Manufacturers Spent ₦1.11trn On Alternative Energy Sources

• As Declining Consumer Demand Pushes Unsold Inventory To ₦2.14trn

The Manufacturers Association of Nigeria (MAN) has reported that manufacturers spent a record ₦1.11trn on alternative energy sources, driven by persistent electricity supply challenges and surging energy costs.

This development was detailed in MAN’s economic review for the second half of 2024 that the Nigerian manufacturing sector faced a challenging but resilient economy in 2024, navigating macroeconomic instability, inflationary pressures, and policy-driven disruptions.

It noted that electricity posed a great challenge on a half-on-half basis, as electricity supply rose from 11.4 hours per day in H1 2024 to 15.2 hours in H2 2024, however, electricity tariffs it said surged by over 200 percent for Band A consumers, significantly increasing manufacturing costs.

The executive summary which was signed by the Director General MAN, Segun Ajayi-Kadir, mni, noted that the electricity supply situation for industries improved in 2024, with average daily supply increasing to 13.3 hours per day, up from 10.6 hours in 2023.

“On a half-on-half basis, electricity supply rose from 11.4 hours per day in H1 2024 to 15.2 hours in H2 2024. However, electricity tariffs surged by over 200 percent for Band A consumers, significantly increasing manufacturing costs. While power availability improved, many manufacturers still faced frequent outages, and costs as the country witnessed 12 national grid collapses and this remained a major concern,” he stated.

DG MAN revealed that “In response to unreliable grid power and increases in prices of Diesel and PMS, manufacturers’ total expenditure on alternative energy sources surged to N1.11 trillion, a 42.3 percent increase from N781.68 billion in 2023. On a half-on-half basis, manufacturers spent N404.80 billion in H1 2024, which increased by 75.0 percent to N708.07 billion in H2 2024.

He added “The Food, Beverage & Tobacco sector recorded N229.41 billion in alternative energy spending, up from N182.76 billion in 2023, while Chemical & Pharmaceutical energy costs doubled to N208.68 billion. The Non-Metallic Mineral Products sector’s energy costs increased by 33.7 percent to N118.49 billion, and the Textile, Apparel & Footwear industry saw a fourfold increase, reaching N26.45 billion in 2024, compared to N6.97 billion in 2023.”

The Manufacturers Association of Nigeria (MAN) also reported that the inventory of unsold finished goods surged by 87.5 percent to N2.14 trillion in 2024, driven by weakened consumer demand, escalating production costs, and declining purchasing power. However, it noted that a half-on-half decrease of 27.9 percent in H2 2024 suggests improved clearance efforts and price adjustments. The Food, Beverage & Tobacco and Textile, Apparel & Footwear sectors faced the most significant increases in unsold stock.

On one hand, it stated that the sector showed resilience in areas such as local raw material sourcing, as the manufacturing sector’s local raw material sourcing increased to 57.1 percent in 2024, up from 52.0 percent in 2023.

According to the report, this shift was largely driven by forex scarcity, high import costs, and government incentives promoting local content, adding that notable improvements were observed in Wood & Wood Products, Textile, Apparel & Footwear, and Chemical & Pharmaceuticals, while Electrical & Electronics continued to lag due to dependency on imported components.

The DG MAN clarified that the real manufacturing investment fell by 35.3 percent year-on-year to N658.81 billion in 2024, reflecting economic uncertainty and reduced expansion plans. He however, noted that H2 2024 witnessed a 19.4 percent increase compared to H1 2024, as manufacturers cautiously resumed capital expenditures, stressing that in nominal terms, total investment declined by 11.3 percent to N2.85 trillion, with Land & Buildings and Furniture & Equipment seeing the most significant declines.

The report recorded that employment situation in Nigeria’s manufacturing sector remained relatively stable in 2024, with 34,769 jobs added, a 1.8 percent increase from 34,163 jobs in 2023.

However, it highlighted that the number of employees leaving manufacturing companies also increased from 17,364 in 2023 to 17,949 in 2024, indicating ongoing labour mobility due to economic uncertainties, skill migration, and company restructuring.

On the other, it declared that the sector grappled with macroeconomic instability, exchange rate volatility, and surging inflation, which peaked at 34.8 per cent by year-end, adding that these conditions drove operational expenses higher and constrained new investments, despite a slight half-year improvement in some indicators.

The manufacturing sector the report noted also suffered as the Central Bank of Nigeria’s aggressive monetary tightening drove up the Monetary Policy Rate (MPR) to 27.5 per cent, pushing average commercial lending rates for manufacturers to 35.5 per cent—up from 28.06 per cent in 2023, adding that as a result, total finance costs for the sector reached ₦1.3trn, severely limiting capacity for expansion and capital investment.

Ajayi-Kadir, noted that while the sector demonstrated a degree of resilience, more decisive policy support is needed to ensure sustainable growth.

He highlighted the importance of stabilising macroeconomic conditions, ensuring a reliable energy supply, and expanding access to affordable financing for manufacturers.

According to him, “The challenges are real, but so are the opportunities. If we can address the structural constraints—particularly energy and finance—we can unlock far greater productivity and industrial contribution to national growth.”

The report concludes with a call for urgent reforms to ease manufacturers’ cost burdens and stimulate investment, noting that moving forward, stabilizing macroeconomic conditions, improving energy supply, and ensuring access to affordable financing will be critical for sustaining growth and enhancing industrial productivity in Nigeria.