Manufacturers’ confidence in Africa’s most populous country has risen marginally in the fourth quarter of 2024 as consumer demand surged during the festive period.
The aggregate Manufacturers CEOs Confidence Index (MCCI) of MAN increased by 0.5 points to 50.7 points in the fourth quarter from 50.2 points in the preceding quarter of 2024.
On a year-on-year basis, the aggregate MCCI decreased by 1.1 points from 51.8 percent in the corresponding period of 2023.
According to MAN’s Q4 report, current business condition, employment and production level indices recorded improvement due to the moderate increase in consumer demand, especially during the festive period.
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However, the report said the three current indices stood below the 50-point threshold as a result of the prevailing hostile macroeconomic environment.
“Manufacturing operations were directly stalled by the lingering effects of the high cost of raw materials, energy and logistics as the existence of high exchange rate, interest rate and inflation rate remained unfavourable to the overall business environment,” the report said.
Reading above 50 points indicates the expectation for economic expansion, while an index score of less than 50 suggests deterioration in the operating environment.
The report also projected that manufacturers’ confidence in the first quarter of 2025 declined but remained above the 50-point threshold.
“The projected business condition in Q1 2025 slid from 56 points to 53.2 points,” the report said. “The projected employment condition also dropped from 53.8 points to 53 points while the expected production level declined from 54.3 to 54 points.”
According to the report, the decline in the indices indicates that despite a predicted slowdown in business activity for the first month of 2025, operators remain moderately optimistic by the expectations of a more stable exchange rate, halt in interest rate hikes, minimal decline in energy prices and the enactment of favourable Tax Reform Bills by Q1 2025.
Across the sectoral groups, the reports showed that seven of the ten groups witnessed improvement in confidence levels, while three groups contracted.
The three contracted groups include Basic Metal, Iron & Steel, Electrical & Electronics and Non-Metallic.
The report added that the delay in the take-off of the Ajaokuta Steel Company and the Aluminum Smelter Company has rendered operators in the basic metal, iron and steel sectoral group highly dependent on metallic materials and vulnerable to FX volatility.
In industrial zones, only manufacturers operating in Ikeja, Kwara/Kogi, Apapa, Imo/Abia, Ogun, Abuja, Edo/Delta, Cross River/Akwa Ibom, and Oyo/Ondo/Ekiti/Osun recorded index scores above the 50-point standard in the quarter under review.
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However, among these resilient zones, four contracted while five recorded improved confidence.
Despite the prevailing hostile macroeconomic environment, the operators in Abuja, Apapa, Ikeja, Ogun and Oyo/Ondo/Ekiti/Osun benefitted largely from the stable exchange rate and the seasonal increase in consumer demand during the period.
“The contracted confidence in Kwara/Kogi, Anambra/Enugu, Imo/Abia and Edo/Delta Industrial Zones shows that the operators remain highly affected by the outrageous increase in electricity tariff, high borrowing cost as well as the effect of high exchange rate on cost of shipment,” the report said.
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