Navigating a Turbulent Global Economy
Ajayi-Kadir emphasized the timeliness of the conference theme, noting that the world is grappling with economic uncertainty, disrupted global supply chains, and rapid technological advancements. He pointed out that the global economy is experiencing a slowdown, with anticipated growth dropping from 3.5% in 2022 to 3.3% in 2024. These global shifts profoundly impact the manufacturing sector worldwide.
Nations that have prioritized industrialization and built robust manufacturing sectors have demonstrated greater resilience in the face of these disruptions. Countries like China, the United States, Germany, India, South Korea, and Malaysia collectively account for 60% of global manufacturing output. China, for instance, has seen its manufacturing value skyrocket from $625.22 billion to an impressive $4.66 trillion over the past two decades, showcasing the transformative power of a strong manufacturing base.
In Africa, Egypt, Nigeria, and South Africa are leading industrial nations, contributing approximately 49.2% to the continent’s manufacturing output. Nigeria's manufacturing sector alone contributes a significant manufacturing value added of $55.9 billion, underscoring its crucial role on the continent.
The Untapped Potential of Nigeria's Manufacturing Sector
The Nigerian manufacturing sector is a vital engine for economic growth, significantly contributing to value addition, Gross Domestic Product (GDP), employment rates, government revenue, foreign exchange inflow, and technological advancement. In 2024, the sector recorded a market value of N37.49 trillion, representing 13.9% of the country’s overall market size and 8.64% of real GDP.
Beyond its direct economic contributions, the sector is a major employer, providing an estimated 12.7 million jobs and accounting for 12.5% of total employment. Manufacturers also contribute substantially to government revenue, with over N578.39 billion in local Non-Import VAT and N626.42 billion in Company Income Tax (CIT) in 2023. The sector's strong interconnections with agriculture, construction, and services further highlight its foundational role in the Nigerian economy.
Despite facing a challenging macroeconomic environment and persistent naira depreciation, the manufacturing sector has demonstrated its capacity for foreign exchange generation. It generated over $6.72 billion through manufactured exports in 2019 and attracted $1.59 billion in foreign investment in 2023.
While export earnings dipped to $1.51 billion in 2024, the potential for enhancing these contributions to stabilize the local currency and promote employment growth remains immense. The sector also achieved $2.2 billion in earnings from the export of medium and high-tech manufactured products in 2022, indicative of ongoing technological adoption and enhanced productivity. These achievements underscore the sector's critical role in driving currency stability, generating employment, and fostering economic growth.
Overcoming Obstacles for Sustainable Growth
Despite these significant contributions, the manufacturing sector's performance is currently suboptimal. Ajayi-Kadir identified several key constraints, including:
- Unstable Exchange Rates: The persistent depreciation and volatility of the naira significantly increase the cost of imported raw materials and machinery, impacting production costs and profitability.
- Inadequate Power Supplies: The unreliable and insufficient electricity supply forces manufacturers to rely on expensive alternative power sources, driving up operational costs and reducing competitiveness.
- Insufficient Supportive Government Policies and Incentives: A lack of consistent and comprehensive government policies, as well as inadequate incentives, hinders investment and growth in the sector.
- Inadequate Infrastructure: Beyond power, other infrastructural deficits, such as poor transportation networks, further impede the smooth flow of goods and services.
Ajayi-Kadir stressed that addressing these challenges requires collaborative efforts, innovative solutions, and strategic partnerships. Empowering the manufacturing sector to fulfill its undeniable potential is not just an economic necessity but a strategic imperative for Nigeria to achieve sustainable national development and a thriving economy.
What specific policy changes or government interventions do you think would have the most immediate and positive impact on the Nigerian manufacturing sector?