The first half of 2023 witnessed a significant surge in the inventory of unsold finished products in Nigeria’s manufacturing sector, reaching a total of N271.96 billion. This figure represents a substantial increase compared to the N187.08 billion recorded during the same period in 2022, reflecting a noteworthy growth of N84.88 billion, equivalent to 45.4%.
Segun Ajayi-Kadir, the Director General of the Manufacturers Association of Nigeria (MAN), attributed this sharp rise in unsold product inventory to the weakened purchasing power of consumers during the first half of 2023. According to MAN’s recently released ‘Half Yearly Review of the Economy (January – June 2023),’ this decline in purchasing power is primarily a result of diminishing real household income due to the ongoing rise in inflationary pressures.
The inflationary pressure was further exacerbated by the scarcity of the Nigerian currency in the first quarter of the year and the consequences of subsidy removal, according to the report.
Impact of CBN’s Naira Redesign Policy
Ajayi-Kadir pointed out that the year 2023 began with economic uncertainty stemming from the Central Bank of Nigeria’s (CBN) Naira redesign policy. This policy led to a Naira shortage and a slowdown in economic activities leading up to the general election in late 2022. The repercussions of the Naira redesign and the resulting sluggish economic activities were reflected in the Gross Domestic Product (GDP) data published by the National Bureau of Statistics (NBS), which showed a decline to 2.31% and 2.51% in the first and second quarters, respectively.
Subsidy Removal and Exchange Rate Unification
Furthermore, the removal of subsidies and the policy of exchange rate unification in the latter part of the first half of the year added to the economic uncertainty. These changes triggered a ripple effect that further eroded investor confidence.
According to Ajayi-Kadir, “Consequently, both businesses and foreign investors are growing increasingly cautious about committing capital, thereby impeding economic growth and the prospects for recovery. The collective impact of these factors is an upsurge in inflationary pressures, which inflates production costs, diminishes consumers’ purchasing power, and exerts a significant influence on manufacturers.”
The ‘Half Yearly Review of the Economy’ by MAN provides a summary of the findings from MAN’s survey of the manufacturing sector for the first half of 2023. The report aims to monitor changes in manufacturing sector performance indicators in light of the macroeconomic and policy environment during the survey period.
Key manufacturing indicators examined in the report include capacity utilization, production value, inventory levels, utilization of local raw materials, investment, expenditure on alternative energy sources, and more.
The rising inventory of unsold finished products in the manufacturing sector underscores the challenges faced by businesses in Nigeria amid economic uncertainties and calls for targeted measures to boost economic recovery and stimulate consumer demand.