Nigeria’s industrial sector still battling inflation, FX volatility and weak demand, financial results show
Nigeria’s manufacturing sector is still under significant strain, even as the Federal Government has reported improving macroeconomic indicators. The latest financial results from major manufacturing firms show that inventory accumulation—both finished goods and raw materials—remains elevated, highlighting persistent inflationary pressures, foreign exchange volatility, and tight credit conditions.
Financial Vanguard’s analysis of 2025 financial reports reveals that manufacturers continue to contend with unsold goods piling up in warehouses and swelling stockpiles of inputs. This development underscores deep constraints in the sector that are yet to be resolved despite government claims of economic recovery.
Inventory Build-Up Continues
In the first nine months of 2025 (9M’25), leading manufacturing firms recorded a combined inventory increase of about N200 billion, rising to N1.8 trillion from N1.6 trillion in the corresponding period of 2024 (9M’24). This represents an increase of approximately 18.8%.
At the same time, raw materials inventories climbed by 15.4%, reaching nearly N1.5 trillion.
Financial and industry experts say the pattern suggests that inventory accumulation in 2025 was driven not only by unsold finished goods but also by deliberate stockpiling of inputs. Firms are said to be hedging against inflation, exchange-rate volatility, and tight monetary conditions.
Experts argue that this trend contradicts official claims that inflation moderated significantly in 2025, given the persistent rise in production costs and replacement values.
Inventory Positions Across Major Manufacturers
A breakdown of inventory positions among 17 major manufacturing companies highlights the scale of the challenge.
Companies with Significant Inventory Increases
- Dangote Cement Plc: N769.5 billion (9M’25) vs N669.7 billion (9M’24)
- Nigerian Breweries Plc: N224 billion vs N181.3 billion
- Nestlé Nigeria Plc: N203.4 billion vs N174.8 billion
- Lafarge Africa Plc: N117 billion vs N104.2 billion
- BUA Foods Plc: N76.7 billion vs N59.8 billion
- Cadbury Nigeria Plc: N26.7 billion vs N13.8 billion
- International Breweries Plc: N107 billion vs N89.7 billion
- Guinness Nigeria Plc: N63.7 billion vs N41.9 billion
- Northern Nigeria Flour Mills: N20.8 billion vs N16.5 billion
- Champion Breweries Plc: N3.7 billion vs N2.9 billion
- Vitafoam Nigeria Plc: N28.7 billion vs N20.5 billion
Companies with Improved Inventory Positions
Some manufacturers recorded improved inventory positions:
- Dangote Sugar Plc: N130.5 billion vs N131.5 billion
- UAC of Nigeria Plc: N37.5 billion vs N54.9 billion
- NASCON Allied Industries Plc: N14.3 billion vs N17.6 billion
- Unilever Nigeria Plc: N28.3 billion vs N30.8 billion
- Berger Paints: N2.5 billion vs N3.3 billion
Raw Materials Inventories Reflect Persistent Pressures
The inventory build-up was mirrored by a sharp rise in raw materials holdings, reflecting manufacturers’ hedge against inflation, forex challenges and imported inflation.
Companies with Rising Raw Materials Stock
- Nigerian Breweries Plc: N486.9 billion (9M’25) vs N407.2 billion (9M’24)
- Dangote Sugar Plc: N450.7 billion vs N401.6 billion
- Nestlé Nigeria Plc: N84 billion vs N73.5 billion
- Cadbury Nigeria Plc: N10 billion vs N5 billion
- BUA Foods Plc: N52.5 billion vs N38.6 billion
- Guinness Nigeria Plc: N39.6 billion vs N8.7 billion
- Northern Nigeria Flour Mills: N17.7 billion vs N14.7 billion
- Champion Breweries Plc: N6.9 billion vs N4.9 billion
- Vitafoam Nigeria Plc: N21.9 billion vs N16.3 billion
Companies with Declining Raw Materials Stock
Some manufacturers recorded declines in raw materials stock:
- Dangote Cement Plc: N255.2 billion vs N299.8 billion
- Unilever Nigeria Plc: N14.4 billion vs N19.8 billion
- NASCON Allied Industries Plc: N6.6 billion vs N11.2 billion
- Lafarge Africa Plc: N9.7 billion vs N10.0 billion
- Berger Paints: N4.6 billion vs N4.7 billion
The continued rise in both finished goods and raw materials inventories indicates that Nigeria’s manufacturing sector remains under stress. While macroeconomic indicators may show signs of improvement, the operational realities for manufacturers suggest otherwise. The persistent accumulation of inventories reflects an environment of high inflation, exchange-rate uncertainty, and restricted access to credit—factors that are still limiting production efficiency and sales performance across the sector.
Manufacturers’ Inventory Build-Up Linked to FX, Inflation and Weak Demand
Industry experts say the rising stockpiles of raw materials and finished goods reflect ongoing macroeconomic pressures, particularly exchange-rate instability, inflation, weak purchasing power and high production costs. Their analysis suggests that while the Federal Government highlights improving macro indicators, the realities on the ground reveal persistent constraints in the manufacturing sector.
Exchange-Rate Pressures Drive Raw Materials Stockpiling
Experts noted that the increase in raw materials inventories largely reflects exchange-rate pressures during the period. Many manufacturers rely heavily on imported inputs, and the weak naira significantly increased replacement costs. To hedge against foreign exchange volatility and potential supply disruptions, firms increased their holdings of raw materials, even as production volumes and sales declined.
