Naira Weakness, Inflation Drive Manufacturing Expenses to N2.6tn

The severe pressures from a weak Naira and relentless inflation have pushed the operational expenses of Nigeria’s manufacturing sector to a staggering N2.6 trillion in the first half of 2025. This figure, representing the “cost of sales” for a sample of 12 major manufacturing companies, marks a nearly 20 percent increase from the N2.18 trillion recorded in the same period last year.

According to an analysis published on Monday by The PUNCH, the financial statements of these key firms reveal a sector grappling with soaring costs that threaten its viability. The primary drivers behind the escalating expenses are the nation’s turbulent macroeconomic conditions.

Key Factors Driving the Cost Surge:

• Foreign Exchange Volatility: With most manufacturers relying heavily on imported raw materials, the continuous depreciation of the Naira has led to a significant increase in the cost of production inputs. Muda Yusuf, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), identified the volatile exchange rate as the single biggest challenge facing manufacturers today.
• Soaring Energy Costs: Despite marginal improvements in public power supply, manufacturers are still spending vast sums on alternative energy sources. With the high cost of diesel and frequent national grid collapses, reports indicate that this single expense has become a major financial burden, pushing up overall production costs.
• High Cost of Financing: The Central Bank of Nigeria’s aggressive monetary tightening, aimed at taming inflation, has pushed commercial bank lending rates well above 30 percent. This has made borrowing prohibitively expensive, constraining new investments and expansion plans for manufacturers.

The consequences of these rising costs are already manifesting. Industry analysts are warning of shrinking profit margins and a potential for factory shutdowns or relocation if the current economic headwinds are not addressed. A recent report from the Manufacturers Association of Nigeria (MAN) also highlighted that the inventory of unsold finished goods surged to N2.14 trillion in the second half of 2024, a clear sign that eroded consumer purchasing power is compounding the sector’s woes.

While the government has yet to release a direct response to this latest financial data, industry leaders are urging for urgent policy interventions. Proposed measures include a dedicated foreign exchange window for manufacturers and a cap on interest rates for industrial loans to restore the sector’s health and competitiveness.