Nigeria’s manufactured exports hit 5-year low

The contribution of the manufacturing sector to Nigeria’s non-oil exports has hit the lowest in five years as operators battle rising expenses amid high borrowing costs and low consumer spending.

Data from the most recent foreign trade report shows that the contribution of manufacturing exports to total exports dipped to 1.9 percent in the first half of 2024 from 11.1 percent in the first half of 2020.

In the first half (H1) of 2021, the sector contributed 5.8 percent to total exports and the figure declined by 2.5 percent to 2.3 percent in H1 2022. Manufacturing contribution to total exports increased marginally in 2023 to 2.5 percent.

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Manufacturers have attributed the decline to the continued surge in production costs and the worsening business environment that is crimping profits, wiping off shareholders’ funds and making local products uncompetitive.

According to them, the sector has suffered from a lack of competitiveness, resulting from poor infrastructure and financing, high energy costs, high cost of logistics, inconsistency in government policies, the multiplicity of taxes, and skills shortages, among others.

“The high cost of production is a significant factor contributing to the sector’s struggles,” Muda Yusuf, chief executive officer at the Centre for the Promotion of Private Enterprise (CPPE), told BusinessDay.

Yusuf explained that the high production costs in Nigeria and other challenges in the country’s business environment are making it difficult for manufacturers to compete favourably.

“You know, you are competing with many other exporters from other parts of the world. Many of them have better infrastructure, better logistics, better financing, and all of that,” he said.

“If you are now going to the export market and your own domestic cost is high, you know you are using diesel or gas to produce, you are borrowing at 30 percent interest rates. Your challenges are that the courts are so enormous, and by the time you get to the destination, your products will not be able to compete,” Yusuf added.

He stressed the need to improve the business environment for manufacturers, to ensure their products can compete favourably in global markets.

“It’s an issue of the environment that you have created for the manufacturers. You need to improve the environment so that whatever they produce can be competitive in the global markets. The language that works in the global market is competitiveness,” Yusuf said.

He reiterated that the environment for manufacturers such as reducing costs and enhancing competitiveness is crucial for the growth and success of the sector in the export market.

In value terms, the country’s manufactured exports increased by 89.4 percent from N254.2 billion in 2020 to N480.82 billion in 2024. However, due to the naira devaluation, it does not necessarily mean that export volumes increased over the period.

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Uchenna Uzo, professor of marketing at Lagos Business School, said there is a significant demand for Nigeria’s non-oil products across the West African region due to devaluation that has made them cheaper.

The value of manufactured goods exports in Q2 2024 was N480.82 billion, reflecting a 78.95 percent increase from N268.70 billion in Q1 2024 and a 126.65 percent increase from N212.14 billion in Q2 2023.

The report also stated that total exports in Q2 2024 were valued at N19,418.93 billion, reflecting a 1.31 percent increase compared to N19,167.36 billion in Q1 2024 and a 201.76 percent rise compared to N6,435.13 billion in Q2 2023.

The major export in this sector was unwrought aluminum alloys exported to Japan and China, with values worth N82.74 billion and N16.02 billion respectively.

“This was followed by floating or submersible drilling or production platforms valued at N81.69 billion to Namibia, and vessels and other floating structures for breaking up exported to Cameroon and Togo valued at N20.43 billion and N16.59 billion respectively,” the report stated.

The data revealed that manufactured goods exports by region were mainly exported to Africa at N225.87 billion, followed by exports to Asia valued at N156.07 billion and to America valued at N56.24 billion.