A combination of higher production costs and weak consumer demand left manufacturing companies listed on the Nigerian Exchange Limited (NGX) carrying inventories worth about N1.77 trillion at the end of the second quarter of 2026.
The figure represents a 10.6 per cent increase from the N1.597 trillion recorded in the same period of 2025, highlighting the growing volume of goods held by manufacturers amid challenging market conditions. The increase was based on an analysis of the companies’ financial statements.
Meanwhile, manufacturers also recorded a significant rise in the cost of sales, which climbed 13.7 per cent year-on-year to N1.434 trillion from N1.261 trillion.
The divergence between inventory growth and the faster increase in the cost of sales highlights the difficult operating environment confronting manufacturers, with companies having to contend with elevated input, energy, transportation, financing and distribution costs even as consumers struggle with reduced purchasing power.
The inventory build-up cuts across major segments of the manufacturing economy, including consumer goods, cement and building materials, agriculture, food processing and beverages.
However, the performance varied significantly from one company to another, indicating that inventory accumulation is being driven by a combination of factors, including production levels, demand conditions, input costs, supply-chain considerations and individual companies’ strategies.
Dangote Cement leads inventory ranking
Dangote Cement had the largest inventory position among the companies examined, with inventories rising to N703.58 billion in the first quarter of 2026 from N671.55 billion in the corresponding quarter of 2025.
The increase represents a 4.8 per cent rise.
UACN recorded one of the largest increases, with its inventory soaring by 231.8 per cent to N189.55 billion from N57.13 billion.
Okomu Oil Palm followed, with inventories rising by 90.3 per cent to N39.90 billion, while Livestock Feeds recorded a 35.9 per cent increase to N9.14 billion.
PZ Cussons’ inventories increased by 29.7 per cent to N69.37 billion, while Beta Glass recorded a 28.8 per cent rise to N25.21 billion.
Vitafoam’s inventory also increased by 12.3 per cent to N23.20 billion.
Other companies recorded more moderate increases. Lafarge’s inventory rose by 7.3 per cent to N110.64 billion, Presco increased by 3.6 per cent to N58.90 billion, while International Breweries recorded a 2.2 per cent increase to N95.83 billion.
The rise in inventories, however, was not universal.
Northern Nigeria Flour Mills recorded a 34.6 per cent decline in inventory to N31.46 billion, while NASCON Allied Industries’ stock fell by 17.1 per cent to N14.34 billion.
Cadbury Nigeria’s inventory declined by 16.9 per cent to N27.14 billion, while Unilever Nigeria recorded a 7.7 per cent reduction to N23.42 billion.
Nestlé Nigeria’s inventory fell by 7.3 per cent to N167.84 billion, while Nigerian Breweries recorded a 6.7 per cent decline to N171.92 billion.
Cost of sales rises faster
While manufacturers’ inventories increased by 10.6 per cent, their combined cost of sales expanded at a faster rate of 13.7 per cent.
This development could put further pressure on manufacturers’ gross margins if companies are unable to transfer higher production and distribution costs to consumers through increased prices.
It could also force businesses to seek productivity gains and operational efficiencies to preserve profitability in an environment where consumers are already under pressure.
Dangote Cement recorded cost of sales of N448.73 billion, representing a 10.2 per cent increase from N407.27 billion.
Nigerian Breweries’ cost of sales rose by 7.4 per cent to N233.16 billion, while Nestlé Nigeria recorded a 10.8 per cent increase to N194.07 billion.
UACN recorded the largest percentage increase among the companies examined, with its cost of sales surging by 226.8 per cent from N41.75 billion to N136.41 billion.
PZ Cussons’ cost of sales increased by 51.1 per cent to N25.04 billion, while Champion Breweries recorded a 90 per cent increase to N8.20 billion.
Some companies, however, managed to reduce their cost of sales.
NASCON recorded a 21.1 per cent decline to N18.89 billion, while Northern Nigeria Flour Mills’ cost of sales fell by 35.9 per cent to N5.95 billion.
Okomu Oil Palm reduced its cost of sales by 24.5 per cent to N11.70 billion, while International Breweries recorded a 9.1 per cent decline to N103.61 billion.
Cadbury Nigeria, however, recorded a 15.4 per cent increase in cost of sales, while Unilever Nigeria’s rose by 15.8 per cent.
‘Demand has not expanded at the same pace’
President of the Chartered Institute of Stockbrokers, CIS, Fiona Ahimie, attributed the increase in inventories to a combination of supply- and demand-side factors.
She explained that manufacturers had invested significantly in production capacity as operating conditions improved and access to foreign exchange became more stable, resulting in higher production.
However, she said consumer demand had not grown at the same pace.
“The increase in inventories reflects a combination of supply side and demand side factors. Many manufacturers have made significant investments to improve production capacity over the past year as operating conditions became more stable and access to foreign exchange improved. As a result, production has increased.
“However, demand has not expanded at the same pace. Although inflation has moderated, prices remain elevated relative to household incomes, which have continued to weigh on consumer spending.
“Many households are still prioritising essential goods and cutting back on discretionary purchases. Businesses are also becoming more cautious with inventory management and procurement decisions.
“There is also a degree of deliberate inventory buildup by some manufacturers who expect stronger demand in the coming quarters.
“So, while higher inventories may suggest slower sales in some cases, they can also reflect strategic positioning in anticipation of improved market conditions.”
