Five top issues challenging Nigeria’s manufacturing sector

The Nigerian manufacturing sector is constrained by high interest rate, persistent inflationary pressures among many other things that’s weakened productivity of the nation’s real sector, according to a new report.

PwC stated this in its outlook report titled ‘Nigeria’s 2025 Budget and Economic Outlook’ presented at an executive hosted by the tax advisory firm in partnership with BusinessDay on Thursday.

“Foreign Exchange pressures, high energy costs and elevated interest rate continue to negatively impact operational and production cost of businesses in Nigeria especially the manufacturing sector,” the report said.

It stated that high cost of input and the pass through to prices may remain a challenge in 2025 if foreign exchange and energy infrastructure challenges are not addressed.

“The regulatory landscape in Nigeria has seen significant developments such as the extension of duty waivers, bank recapitalisation, naira stabilisation, among others.

“Expected implementation of reforms especially the tax reforms, is expected to stimulate growth, foster ease of doing business and alleviate the increase in cost of living,” the report said.

Read also: Manufacturers’ N1.4trn unsold inventory weighs on operations – MAN’s President

It stated that significant funding gap persists and private sector funding remains a key challenge for businesses in Nigeria especially MSMEs due to high interest rate (currently at 27.25 percent)

PwC stated in the report that Nigerian MSMEs require an estimated $32.2 billion (N13 trillion) in financing to close the funding gap.

“Inflationary pressures continue to significantly impact consumer purchasing power with implications for demand of non-essential goods from businesses in the real sector,” it said.

It stated that businesses must create innovative products to deliver value to consumers while keeping costs low and operating efficiently as the CBN attempts to curb the rise in inflation.

The PwC report noted that Nigeria’s road and energy infrastructure remain inadequate, increasing logistics and
production cost for businesses.

“About 135,000km of roads in Nigeria remain untarred due to fiscal constraints and leakages,” it stated, while adding that a structured approach is required to address these challenges.