Dangote Refinery seen fueling manufacturing growth in 2025

The multi-billion dollar Dangote refinery will boost the material growth of the manufacturing sector that has been plagued with multiple macroeconomic headwinds, according to a report by CardinalStone.

In its outlook for 2025, the Lagos-based research and investment firm said the 650,000-barrels-per-day facility is expected to bring relative stability in the exchange rate and usher in an easing cycle by the central bank which would in turn ease the manufacturing sector this year.

“In 2025, we expect the sector to experience material growth, aided by the operation of the Dangote Refinery (which boosted effective refining capacity from near zero to 650,000 barrels of crude oil per day before the rejig of the old Port Harcourt Refinery in November 2024), relative stability of the FX market, and a possible rate cut by the CBN,” the report stated.

The manufacturing sector in Nigeria remains easily susceptible to macroeconomic headwinds, as was laid bare by recent reform-induced FX and interest rate pressures, including inflationary pressures lowering consumer spending and piling unsold inventories.

Unsold products worth N1.24 trillion have piled up in warehouses during the first half of 2024, jumping 357.57 percent compared to the same time last year, according to the Manufacturers Association of Nigeria (MAN).

MAN explained that people aren’t buying as much because of three main reasons: rising prices, the government’s removal of fuel subsidies, and the weakening value of Nigeria’s currency, the naira.

Also, about 65 percent of the listed manufacturing companies on the NGX reported FX losses in H1 ’24, with the country’s richest man also warning that no business can sustainably create jobs with an interest rate of over 30 percent.

With prices climbing up to 34.6 percent, the highest in nearly three decades and a battered naira that shed over 40 percent of its value in 2024, key interest rates are rising, increasing the borrowing costs of manufacturers and limiting business expansion.

The CBN was hawkish all through 2024, raising the monetary policy rate (MPR) sixth straight time to 27.5 percent in an attempt to anchor stubbornly high inflation and bring calmness to the exchange rate.

These policies were however not enough to steer the economy towards calmer waters but analysts are expecting inflation to slow this year, signaling a potential rate cut in focus.