Ajaokuta Steel's Slow Start Eroding Confidence in Nigeria's Iron, Metal, Steel Sector, MAN says

The Manufacturers Association of Nigeria (MAN) has observed that the postponement of operations at the Ajaokuta Steel Company and the Aluminum Smelter Company has negatively impacted the confidence of stakeholders in Nigeria’s iron, metal, and steel sector during the last quarter of 2024.

This information was highlighted in the Q4 2024 report of the Manufacturers CEO Confidence Index, published by MAN.

The report indicates that the Basic Metal, Iron & Steel sub-sector experienced a decline in confidence indices, falling from 58 points in Q3 2024 to 57 in Q4 2024.

The report attributes this decrease to the delays in launching the Ajaokuta Steel Company, which forced local metal and steel producers to rely on imports.

“The prolonged delay in the take-off of these key industrial projects has left operators in the Basic Metal, Iron & Steel Sectoral Group heavily reliant on imported metallic materials, making them highly vulnerable to the adverse effects of foreign exchange volatility,” the report read.

The report pointed out some issues in the Electrical & Electronics Sectoral Group, mentioning that ongoing drops in consumers' real income and regular increases in electricity prices have caused a decrease in the purchase of household electrical appliances.

Additionally, the confidence level for the Electrical & Electronics Sectoral Group fell from 52.5 points in Q3 2024 to 51.3 points in Q4 2024.

Similarly, the Non-Metallic Sectoral Group saw a drop in confidence due to broader economic challenges like rising energy costs and foreign exchange losses. This subsector's confidence index fell to 50.2 in Q4 2024, down from 57.6 points in Q3 2024.

“Despite the increasing number of large-scale infrastructure projects in the public sector, the confidence of operators within the Non-Metallic Sectoral Group was dampened by the rising energy cost, huge Forex losses, the expiration of pioneer tax incentives across multiple cement plants, and the renewed enforcement of the ban on tinted vehicle glasses,” the report notes.

High confidence levels have been observed in the Plastic & Rubber and Wood sectors, among others.

According to the MCCI report, various subsectors demonstrated elevated confidence indices in the previous quarter. Notably, the Domestic/Industrial Plastic & Rubber and Wood & Wood Products subsectors saw significant increases in operator confidence.

In the Domestic/Industrial Plastic & Rubber Sectoral Group, confidence levels rose by 3.3 points, moving from 48 points in Q3 2024 to 51.3 points in Q4 2024. This increase has been linked to the growing establishment of recycling hubs across the country, which are enhancing cost-effective production within the sector despite foreign exchange challenges.

Similarly, the confidence index for the Wood & Wood Products Sectoral Group increased by 3.2 points, rising from 48 points in Q3 2024 to 51.2 points in Q4 2024. 

The report highlights that heightened demand for furniture in the real estate market and the removal of the export ban on processed wood significantly contributed to this improved confidence. Exports of processed wood to Europe and Asia have notably surged since the ban was lifted.

Additional sectors that reported increased confidence levels include:

Pulp, Paper, Paper Products, Printing, Publishing & Packaging, which achieved a confidence score of 52.9, reflecting a rise of 1.4 points from 51.5 in Q3 2024. This growth is attributed to advancements in digitalization and self-publishing trends.

Chemicals & Pharmaceuticals, which recorded a score of 50.8, marking a slight increase of 0.3 points from 50.5 in Q3 2024. This positive trend is linked to stable drug prices and the gradual growth of local production capabilities.

Food, Beverages & Tobacco, which reached a confidence score of 50.3, an increase of 2.8 points from 47.5 in Q3 2024.

The increase in the Tourism and Entertainment sectors during the Yultide season was a significant factor that benefited operators within the Food, Beverage, and Tobacco group.

The Textile, Apparel, and Footwear sector achieved a score of 46.8 points, an improvement from 44 points in Q3 2024.

Nevertheless, the confidence index for this sector remained under the 50-point threshold, primarily due to ongoing issues such as the smuggling of foreign materials, a substantial influx of imported textile goods, and limited support from Government MDAs, as highlighted in the report.

The Motor Vehicle and Miscellaneous Assembly sector recorded a score of 44.8, which, while still below the 50-point benchmark, represents a slight increase from the 44.0 points noted in Q3 2024.