Manufacturing Sector Faces Crisis Amid Naira Depreciation
Nigerian manufacturers are grappling with significant financial losses caused by the steep depreciation of the naira and a persistent shortage of foreign exchange. George Onafowokan, Chairman of the Ogun State chapter of the Manufacturers Association of Nigeria (MAN), highlighted these challenges during the 39th Annual General Meeting held in Abeokuta. The meeting, themed “Dollar to Naira Cost, the Nigerian Manufacturers’ Daily Dilemma,” underscored the dire situation facing the industry.
N792 Billion Losses Recorded by Major Manufacturers
Onafowokan revealed that 16 major manufacturers recorded combined losses of ₦792 billion due to the government’s decision to float the naira in 2023. By early 2024, the naira had plummeted to an exchange rate of ₦1,900 to $1. This depreciation, coupled with forex scarcity, has made it nearly impossible for businesses to access affordable dollars for essential imports, forcing many to turn to the parallel market where rates remain exorbitant.
Skyrocketing Production Costs Halt Operations
The reliance on the parallel market has significantly inflated production costs, particularly for manufacturers dependent on imported raw materials and machinery. Onafowokan explained that these rising costs have forced several manufacturers to suspend operations or scale back production, with the ripple effects extending from large corporations to small and medium enterprises (SMEs).
Infrastructure and Energy Woes Add to Challenges
Beyond currency challenges, manufacturers are also grappling with inadequate infrastructure and rising energy costs. Onafowokan pointed out the poor state of transport routes in Ogun State as a major hurdle. Damaged roads lead to frequent accidents and higher logistics costs, compounding the difficulties for businesses trying to remain operational in a tough economic climate.
Ripple Effects Extend Across the Economy
The combined impact of currency depreciation, forex scarcity, and inadequate infrastructure threatens the sustainability of Nigeria’s manufacturing sector. Onafowokan warned that these challenges could have long-term effects on job creation, economic growth, and the overall stability of the industrial sector if immediate action is not taken.
Call for Policy Reforms and Support
To mitigate these issues, manufacturers are urging the government to implement policy reforms that address forex scarcity and stabilise the naira. Improved infrastructure and reduced energy costs are also critical to sustaining businesses and promoting economic recovery. Without these measures, the survival of many Nigerian manufacturers hangs in the balance.
Follow us on Socials: