Manufacturers in Nigeria are increasingly selling products below production cost as they struggle to clear nearly N2 trillion worth of unsold inventory, according to the Manufacturers Association of Nigeria (MAN).
The association said the increase in sales recorded by many manufacturers has been driven largely by price reductions and lower profit margins, rather than stronger consumer demand.
Speaking in an interview, MAN Director-General, Segun Ajayi-Kadir, said many companies have been forced to absorb losses in order to move finished goods and keep their factories running.
He explained that the industry’s inventory, estimated at almost N2 trillion, has compelled manufacturers to sell products at prices that, in many cases, are below production costs.
Ajayi-Kadir attributed the situation to rising production expenses, weak consumer purchasing power, high borrowing costs, foreign exchange volatility, poor infrastructure, insecurity and persistent logistics challenges.
He noted that manufacturers are increasing the use of locally sourced raw materials and investing in value addition to reduce dependence on imports. However, he said high foreign exchange costs and import-duty benchmark pricing continue to weaken the competitiveness of locally produced goods, limiting Nigeria’s ability to benefit fully from the African Continental Free Trade Area (AfCFTA).
The MAN Director-General also identified access to affordable financing as one of the biggest challenges facing the sector. He said the Monetary Policy Rate (MPR) of about 26 per cent has pushed commercial bank lending rates to between 30 and 35 per cent, making it difficult for manufacturers to borrow and remain profitable.
Although some businesses have turned to the Bank of Industry (BoI) and other development finance institutions, Ajayi-Kadir noted that borrowing costs have also increased, with BoI lending rates rising to as much as 15 per cent, compared to the single-digit rates previously enjoyed by many manufacturers.
He said the higher financing costs have increased debt servicing obligations and placed additional pressure on already strained business operations.
To support the sector, MAN called on the Federal Government to urgently release the proposed N1 trillion Manufacturing Stabilisation Fund, saying the intervention is needed to provide affordable financing and help manufacturers remain in business.
