

The cost of raw materials increased by 88% year-on-year, driven by high exchange rates and importation challenges. Some of the major increases reported in cost of sales for 2024 include:

• Nestlé Nigeria: ₦652.5 billion (97.7% increase from ₦329.9 billion in 2023)
• Cadbury Nigeria: ₦111.7 billion (77.2% increase from ₦63.04 billion in 2023)
• Nigerian Breweries: ₦764.5 billion (97.5% increase from ₦387.03 billion in 2023)
• BUA Foods: ₦985 billion (110% increase from ₦469 billion in 2023)
• Dangote Sugar: ₦634.6 billion (78.7% increase from ₦355.1 billion in 2023)

Bank Borrowing Declines as High Interest Rates Impact Businesses

Companies have reduced reliance on bank loans, cutting total borrowing by 6.4% to ₦1.7 trillion in 2024. However, high interest rates have significantly raised financial costs, making operations more difficult for manufacturers.

The total finance cost for these companies surged 81% to ₦1.2 trillion in 2024, compared to ₦664.6 billion in 2023. While combined revenue increased 67.7% to ₦7.6 trillion, losses before tax worsened by 76.6% to ₦407.4 billion.

Industry Executives Remain Optimistic Despite Financial Setbacks
Despite financial challenges, several industry leaders expressed confidence in their company’s resilience and future prospects.

Nestlé Nigeria MD, Wassim Elhusseini, highlighted the company’s 75.2% revenue growth and 35.6% operating profit increase in 2024.

Nigerian Breweries CEO, Hans Essaadi, credited the company’s 54% operating profit surge to cost management and market expansion strategies.

BUA Foods MD, Ayodele Abioye, emphasized the company’s agility in navigating supply chain disruptions and foreign exchange volatility.

Unilever Nigeria MD, Tobi Adeniyi, reaffirmed a commitment to cost optimization and increasing market share across key product categories.

Experts Call for Government Policy Reforms
Economic analysts stress the need for targeted government policies that support Nigeria’s manufacturing sector in overcoming challenges.

CPPE CEO, Dr. Muda Yusuf, highlighted inflation, energy prices, and exchange rate volatility as key drivers of rising production costs. He believes improvements in macroeconomic stability and inflation control could ease manufacturers’ financial burdens.

NACCIMA President, Dele Oye, urged the government to focus on long-term policies, tax simplification, and infrastructure development to lower business costs.

MAN Director General, Segun Ajayi-Kadir, emphasized the need for practical reforms to stabilize inflation and increase consumer purchasing power.

Outlook for 2025 Remains Cautiously Optimistic
Experts foresee a more stable business environment in 2025, provided key economic conditions continue improving. They recommend that manufacturers increase local sourcing, optimize production costs, and explore new markets for growth.

If proactive government policies align with industry adaptation strategies, Nigeria’s manufacturing sector could experience financial recovery soon.

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In a statement on Sunday in Lagos, MAN’s director-general, Segun Ajayi-Kadir, noted that the manufacturing sector was already beguiled by many challenges.

“While we acknowledge the need for revenue generation, increasing port tariffs can be counterproductive in the long run,” said Mr Ajayi-Kadir.

“MAN implores the NPA to shelve the proposed 15 per cent tariff increase and, instead, collaborate with stakeholders to explore sustainable alternatives for revenue generation.”

On Thursday, the NPA disclosed its decision to begin a review of its tariff across rates and dues to ensure it met current demands in port operations. It cited infrastructural development and all-round competitiveness as reasons for the review, which was its first since 1993.

However, the MAN director general stated that the timing was inimical, particularly as businesses struggled with the rising cost of operations and high foreign exchange rate, among general economic uncertainties.

Mr Ajayi-Kadir added that rising inflation, foreign exchange challenges, and declining industrial capacity utilisation characterise Nigeria’s current economic climate.

He noted that ports, as the gateway to international trade, play a crucial role in the efficiency and cost-effectiveness of business operations.

“According to the United Nations Conference on Trade and Development (UNCTAD), 80 per cent of Nigeria’s traded goods are transported by sea, with 70 per cent of total imports and exports in West and Central Africa destined for Nigeria.

“For manufacturers, port-related charges constitute significant indirect costs, as most raw materials and industrial machinery are imported through these ports.

“Any increase in charges will have a ripple effect, leading to higher production costs, increased inflationary pressures, and reduced competitiveness of locally manufactured goods,” Mr Ajayi-Kadir said.

The MAN director general stated that many businesses are experiencing worrying downturns due to unsustainable operating costs.

He said that increasing port tariffs was ill-timed and could signal a departure from the government’s avowed efforts and commitment to the ease of doing business.

According to him, it is inevitable that this additional strain on industrial activities will ultimately lead to reduced capacity utilisation and possibly job losses.

“Furthermore, Nigeria must remain competitive in regional trade. Neighbouring countries with more efficient and cost-effective ports will become far more attractive alternatives, leading to increased cargo diversion.

“This will not only reduce revenue for the Nigerian government but will encourage smuggling and other untoward trade practices that weaken our economy,” he said.

Mr Ajayi-Kadir said alternative approaches to port revenue generation, such as reducing turnaround time for vessels, improving cargo clearing processes, tackling bottlenecks and infrastructural development, were critical.

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