Naira’s depreciation leads to a significant impact on manufacturers


Over the past three years, the manufacturers have invested a substantial N7.9 trillion in the importation of raw materials. The driving factor behind this high expenditure on raw material imports stems from manufacturers resorting to the parallel market for foreign exchange due to its scarcity in the official market.

An examination of the National Bureau of Statistics’ foreign trade reports also indicates that Nigeria managed to export raw materials valued at only N1.77 trillion during this period, leading to a trade deficit of N6.1 trillion.

A detailed breakdown of the data demonstrates that manufacturers imported raw materials worth N570.6 billion in the second quarter of 2020. This amount increased to N710.2 billion in the subsequent quarter and further rose to N715.7 billion in the fourth quarter of the same year.

Moving into 2021, the importation of raw materials by manufacturers reached N2.9 trillion. This figure then slightly decreased to N2.4 trillion in 2022, while the first quarter of 2023 saw imports of raw materials worth N555.4 billion.

Notable raw materials imported during this period include cane sugar from Brazil, milk preparations from Ireland, odoriferous substance mixtures from Ireland and Swaziland, and lubricating oils from The Netherlands.

According to the Manufacturers Association of Nigeria’s Bi-Annual Economic Report, the manufacturing sector’s local sourcing of raw materials averaged 52.8%, a modest increase from the 51.5% recorded in 2021.

The increase in local raw material utilization can be attributed to the challenges in obtaining foreign exchange. This situation has compelled manufacturers to look inwards for raw materials despite the associated higher costs.

Segun Ajayi-Kadir, the Director-General of MAN, emphasized the importance of addressing forex volatility to ensure productive manufacturing. He noted that the shortage of forex leads to expensive imported inputs and subsequently elevated production costs, resulting in higher prices for goods.

Ajayi-Kadir recommended that the government establish a fixed rate for calculating import duties on production inputs like raw materials, machines, and spares that are not domestically available.

In a perspective shared by Mansur Ahmed, a former president of MAN, and Gabriel Idahosa, Deputy President of the Lagos Chamber of Commerce and Industry, the country’s heavy reliance on imported raw materials stems from the lack of progress in Nigeria’s import substitution strategy. Idahosa highlighted that a focus on exporting raw materials could help balance the impact of raw material imports on the local economy.


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