Nigeria’s manufacturing sector faces increasing unsold goods as inventory stockpiles rise by 22% to N469.66 billion in 2022 from N384.58 billion in the previous year, and the industry claims it’s getting worse.
The bi-annual economic review of the Manufacturers Association of Nigeria (MAN), which is the umbrella body of manufacturers in Nigeria, has released a report attributing the rise in inventory to a decrease in the purchasing power of Nigerians. This has been caused by sustained inflationary pressures and has been worsened by the cash crunch that hit the economy in the first quarter of 2023. This was in the wake of the Naira Redesign Policy, which was implemented during the same period. Despite a 9.7 percent decrease in the manufacturing sector’s factory output to N6.67 trillion in 2022 from N7.39 trillion in 2021, analysis of the report shows that there has been a rise in inventory.
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MAN’s DG, Segun Ajayi-Kadir, said the sector’s unsold goods inventory was N469.66 billion in 2022, up from N384.58 billion recorded in 2021 due to low purchasing power caused by declining real income and increasing inflation. The Naira Redesign Policy in late 2022 caused a cash shortage for households due to the insufficient replacement of old notes with new ones. N112.81 billion was recorded in H1 2021, indicating a 66% increase. It rose by N85.46 billion (51%) vs. N187.1 billion recorded in H1, and prices rose with increased costs and logistics escalation despite COVID-19. CBN’s policy on redesigning the naira caused a cash crunch that hindered economic activities in Q4 2022. The manufacturing sector suffered due to difficulty selling FMCG and commodities. The speaker urged the government to create a policy to combat high inflation.
“MAN President, Francis Meshioye, states that the manufacturing sector is facing declining sales due to naira scarcity, leading to production cuts and reevaluation of investments.” Sales cannot cover expenses, leading to downsizing, factory closures, job losses, and lower exports.
