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The largest listed manufacturers in Africa’s most populous nation are choking on the huge cost of production brought on by the energy crisis and imported inflation which forces some of them to close shop.
Data gathered by MoneyCentral shows 20 firms-that cuts across health sector, building materials sector, and consumer goods- collectively incurred N6.22 trillion in total costs for the year ended December 2023, which is 50.97 percent higher than 2022’s N4.12 trillion.
On average, they spent N0.83k on input costs to produce N1 of every unit of products, according to MoneyCentral calculations.
Manufacturers are reeling from increased operating costs due to rising inflation and depreciation of the Naira, and that combined with energy costs leave them with a very slim profit margin.
The ones who made a profit were able to do so due to a high in the price of key products as they continue to pass on higher input costs to the final consumers in the form of higher prices.
Another elephant in the room is a severe foreign currency scarcity. All in all, the macroeconomic conditions have forced some firms to exit the country.
“The cost of manufacturing is rising daily owing to scarce and unavailable manufacturing inputs that continue to shrink profitability and threaten the existence of the critical sector of the economy,” Francis Meshioye, president of Manufacturers Association of Nigeria (MAN).
“Such challenges as epileptic power supply, insecurity, inadequate infrastructure, shortage of foreign exchange and naira depreciation are prevailing issues that are impacting negatively on the sector,” he added.
Between 2015 and 2023, the sector has lost more than 200 factories, according to Dataphyte investigations.
In August, GlaxoSmithKline UK exited Nigeria’s pharmaceutical market after over 51 years due to challenges like foreign exchange complexities, security concerns, and high operational costs.
In December, P&G discontinued its on-ground operations in Nigeria, transforming the country into an import-focused market.
In November, Sanofi, a French pharmaceutical multinational, discreetly announced its exit from Nigerian operations.
In December, Jumia Food closed shop and left the country, along with six other African countries. In December, Bot Food exited the Nigerian market.
Manufacturers’ energy spend has increased from N58.82 billion in 2015 to N112.81 billion in 2022, according to data from Manufacturers Association of Nigeria (MAN).
Some analysts say Nigerian Breweries might exit the country due to recurring net losses caused by FX revaluation losses.
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