“Manufacturers were forced to hold more raw materials as a hedge against FX instability. But this came at a cost, especially in an environment where demand was already weak,” a financial expert said.
Why Unsold Inventories Are Rising
Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), said the twin challenge of unsold inventory and rising raw materials stockpiles reflects a difficult operating environment driven by macroeconomic headwinds and structural constraints.
A key factor, he explained, is weak purchasing power. “Over the last three years, inflationary pressures have significantly eroded household incomes in real terms. As purchasing power weakens, consumers become less able to buy manufactured products, especially those that are not considered essential,” he said.
Yusuf also pointed to rising production costs, noting that energy costs, foreign exchange pressures, logistics and other input challenges have driven up the cost of production. “Firms have been compelled to adjust their product prices upwards in order to remain viable,” he said. But higher prices further constrained demand, he added: “Once these higher costs are reflected in final product prices, demand becomes even more constrained because consumers already grappling with weaker purchasing power cannot absorb the price increases.”
He further explained that changing consumption patterns have compounded the problem. “With incomes largely stagnant and prices rising sharply, households are forced to prioritise spending. Under such circumstances, demand for non-essential manufactured products tends to fall sharply,” he said.
On the accumulation of finished goods, Yusuf noted: “When finished goods fail to sell, inventories naturally accumulate. The situation is even more severe for manufacturers producing goods with expiry dates, where high inventories translate into heavier financial losses and greater operational risk.”
He also linked raw materials stockpiles to slow production cycles, stating: “When finished goods remain unsold, raw material stocks will also remain high. Inputs are not being depleted at the expected pace because production cycles slow down in response to weak sales. Therefore, rising raw material inventory is often a direct consequence of rising finished-goods inventory.”
Industrialisation Efforts Under Strain
Yusuf warned that the trend weakens Nigeria’s industrialisation drive. He cited recent GDP data showing sluggish industrial growth. “In the last quarter of 2025, GDP growth in the industrial sector was approximately 1.25 per cent, compared with overall GDP growth of about 4.3 per cent,” he said.
He noted that low capacity utilisation, potential job losses, declining investor confidence, weaker incentives to invest in manufacturing, reduced profitability and diminished capacity to deliver shareholder value and dividends are likely outcomes.
On the way forward, Yusuf urged a stronger push for resource-based industrialisation to reduce exposure to FX volatility and lower costs through improved local input sourcing. He also called on firms to remain flexible through cost restructuring, product redesign, targeted market segmentation and innovation.
Rising Costs and Weak Demand Squeeze Firms
Oluropo Dada, 13th President of the Chartered Institute of Stockbrokers (CIS), said the increase in inventories reflects rising production costs, weak consumer demand and continued dependence on imported inputs.
“The cost of labour has also increased significantly, which tends to shoot up prices of local raw materials and other inputs,” he said. “Despite the relative foreign exchange stability recorded in Nigeria in 2025, most developed economies recorded higher inflation rates, which accounted for increases in imported raw materials through imported inflation.”
Dada said the economic implications include increased working capital pressure, margin compression, higher financing costs, risks of capacity underutilisation and job losses. For consumers, he said, the outcome is higher prices, reduced product variety and quality adjustments such as smaller package sizes.
He advised manufacturers to pursue backward integration by developing local supply chains, investing in supplier partnerships and improving demand forecasting and inventory management to reduce FX exposure and stabilise costs.
Inflation Contradiction
David Adonri, Executive Vice Chairman of Highcap Securities Limited, said inventory values can rise due to increased volumes or inflation. “The disproportionate rise in cost of production indicates that inflationary growth played a big role. This scenario contradicts the official claim that inflation rate moderated massively in 2025,” he said.
He added that inflation affected both producers and consumers. “Any import-dependent enterprise that does not earn in hard currency will continue to be exposed to currency risk. This underscores the importance of backward integration, although rural insecurity makes this challenging,” he noted.
Financing, Demand and Backward Integration Challenges Weigh on Manufacturers
Financial analysts say the sharp rise in inventories among Nigeria’s manufacturing firms is a clear sign of slowing demand and rising financing pressure.
Ambrose Omordion, Financial Analyst and Chief Operating Officer at InvestData Consulting Limited, noted that the jump in inventories points to slower movement of finished goods. He said the trend reflects weakening consumer purchasing power and higher cost of funding.
“High inflation in the nine months of 2025 eroded household purchasing power, as consumers prioritised spending on essentials such as food, transport and energy,” Omordion said. “Manufacturers raised prices to survive, but consumers responded by buying less,” he added.
He also highlighted the impact of high interest rates, saying that unsold goods funded through bank loans attracted interest expenses, squeezing profit margins and turning inventory from a buffer into a financial liability.
Backward Integration Under Scrutiny
Beyond demand and financing pressures, Omordion stated that the sharp rise in raw materials inventories raises questions about the effectiveness of Nigeria’s backward integration policy. The policy is intended to reduce dependence on imported inputs across key value chains such as food processing, cement, sugar, textiles and pharmaceuticals.
However, Omordion warned that the persistence of high raw material inventories suggests uneven progress in local sourcing, leaving manufacturers vulnerable to inflation, currency volatility and weak consumer demand.
“Instead of reducing exposure to imported inflation and forex risks, manufacturers are still heavily dependent on imported inputs,” he said. “This leaves them exposed to exchange-rate shocks and supply disruptions, which in turn drives them to hold larger inventories as a hedge.”