Nigeria’s manufacturing sector is grappling with soaring production costs, as newly released 2024 financial reports reveal a 90.6% increase in the cost of sales for major manufacturers. This spike is largely attributed to inflation, exchange rate volatility, and rising raw material expenses.
Despite efforts at cost management and backward integration, manufacturers continue to struggle with financial and economic headwinds. Analysts suggest that while current macroeconomic stability offers hope for 2025, businesses are still facing tough operating conditions.
Rising Production Costs and Financial Pressures
The cost of sales, which includes expenses for raw materials, logistics, and energy, reached ₦3.91 trillion in 2024, up from ₦2.1 trillion in the previous year. This marks an 88.5% year-on-year increase, highlighting the challenges manufacturers face in controlling operational expenses.
Several leading companies recorded significant jumps in production costs:
- Nestlé Nigeria: +97.7% to ₦652.5 billion
- Cadbury Nigeria: +77.2% to ₦111.7 billion
- Unilever Nigeria: +30.6% to ₦94.03 billion
- Nigerian Breweries: +97.5% to ₦764.5 billion
- BUA Foods: +110.0% to ₦985 billion
- Guinness Nigeria: +37.5% to ₦208.03 billion
- Dangote Sugar: +78.7% to ₦634.6 billion
- Honeywell Flour Mills: +147.5% to ₦248.8 billion
The cost of raw materials alone surged by 88%, reaching ₦2.2 trillion in 2024, up from ₦1.2 trillion in 2023. This underscores the impact of Nigeria’s reliance on imported inputs, despite efforts to promote local sourcing.
High Finance Costs Weigh on Manufacturers
In addition to production expenses, manufacturers are also dealing with rising finance costs due to high interest rates. The total finance cost across the top 12 manufacturers rose by 81%, hitting ₦1.2 trillion in 2024, compared to ₦664.6 billion in the previous year.
This increase is largely attributed to the high-interest rate policy implemented by the Central Bank of Nigeria (CBN) in an attempt to curb inflation. While some manufacturers have reduced their dependence on bank loans, the elevated borrowing costs continue to affect profitability.
Industry Experts Call for Reforms
Economic analysts and industry stakeholders believe these challenges stem from the government’s economic reforms and monetary policies. While these reforms are intended to stabilize the economy, they have inadvertently placed heavy financial burdens on manufacturers.
The Manufacturers Association of Nigeria (MAN) has called for “actionable reforms” to ease the pressure on production costs, while the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) has highlighted key constraints and suggested policy interventions.
Despite these hurdles, experts suggest that if macroeconomic stability continues in 2025, manufacturers could see some relief. However, businesses must continue adapting to survive in the evolving economic landscape.