On the continued increase in production costs, Ahimie said manufacturers remained exposed to a high-cost operating environment despite some improvement in macroeconomic conditions.
“Energy remains one of the biggest cost drivers, with many companies still relying on alternative power sources. Transportation and logistics costs also remain elevated, while the prices of many raw materials, both imported and locally sourced, have remained relatively high.
“Interest rates have also stayed at elevated levels, increasing the cost of financing working capital and expansion. While exchange rate stability has reduced some of the uncertainty around imported inputs, businesses are still adjusting to the higher cost structure that followed the exchange rate reforms.
“These factors have combined to keep production costs under pressure, even though the pace of cost increases has become more manageable compared to previous periods.”
Power, infrastructure, financing key to recovery
Ahimie said government intervention would be critical to lowering production costs and strengthening consumers’ purchasing power.
She identified electricity and transportation infrastructure as priorities, arguing that reliable power would substantially reduce the cost burden on manufacturers that depend heavily on generators.
“Reliable power alone would significantly reduce production costs for manufacturers that currently depend heavily on generators,” she said.
She also stressed the importance of policy consistency, noting that businesses require predictable policies when making long-term investment decisions.
Ahimie further called for greater access to affordable financing, particularly for manufacturers and small and medium-sized enterprises, saying lower financing costs would support investment, productivity and competitiveness.
On the demand side, she advocated policies that would promote job creation, improve real incomes and sustain lower inflation.
“As consumers regain spending capacity, manufacturers will experience stronger demand, inventories will decline naturally, and production will become more efficient,” she stated.
‘Inflation eroded consumers’ purchasing power’
Managing Director of Highcap Securities Limited, David Adonri, also linked the inventory build-up to inflation and declining consumer purchasing power.
He said the erosion of consumers’ purchasing power had weakened demand for manufactured goods, while external and domestic cost pressures had compounded the problem.
“Inflation started spiking this year, resulting in erosion of purchasing power by consumers. Consumer pull was adversely affected. Nigeria’s economy is majorly import dependent and rising global inflation emanating from Iran War infiltrated into domestic manufacturing cost.
“Rising domestic energy and distribution were other cost-push factors. Insecurity crippled several domestic sources of raw materials.”
Adonri said efforts to reduce unsold goods would remain difficult unless the government addressed both inflation and supply constraints.
He identified insecurity as a major obstacle to agricultural production and the supply of raw materials to manufacturers.
“Insecurity is another albatross stifling supply. Peace and progress go hand in hand. Without solving the insecurity challenge, the rural economy cannot function and help to close the supply gap notwithstanding an increase in public and private spending.
“After restoring a firm order nationwide, aggregate demand can be boosted in the strategic sectors of the productive economy.
“These are what can revive the economy, lower production costs and enhance consumers’ purchasing power,” he said.
High interest rates compound manufacturers’ woes
Managing Director of Arthur Steven Asset Management Limited, Olatunde Amolegbe, said the rise in inventories was likely the outcome of both demand- and supply-side pressures.
He noted that although inflation had moderated significantly from its 33.4 per cent peak in 2024 to 15.91 per cent as of June 2026, the effects of the earlier period of high inflation were still being felt by households.
“Consumer demand is gradually recovering but remains below the pace required to absorb production, particularly for discretionary and non-essential goods,” Amolegbe said.
He added that the monetary policy environment remained restrictive, with the Monetary Policy Rate maintained at 26.5 per cent at the Monetary Policy Committee meeting of July 22, 2026.
“High financing costs continue to constrain consumption, inventory financing, and business expansion,” he said.
According to him, many manufacturers had maintained production in an effort to preserve market share, fulfil distribution commitments and ensure efficient use of production capacity.
“Many manufacturers have sustained production to preserve market share, meet distribution commitments and maintain efficient capacity utilisation.
“However, sales growth has not kept pace with production, resulting in inventory accumulation.
“Some manufacturers may also be maintaining higher inventory levels as a strategic buffer against potential supply chain disruptions or future increases in input costs.”
Exchange-rate stability not enough
Amolegbe said manufacturers continued to face structural cost pressures despite greater stability in the foreign exchange market.
“Many manufacturers continue to experience the lagged effects of earlier currency depreciation, particularly those that rely heavily on imported raw materials, machinery, and industrial inputs,” he said.
He added that energy, logistics, transportation and utility costs remained high, while elevated interest rates had increased the cost of financing working capital and capital expenditure.
For the sector to become more competitive, Amolegbe said government policy would have to focus on reducing structural production costs.
He called for continued investment in reliable electricity, transportation infrastructure and logistics networks, as well as expanded access to affordable financing for productive sectors.
He also advocated greater support for local sourcing of raw materials through backward integration initiatives and targeted fiscal incentives for manufacturers.
“On the demand side, policies that promote employment, improve productivity, and support sustainable growth in real household incomes would strengthen purchasing power and stimulate consumer demand, helping manufacturers reduce inventory levels,” he stated.
The analysts’ views point to a common challenge facing Nigeria’s manufacturing sector: companies may be producing more efficiently and rebuilding capacity, but weak purchasing power and high operating costs are preventing demand from keeping pace.
Unless consumer incomes improve while structural production costs decline, manufacturers may continue to face the difficult combination of rising inventories, expensive financing and squeezed margins.