Nigeria’s manufacturing sector remains on unstable footing despite signs of recovery, according to the latest Business Confidence Monitor (BCM) report by the Nigeria Economic Summit Group (NESG) and Stanbic IBTC. The sector recorded a BCM Index score of -0.66 in January 2025, improving from -2.43 in December 2024.
The report highlighted mixed outcomes across sectors. Agriculture stood out with strong growth, achieving a BCM Index of +10.86, while the manufacturing, services (-1.40), trade (-0.84), and non-manufacturing (-4.64) sectors struggled to maintain positive performance. However, all sectors showed slight improvement compared to December 2024, signaling a gradual, though fragile, recovery.
The manufacturing sector continues to grapple with inflationary pressures, high financing costs, and supply chain disruptions, according to the report. Weak domestic demand and restricted access to credit remain significant obstacles, dampening the sector’s growth prospects. “The manufacturing sector continues to battle inflationary pressures, high financing costs, and supply chain disruptions,” the report noted, underscoring the tough conditions.
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Performance across manufacturing sub-sectors was uneven. Key areas such as textiles, pharmaceuticals, and motor vehicle assembly experienced significant downturns, with the Motor Vehicles and Assembly sub-sector particularly hit hard by weak demand and escalating production costs. On the other hand, sub-sectors like food, beverages, and tobacco managed slight gains, driven by seasonal demand, though they remained vulnerable to inflation and declining export volumes.
The report revealed mixed trends in the manufacturing sector’s key indices. The Business Situation Index fell to +21.55 in January from +24.44 in December 2024, reflecting a decline in confidence. Meanwhile, the Investment Index dropped sharply into negative territory, from +20.79 in December to -5.77 in January. However, there were some positives: the Production Index surged to +46.56 from +10.96 in December, supported by improved output and liquidity. Operating cash flow also improved, rising to +21.13 from +17.49. Persistent inflationary pressures and high interest rates remained evident in the Cost of Doing Business Index (+41.57) and the Price Index (-40.82).
The report also noted broader business conditions in Nigeria at the start of 2025. The overall business environment saw an uptick, with the Current Business Index rising to +5.69 from +0.77 in December 2024. This increase was attributed to higher commercial activity typical of the new year. Despite this improvement, high financing costs, reduced investments (-27.50), and falling price levels (-26.62) significantly dampened overall business activity.
Structural challenges, including power shortages, limited foreign exchange access, and restricted financing, remained critical barriers to growth. The report stressed the importance of policy interventions to sustain the recovery. “Without strategic measures to improve credit access, stabilize exchange rates, and reduce operational bottlenecks, the manufacturing sector’s recovery will remain fragile,” it warned.
