Nigeria’s manufacturing contribution to gross domestic product shrunk to the lowest in four years in the first nine months of the year as operators battle to stay afloat amid rising operating costs, data from the National Bureau of Statistics shows.
The sector’s contribution to the GDP in the third quarter of 2024 declined to 8.21 percent from 8.42 percent in the corresponding period of 2023.
The sector in Q3 contributed 8.59 percent and 8.42 percent to the GDP in 2022 and 2021 respectively.
Analysts at FBNQuest Capital Research said in a note on Tuesday that the sector’s progress has been constrained by multiple macro-headwinds, including the adverse impact of high inflation on household wallets and operating costs, high-interest environment, and naira volatility.
“The sector posted another sluggish growth,” the Analysts said, noting that several multinational companies have exited the Nigerian market due to the tough business environment.
Odiri Erewa-Meggison, chairman of the Manufacturers Association of Nigeria Export Promotion Group (MANEG), said that the potential consequences of the decline to the economy are numerous, ranging from unemployment, loss of revenue to the government in terms of taxes, social vices from the unemployed youths, increased crime rate, and increase in poverty between the rich and the poor or vulnerable.
Meggison said the ways to mitigate these consequences to boost the sector’s contribution to the GDP are if the necessary interventions are put in place by the federal government.
“These include; lowering the cost of borrowing and energy, curbing the problems of insecurity, providing the infrastructure and stabilising the exchange rate,” she said.
“To expedite the implementation of existing incentives targeted at boosting the manufacturing and export value chain,” she added.
The Central Bank of Nigeria (CBN) recently raised its benchmark interest rate by 25 basis points to 27.50 percent as manufacturers still struggle with the high interest rate amid rising production costs.
Muda Yusuf, chief executive officer, of the Centre for the Promotion of Private Enterprise (CPPE) said it is troubling that despite the declining growth performance of many critical sectors of the economy as evidenced in the third quarter GDP report, the Monetary Policy Committee (MPC) continued its tightening stance.
Yusuf added that these sectors need monetary and fiscal support, not tightening financial conditions.
“In the meantime, we urge the CBN to upscale its support for development finance institutions to make up for the financing challenges created by the sustained tight monetary policy regime,” Yusuf said.
The manufacturing sector comprises thirteen activities: oil refining; cement; food, beverages, and tobacco; textile, apparel, and footwear; wood and wood products; pulp paper and paper products; chemical and pharmaceutical products; non-metallic Products; plastic and rubber products; electrical and electronic; basic metal and iron and steel; motor vehicles and assembly; and other manufacturing.
Real GDP growth in the manufacturing sector in the third quarter of 2024 was 0.92 percent year-on-year, higher than the same quarter of 2023 and lower than the preceding quarter by 0.44 percent and 0.35 percent respectively.
On a quarter-on-quarter basis, the sector’s growth rate stood at 6.74 percent.
The nominal GDP growth of the manufacturing sector in the third quarter of 2024 was recorded at 3.62 percent (year-on-year), 32.97 percent points lower than the figure recorded in the corresponding period of 2023 (36.59 percent) and 1.72 percent points higher than the preceding quarter figure of 1.91 percent.
The contribution of manufacturing to nominal GDP in the third quarter of 2024 was 14.30 percent, lower than the figure recorded in the corresponding period of 2023 at 16.18 percent and higher than the second quarter of 2024 at 12.68 percent.
The non-oil sector grew by 3.37 percent in real terms during the reference quarter (Q3 2024). This rate was higher by 0.62 percent compared to the rate recorded in the same quarter of 2023 which was 2.75 percent and higher than the 2.80 percent recorded in the second quarter of 2024.
In real terms, the non-oil sector contributed 94.43 percent to the nation’s GDP in the third quarter of 2024, lower than the share recorded in the third quarter of 2023 which was 94.52 percent, and higher than the second quarter of 2024 recorded as 94.30 percent.
Erewa-Meggison further said that the manufacturing sector is currently witnessing several impediments to the prosperity of their businesses, augmented by harsh government policies.
She, however, said that the sector can still contribute meaningfully to economic growth by creating jobs for the youths.
“Even with the inadequate level of the above, the sector is the highest on employment generation contribution to government revenue, through tax payment of both company income tax and personal income tax that is being paid by employees of the manufacturing sector.
“Since Nigeria is dependent on oil exports, if manufacturers can expand then it will create an avenue for other sources of income that will contribute to economic growth,” Erewa-Meggison said.
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