Manufacturing rebound seen on naira stability

The Nigerian manufacturing sector is poised for a rebound in 2025 as players anticipate stability in the foreign exchange market.

They are optimistic that the country’s volatile foreign exchange market will moderate while inflation pressure eases in 2025.

“We hope for stability in foreign exchange market and easing of the inflationary pressure,” said Sola Obadimu, director general of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA).

“With stability in the foreign exchange market, manufacturers can plan and budget their inputs and outputs,” Obadimu said, noting that declining inflation rates will translate to a low monetary policy or interest rate.

According to him, with stability in the FX market and declining inflation rate, manufacturing growth will rebound in 2025, noting that both issues were major challenges faced by manufacturers in 2024.

The Nigerian foreign exchange market has remained calm since December 2024 when the Central Bank of Nigeria (CBN) introduced the electronic FX trading platform.

The naira closed flat across all markets on Wednesday, exchanging for N1,539.4/$ at the Nigeria Autonomous Foreign Exchange Market (NAFEM), data from the apex bank shows.

Segun Ajayi, director general of the Manufacturers Association of Nigeria (MAN), projects the manufacturing sector to grow by 10 percent with foreign exchange market stability and the federal government’s revisit of the pricing mechanism for power and tax.

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He noted that the manufacturers’ association expects full implementation of the minimum wage and passage of fiscal policy reform bills, noting that it will make more money available to the average Nigerian for purchases.

“If all of these things are taken together, we will expect that there will be an improvement in the performance and growth of the manufacturing sector by about 10 percent,” Ajayi said, in response to questions.

Gabriel Idahosa, president of the Lagos Chamber of Commerce and Industry (LCCI), in a January 1 note, projected the manufacturing sector to grow moderately on enhanced access to foreign exchange, anticipated improvements in infrastructure and government policies aimed at promoting local production.

“Looking ahead to 2025, the manufacturing sector is projected to grow moderately, driven by anticipated improvements in infrastructure, enhanced access to foreign exchange, and government policies aimed at promoting local production and reducing reliance on imports,” he said.

Idahosa noted that Nigeria’s manufacturing sector experienced sluggish growth in 2024, with about 8.9 percent contribution to the gross domestic product (GDP), occasioned by significant headwinds, including high production costs driven by inflation, foreign exchange volatility, and energy shortages.

He, however, noted that despite these challenges, sub-sectors like food processing and textiles showed resilience and were supported by domestic demand.

He therefore urged the federal government to prioritise the promotion of price stability, improvement in ease of doing business, fiscal sustainability and debt management in order to unlock sustainable economic growth and improve the well-being of Nigerians in 2025.

FX volatility, rising cost of energy and food prices pushed the country’s inflation rate to a 28-year high of 34.6 percent in November 2024, according to the National Bureau of Statistics (NBS).

The challenging macroeconomic issues impacted the manufacturing sector as its growth rate slowed to 0.92 percent in the third quarter of 2024, lower than the preceding quarter by 0.48 percent.