The Manufacturers Association of Nigeria (MAN) has issued a stark warning about the escalating inventory of unsold goods, a crisis that threatens the very existence of companies within Nigeria’s production sector.
The association attributes this alarming trend to sustained pressure in the foreign exchange market coupled with the exorbitant cost of production.
As the value of the Nigerian naira continues to plummet in the foreign exchange market, MAN reports a 254% depreciation since the currency’s flotation by the Central Bank of Nigeria in June 2023.
This drastic decline has led to a surge in production costs, stoking inflation and eroding purchasing power, thereby dampening demand for manufactured goods.
MAN’s Director General, Segun Ajayi-Kadir, underscored the detrimental impact of the exchange rate crisis, inflation, and other macroeconomic challenges on the manufacturing sector.
Many warehouses and production plants across the country are now inundated with surplus inventory from the previous year, highlighting the severity of the situation.
Ajayi-Kadir warned that if left unaddressed, the mounting unsold goods could force manufacturers to halt production, inevitably leading to workforce downsizing and operational stagnation.
The dire economic conditions, exacerbated by the relentless depreciation of the naira, have rendered the current business environment unsustainable for many manufacturers.
In response to the crisis, manufacturers have adopted various strategies, including investing in backward integration to source raw materials locally and suspending operations altogether.
However, these measures may not suffice in alleviating the profound challenges facing the manufacturing sector.
The situation calls for urgent intervention from policymakers to address the root causes of the crisis and implement effective solutions to revitalize Nigeria’s manufacturing industry.
Failure to act decisively risks further exacerbating the economic downturn and exacerbating the plight of businesses across the country.