Manufacturers lament high energy costs, over-regulation, policy issues

Juliet Anine
4 Min Read
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The Manufacturers Association of Nigeria has expressed concerns over the difficult business environment in the country, citing high energy costs, multiple taxes, policy inconsistencies, and poor infrastructure as major challenges.

The Director-General of MAN, Segun Ajayi-Kadir, said manufacturers are struggling to operate due to rising electricity tariffs, the high cost of alternative energy, forex scarcity, and high raw material costs.

“There are so many challenges affecting manufacturers, including over-regulation, high interest rates, poor road networks, low patronage, and rising inflation,” he said.

Despite these issues, manufacturers recorded a slight improvement in confidence in the last quarter of 2024, mainly due to increased consumer demand during the festive season. According to the Manufacturers CEOs Confidence Index (MCCI), business confidence rose from 50.2 points in the third quarter to 50.7 points in the fourth quarter. However, this was still lower than the 51.8 points recorded in the same period in 2023.

The report noted that while employment and production levels improved slightly, they remained below the 50-point threshold, indicating a tough business environment. Many manufacturers faced higher costs of raw materials, logistics, and energy due to forex instability, inflation, and high-interest rates.

Looking ahead, expectations for the first quarter of 2025 are mixed. Business confidence is projected to drop from 56 points to 53.2 points, while employment and production levels are also expected to decline slightly. However, manufacturers remain hopeful that a stable exchange rate, lower interest rates, and tax reforms will improve business conditions.

Ajayi-Kadir highlighted further declines in key manufacturing indicators, saying:

“The volume of production dropped by 0.3 per cent in Q4 2024 from a 3.2 per cent decline in Q3. Manufacturing investment also fell by 1.2 per cent in Q4 after a 3.5 per cent drop in the previous quarter. Employment declined by 0.7 per cent, and the cost of shipment rose by 11.6 per cent. However, sales volume increased slightly by 1.1 per cent.”

Across different manufacturing sectors, confidence levels varied. Seven out of ten sectors saw improvement, while three—basic metal, iron and steel, and electrical and electronics—declined. The report noted that the delay in restarting the Ajaokuta Steel Company and the Aluminum Smelter Company had made manufacturers in these sectors highly dependent on imported raw materials and vulnerable to forex fluctuations.

Regionally, manufacturers in Ikeja, Kwara/Kogi, Apapa, Imo/Abia, Ogun, Abuja, Edo/Delta, Cross River/Akwa Ibom, and Oyo/Ondo/Ekiti/Osun recorded confidence levels above the 50-point threshold. However, those in Kaduna, Kano, Rivers/Bayelsa, Anambra/Enugu, and Bauchi/Benue/Plateau struggled due to the impact of economic reforms and power blackouts.

The report stated, “In particular, the power blackout in the North affected operations in Kaduna, Kano, and Bauchi/Benue/Plateau industrial zones. Confidence in Kwara/Kogi, Anambra/Enugu, Imo/Abia, and Edo/Delta also declined due to high electricity tariffs, high borrowing costs, and the effect of forex rates on shipment costs. However, manufacturers in Abuja, Apapa, Ikeja, Ogun, and Oyo/Ondo/Ekiti/Osun benefited from a relatively stable exchange rate and increased consumer demand during the festive season.”

As manufacturers continue to struggle with economic challenges, they urge the government to implement policies that support industrial growth and create a more business-friendly environment.

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