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Manufacturing Sector’s GDP Contribution Drops in Q3’24
Nigeria’s manufacturing sector experienced a decline in its contribution to the country’s GDP in Q3 2024, according to a report by the Manufacturers Association of Nigeria (MAN).
MAN in its Quarterly Economic Report for 3rd Quarter of 2024, also stated that the Manufacturers CEO Confidence Index (MCCI) for the quarter under review dropped by 1.7 points to 50.2 points in Q3 2024 from 51.9 points in Q2 2024.
It attributed the decline to prevailing harsh business-operating environment occasioned by high energy prices, exorbitant exchange rate, soaring interest rates, persistent inflation and unstable fuel supply.
It noted that the economy is highly dominated by services which accounted for 56.7 per cent of GDP while agriculture and industries contributed 24.3 per cent and 19 per cent respectively.
It said: “At 46.5 per cent of industrial output, the manufacturing sector remains the leading contributor to the industrial sector.
“However, its overall contribution to GDP declined year-on-year and quarter-on-quarter from 8.42 per cent in Q3 2023 and 8.46 per cent in Q2 2024 to 8.21 per cent in Q3 2024.
“This underscores the harsh effect of hostile economic policies, which have largely constrained the country’s goal of rapid industrialisation and have left the economy struggling for survival.”
The report also noted that, “The dominance of the service sector portends a drawback for the country’s industrialisation agenda and aspirations of reducing forex demand pressures, promoting value addition, generating mass employment, increasing export earnings, driving industrial-led growth and ensuring sustainable development.”
MAN also disclosed that the employment generation capacity of the manufacturing sector has continued to decline, with only 2,606 jobs created in H1 2024, a 29.99 percent reduction from H2 2023.
It stated, “Year-on-year, job creation fell by 37.83 per cent, reflecting the ongoing challenges within the sector, including economic uncertainties, inflationary pressures, and an unfavourable business environment.
“The chemical and pharmaceuticals industry remained the highest job creator, while the motor vehicle and miscellaneous assembly industry created the fewest jobs.”
The report stated that the net loss of the Naira devaluation has been enormous for manufacturers, which baloomed the Naira value of its export earnings but imposed enormous import cost for raw materials on the sector.
It said: “The devaluation of the Naira highly contributed to the consistent increase in the value of manufactured exports.
“Manufactured exports rose from N212.14 billion in Q2 2023 to N268.79 in Q1 2024 and N480.82 billion in Q2 2024. This marked 126.7 per cent increase year-on-year and 78.9 per cent increase quarter-on-quarter.
“However, the cost of imported raw materials also surged consistently from N567.80 billion in Q2 2023 to N1.47 trillion in Q1 2024 and N1.48 trillion in Q2 2024. This shows that the net loss of the naira devaluation has been enormous for manufacturers.”
The report highlighted that the sporadic rise in the cost of imported raw materials has limited the competitiveness of Nigerian manufacturing exporters.
This, according to the report, is evidenced by the significant decline in the share of manufacturing export in non-oil export from 30.24 per cent in Q2 2023 to 15.11 per cent in Q1 2024 before rebounding to 24.73 percent in Q2 2024.
“Nonetheless, it is yet to retain its initial contribution to non-oil export. The share of manufactured export in total export also dropped from 3.3 per cent in Q2 2023 to 1.4 percent in Q1 2024 before rebounding to 2.48 per cent in Q2 2024. However, it is yet to retain its initial contribution to total export,” the report said.
MAN said that going forward, it is expedient that policymakers should step up their games by tackling the root causes of the economic quagmire rather than addressing symptoms.
“Therefore, the fiscal authority must chart a new course in collaboration with the monetary authority to expedite the much-needed structural reforms in a highly coordinated approach.
“The achievement of a double-digit growth and a friendly macroeconomic environment will require a shift in policy focus. Monetary policy must be supported by a robust fiscal framework and comprehensive structural reforms,” MAN said
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