Outlook for manufacturing sector in 2024 gloomy, says MAN

Giving a breakdown of the manufacturing sector outlook for 2024, Director General of the Manufacturers Association of Nigeria, Mr. Segun Ajayi-Kadir, said judging from observed global trends, it is obvious that the outlook for the manufacturing sector in 2024 may not be a positive one at least in the first half of the year.

Whilst saying the period will be challenging with a subtle possibility of recovery from the third quarter, it noted that “the envisaged recovery is highly dependent on the deployment of policy stimulus supported with a synthesis of domestic growth driven, export focused and offensive trade strategies.”

The stimulus, he explained, would promote resilience, steady growth and ensure that the sector gains meaningful traction in the later part of the year.

The MAN DG said drawing from likely economic dynamics and in the light of the aforementioned, its projections for the manufacturing sector in 2024 indicates there will be clarity on the actual and specific policy direction and priority areas of the current administration, especially around deepening industrialisation.

He said manufacturers look forward to engaging the government in that regard, but expressed the hope that the government will see the manufacturing sector as the key driver of sustained economic growth and give the sector the priority that it deserves.

“In 2024, the sectorial real growth is expected to hit about 3.2 percent while its contribution to the economy will most likely exceed 10 percent, just as he affirmed that the Manufacturers’ CEOs Confidence Index is predicted to rise above 55 points thresholds by the end of Q4 2023.

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Ajayi-Kadiri said: “Average capacity utilization will still hover around the 50 percent threshold as the forex-related challenges and high inflation rate limiting manufacturing performance may linger until mid-year.

“The sector may experience a meager improvement in manufacturing output as forex and interest rates-related challenges are expected to subside from the third quarter.

“Higher manufacturing output is envisaged from the beginning of the third quarter of the year as the government disburses capital provisions of the budget to abandoned, ongoing and new capital projects with expected special preference for locally made products.

“The ongoing concessions of seaports, airports and roads may also provide opportunities for the cement sub-sector and contribute to infrastructure upgrades needed to enhance manufacturing productivity.

“Reasonable stability in the monetary policy ambience as the apex bank reverts to playing its conventional roles and deliberately improves forex supply to the productive sector for import of inputs not available locally.

“The results of the emerging upward surge in global oil prices, domestic oil and gas production, local refining of petroleum products and projected gains of exchange rate unification will promote stability in the forex market and impact manufacturing positively from the second half of the year. This will lead to reduction in the pressure on demand for forex and improve the inflow of export proceeds from oil and gas.

“The ongoing tax reforms and the envisaged bank recapitalization will frontally address the challenges of multiple taxation and poor access to credit that has continued to limit manufacturing sector performance, if successfully implemented.

“Expect dynamic implementation of the Electricity Act 2023, which will increase private investment in renewable energy, enhance energy efficiency and improve electricity supply to the manufacturing sector.

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“The improved electricity supply will ameliorate the issue of inadequacy, reduce the disruptions occasioned by frequent outages and in turn improve energy security.

“In broad terms, the year 2024 may start on a tough note for manufacturing but may end with some measured improvements because the envisaged policy reforms, improved commitment to domestic production and general positive outlook seems favourable for the sector,” the body added.

“To improve the sector in the year, MAN recommended that the government should expend cost savings from fuel subsidies to deploy a bouquet of production focused policies, backed with more structural measures to combat the peculiar inflationary pressures from insecurity, energy and transport cost.

“Overhaul the power sector and incentive investment in renewables to boost electricity generation and promote energy-cost efficiency.

“Encourage inflow of foreign direct investment into pre-determined and domestic production-enhancing businesses. Should intentionally guide Diaspora remittances into non-oil sectors, especially manufacturing to aid forex inflows and curb rising inflation,” Ajayi-Kadiri also said.