A recent report by the National Bureau of Statistics (NBS) showed that Nigeria suffered a significant blow to its manufacturing sector, dropping 36% in profit margins from 2021 to 2022.
This report compared the Q2 figures for 2021, which came in at N4.51 trillion, to the N2.87 trillion for Q2 2022.
The exportation of manufactured goods also saw a substantial decline within the period in review, as its numbers dropped from N211.67bn recorded in 2021 to N119.53bn in 2022. A 43.5 percent decline in 12 months.
These alarming figures result from several factors, including insecurity and a higher cost of running a business. People within this industry find it more difficult to balance their sheets as the profit-to-cost ratio continues to widen.
The net profit of manufacturers continues to shrink as they subsequently invest more and more money into production with lower profit margins. The cost of operation also presents an issue, as that too is impacted by inflation.
Insecurity is a major catalyst in this decline. According to a report by Punch, the Manufacturers Association of Nigeria (MAN) noted that its members had to resort to adopting survival strategies to improve production.
The same report also noted, following an exclusive interview, with the Director-General of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture, Olusola Obadimu, that the downturn manufacturers are currently experiencing was foreshadowed. He mentioned that the insecurity farmers face has drastically affected their productivity and, by extension, units of goods produced.
A drop-off in farming activities affects the revenue expected from both agricultural products intended for exports and raw materials intended for manufacture.
A recent report detailed a similar issue in the Nigerian oil market. This report showed discouraging returns within Nigeria’s most profitable industry
These numbers denote an impending hike in the cost of living for Nigerians and an economic crisis.