POSITION OF THE MANUFACTURERS ASSOCIATION OF NIGERIA ON THE GDP REPORT FOR THE THIRD QUARTER OF 2024 AS RELEASED BY THE NATIONAL BUREAU OF STATISTICS.

1.0. Introduction
Nigeria’s economy recorded a significant improvement in the third quarter of 2024, with a growth rate of 3.46% compared to 2.54% in the same period of 2023 and 3.19% in the previous quarter. The National Bureau of Statistics attributed this growth primarily to the performance of the Services sector.

Based on sectoral performance, the report revealed that the agriculture sector grew by 1.14 percent, down from the 1.30 percent recorded in the third quarter of 2023. Meanwhile, the services sector grew by 5.19 percent and contributed 53.58 percent to the GDP during the same period. The industrial sector recorded a growth of 2.18 percent, an improvement from the 0.46 percent recorded in the third quarter of 2023. This growth was largely due to sectors other than manufacturing, including water supply, sewerage, waste management, and remediation; mining and quarrying; and electricity, gas, steam, and air conditioning supply, which grew by 12.73 percent, 8.75 percent, and 5.23 percent, respectively. A further breakdown showed that the mining and quarrying sector was particularly boosted by the metal ores and crude petroleum and natural gas sub-sectors, which grew by 55.37 percent and 14.87 percent, respectively.
The report also revealed that the oil sector grew by 5.17 percent year-on-year in Q3 2024, indicating an increase of 6.02 percentage points relative to the rate recorded in the corresponding quarter of 2023. The non-oil sector grew by 3.37 percent, up by 0.62 percentage points from the 2.75 percent recorded in the same quarter of 2023. According to the report, the non-oil sector accounted for 94.43 percent of the economy, while the oil sector contributed 5.57 percent, despite the country’s heavy reliance on oil revenue. The report further showed that the economy remains dominated by the services sector, which accounted for 53.58 percent of GDP, while agriculture and industry contributed 28.65 percent and 17.77 percent, respectively. The dominant contribution of the services sector was mainly driven by sectors such as information and communication (14.51 percent), trade (12.67 percent), and financial and insurance (4.72 percent).

The financial and insurance sector recorded a massive growth of 30.83 percent, primarily due to gains from naira devaluation and monetary policy tightening. Unfortunately, the manufacturing sector was one of the least growing sectors during the period under review, with a growth rate of 2.18 percent. This meager growth highlights that the sector is being choked by interest rate hikes, high exchange rates, and escalated energy costs.

Apparently, the service sub-sectors dominate the composition of the country’s GDP and its pattern of growth. This poses a significant drawback for the industrialization agenda. In other words, as the services sector continually booms at the detriment of employment and production in the manufacturing sector, the economy is set to fail in its aspirations of reducing forex demand pressures, promoting value addition, generating mass employment, increasing export earnings, driving industrial-led growth, and ensuring sustainable development. By implication, achieving a $1 trillion economy by 2026 is apparently difficult, as the growth rate clearly falls short of the 6 percent average targeted by the present administration.

2.0 Breakdown of Manufacturing Sector Performance
An in-depth examination of the report shows that the fastest-growing manufacturing sub-sectors were Chemical & Pharmaceutical Products (3.97%). Food, Beverage & Tobacco (1.76%), Wood & Wood Products (2.16%), Cement (2.30%), Pulp, Paper and Paper Products (2.09%), Electrical and Electronics (2.61%), and Non-Metallic Products (1.75%). Also, the top five contributors to manufacturing output were Food, Beverage & Tobacco (6.78%), Cement (3.73%), Electrical and Electronics (6.03%), Non-Metallic Products (2.87%). and Chemical & Pharmaceutical Products (6.92%). Food, Beverage & Tobacco, Chemical & Pharmaceutical Products and Cement were the only sub-sectors that made the list of both the top five growing and contributing sub-sectors in the second quarter of 2024.

