The Manufacturers Association of Nigeria (MAN) has indicated that their performance  in Nigeria will be limited due to the foreign exchange (forex) crisis and high inflation in the country till mid-2024.

This was stated by the Director General, Segun Ajayi Kadir,mni in the ‘Manufacturing Sector Outlook for 2024’, stressing that average capacity utilization is expected to linger around the 50 percent  mark due to forex-related challenges and the prevailing high inflation rate, with a potential uptick only anticipated in the third quarter as these challenges subside.

He said “Average capacity utilization will still hover around the 50 percent threshold as the forex-related challenges and high inflation rate limiting manufacturing performance may linger until mid-year.

“The sector may experience a meagre improvement in manufacturing output as forex and interest rates-related challenges are expected to subside from the third quarter.”

The manufacturers also urged the federal government to take decisive action to address key issues affecting the manufacturing landscape.

Top on the list is a call for an overhaul of the power sector and prioritization of forex and credit allocation to manufacturers, essential steps to drive growth in Nigeria’s industrial sector.

Ajayi emphasized the need for the government to incentivize investment in renewables to enhance electricity generation and promote energy-cost efficiency.

MAN in addition, recommended prioritizing forex and credit allocation to manufacturers while streamlining the number of Bureau De Change operators to curb excesses through effective management and supervision.

The association proposed that the government deploy cost savings from the removal of fuel subsidies to implement a range of production-focused policies.

The policies, coupled with structural measures, should combat inflationary pressures arising from insecurity, energy costs, and transportation.

In order to revitalize the sector, MAN also stressed the importance of mandatorily increasing the patronage of made-in-Nigeria products. The association called on the government to lead by example, prioritizing the purchase of domestically produced goods for all government contracts and projects, in line with Executive Order 003.

The manufacturing sector has grappled with various challenges in recent years, including rising foreign exchange rates, high energy costs due to unreliable power supply, multiple taxation, and inflation. The removal of fuel subsidies and the unification of the foreign exchange market in 2023 exacerbated these issues, leading to notable exits from the sector.

However, President Bola Ahmed Tinubu recently promised upgrades in the power sector by fast-tracking the delivery of the Siemens Energy power project for a reliable electricity supply. The Central Bank of Nigeria (CBN) has also taken steps to address the forex crisis, including clearing the backlog of foreign exchange forward obligations through tranche payments to 31 banks.

If the federal government fulfils its promises to address the forex and power crises, there is optimism that the manufacturing sector can experience a much-needed boost and strengthen its output.