As the nation’s celebrates her 65th anniversary on October 1, this year, stakeholders have warned that such celebrations should be done cautiously, since the state of the nation’s economy still calls for sober reflection.
The stakeholders, comprising the Manufacturers Association of Nigeria (MAN); Association of Small Business Owners of Nigeria (AS BON) and Lagos Chamber of Commerce and Industry (LCCI); have therefore charged the government on the need to intensify efforts at easing the reforms-induced pains individuals and businesses have continued to endure in the past two years.
They argued that, while there seems to be some form of positives in the fact that the non-oil sector of the economy, unlike in the past, now contributes significantly to the nation’s Gross Domestic Product (GDP), they are however of the opinion that the real sector, such as Manufacturing, which should have been the major driver of the nation’s economic growth has not been able to perform such role, due to a myriad of challenges, ranging from inflation, to high interest rates, huge electricity rates, and diminishing consumer purchasing power, among others, facing the sector.
For instance, in his review of the performance of the sector in 2024, the President, Manufacturers Association of Nigeria (MAN), Mr. Francis Meshioye, believed the sector was not able to contribute maximally to the nation’s GDP, due to different macro-economic and infrastructural challenges facing it, during the period under review.
For instance, manufacturing’s share of the economy dropped significantly from 16.04 per cent in Q4 2023 to 12.68 per cent in Q2 2024, indicating a contraction in economic activity within the sector.
‘In 2024, Nigeria’s manufacturing encountered a myriad of macroeconomic and infrastructural challenges that severely impacted its performance. The sector faced mounting pressure from high inflation, a depreciating Naira, rising interest rates, escalating electricity tariffs, record low sales, multiplicity of taxes and levies and militating security concerns, which affected profitability and hindered the sector’s contribution to the nation’s GDP,’ he stated.
On inflation, the MAN boss described as alarming, the 34.6 per cent inflation figure recorded in November 2024, a development, he argued, diminished consumers’ purchasing power and caused a decline in demand for manufactured goods.
According to him, another of the consequences of all these, was the huge unsold inventory of N1.4 trillion, recorded across companies in the sector, during the period.
Meshioye also identified the steep decline in the value of the Naira, from N666/$ in mid 2023 to over N1700/$ by mid-2024, due to the floating of the exchange rate, as another major factor for the sector’s non-performance in 2024.
He noted that the interest rate figure at 27.7 percent, recorded by November 2024, also made it difficult for operators in the sector to access financing for expansion, since it raised borrowing cost for expansion and modernisation; thereby limiting, severely, the potential for investment in the sector, impeding long-term growth prospects.
Interestingly, one challenge that seems intractable in the sector remains the issue of high electricity tariff. A drastic rise in electricity tariffs by over 250 per cent, manufacturers complained, have made energy costs become one of the highest operating expenses for businesses in the sector in 2024.
In a bid to remain in business, they argued, manufacturers now seek alternative energy sources, a development that has further strained their financial resources and complicate their ability to remain competitive.
Speaking in this same vein, the President of the Association of Small Business Owners of Nigeria, Dr. Femi Egbesola, noted that the impact of the reforms on small businesses, in the past two years, had been very negative, since over 2 million businesses had shut down over the period due to the reforms.
He added that small businesses had also continued to groan under the heavy burden of multiplicity of taxes. Egbesola, however expressed the optimism that the new tax reforms, expected to kickoff in January next year, would serve as a form of relief to small businesses.
‘A lot of things will change for good. And if nano, micro and small businesses which form about 96 percent of businesses that we have in Nigeria, are positively impacted by these tax reforms, it would also impact the economy, positively,’ he stated.
He said part of the survival strategies adopted by operators in the sector, has been the decision to leverage the opportunities presented by the African Continental Free Trade Agreement (AfCFTA) to enhance their fortunes.
‘We are beginning to look at how we can be innovative in the way we run our business. That is why you see some of us involved in exports, especially non-oil export. We are also leveraging AfCFTA, ECOWAS and technology to be able to survive at this time,’ he stated.
While expressing the optimism that, with time, businesses would begin to reap the fruits of the reform, he however charged government on the need to begin to think of how to give soft landing to small businesses by cushioning the effects of those reforms.on their operations.
In its review, the Lagos Chamber of Commerce and Industry LCCI expressed the delight that key indicators are showing some positive trends, with GDP growth accelerating to 4.23 percent in Q2, of this year; and headline inflation gradually easing, to 2012 percent as of August.
The Chamber, however , called for sober reflection on the state of the nation’s economy, and the business environment , since sustained reforms still remained imperative to unlocking the country’s full potential.
‘At 65, Nigeria stands at a pivotal juncture. We need to deepen structural reforms that ease the cost of doing business. With the benchmark rate still as high as 27%, weak power supply, high energy costs, and an expensive exchange rate for critical imports, businesses are operating in a harsh business environment.
‘We must prioritise infrastructure investments, particularly in power, logistics, and broadband. We need critical infrastructure upgrades to support innovation, digital transformation, and industrialization,’ it added.