In general, the report revealed that the growth of the Manufacturing Sector grew slowly year-on-year at 0.92 percent and decelerated quarter-on-quarter by 0.35 percent. Similarly, its contribution to GDP in the 2024 third quarter was 8.21%, lower than the 8.42% recorded in the third quarter of 2023 and lower than the 8.46% recorded in the second quarter of 2024. Undoubtedly, this underperformance underscores the harsh effect of hostile economic policies which have largely constrained the country’s goal of rapid industrialisation and have left the economy struggling for survival. Unfortunately, the Nigerian government has been characterized by its passive response towards the countless challenges battling the Manufacturing Sector.

3.0 Implication for the Manufacturing Sector
The decline in the real growth of the Manufacturing Sector is a clear indication of the detrimental impact of the prevailing macroeconomic policies.

This is further evidenced by the significant drop in nominal growth from 36.59 percent to 32.97 percent year-on-year, driven by high inflationary pressure and the exit of major multinational manufacturing companies. It is evident that inflation has been a significant factor in undermining the growth of the manufacturing sector, as the sector has been particularly vulnerable to the unstable macroeconomic environment, exacerbated by recent economic reforms.

Agriculture plays a crucial role in fueling the growth of the manufacturing sector by ensuring a steady supply of affordable local raw materials. However, both the Agricultural and Manufacturing sectors failed to rank among the top five growing sectors during this period, primarily due to security challenges in farming areas and their subsequent negative impact on agro-allied industries. The limited growth in these sectors will lead to:
• The deteriorating state of the agricultural sector has led to increased costs for local raw materials.

• The high cost of living, characterized by high unemployment and inflation, has reduced consumer purchasing power, leading to increased unsold inventory for manufacturers.

• Manufacturers’ negative outlook on the economy has resulted in decreased production and employment.
• Foreign investors are hesitant to invest in a weak economy, and the scarcity of foreign exchange further hinders manufacturing operations.

4.0 Conclusion and Recommendations
In all, while the higher growth recorded in the reviewed period is laudable, it is still relatively modest. Given the prevalence of high unemployment and poverty, a double-digit GDP growth rate is necessary to achieve inclusive growth that benefits all segments of society.

A vibrant Manufacturing Sector is essential for driving economic growth and prosperity. However, the sector faces numerous challenges, including multiple taxation, limited access to credit, an unstable foreign exchange market, infrastructure deficits, and energy insecurity.

To address these challenges and unlock the potential of the manufacturing sector, the government must take decisive action. The Manufacturers Association of Nigeria recommends the following:

• Create special windows for providing single-digit interest rates to productive sectors and relax stringent conditions for SMEs to access funding.

• Recapitalize the Bank of Industry (BOI) to meet the growing credit demand of industries.

• Enhance credit information systems and broaden the scope of assets for collateral.

• Implement the recommendations of the Presidential Fiscal Policy and Tax Reforms Committee.

• Reduce the excessive increase in Environmental Impact Assessment (EIA) and Effluent Discharge (EMP) fees imposed by NESREA.

• Retain the current excise duty of N10 per liter on non-alcoholic beverages to avoid shutting down the industry.

• Direct the Central Bank of Nigeria to clear $2.4 billion outstanding dollar obligations on FX forward contracts to support manufacturers.

• Review import duty rates for production inputs, particularly those not locally available, and consider pegging the rate at N800.

• Implement measures to streamline customs procedures, including increased use of technology and decentralization of seaports.

• Prioritize budgetary allocation for infrastructure development, especially along strategic economic hubs.

• Encourage public-private partnerships for infrastructure development, including roads, railways, and port access roads.

• Direct the Nigerian Electricity Regulatory Commission (NERC) to review the excessive increase in electricity tariffs for Band A customers.

• Prioritize domestic gas supply to manufacturers and enforce Naira-denominated pricing.

• Ensure transparency in electricity tariff charges, invest in infrastructure and efficiency improvements by Distribution Companies, and introduce outage compensation mechanisms.