The manufacturing sector in Nigeria is grappling with significant challenges as high interest rates charged by banks and lending institutions, coupled with rising operational costs, have severely hindered growth. Major consumer goods manufacturers, facing cash flow constraints, have increasingly turned to bank loans to sustain their operations.

In the first half of 2024 (H1’24), these companies’ combined borrowings surged to N2.5 trillion, a 77.8% increase from the N1.7 trillion borrowed in the same period in 2023 (H1’23). This dramatic rise in borrowing was exacerbated by soaring interest rates driven by inflationary pressures and other economic challenges.

The steep cost of borrowing has had a detrimental impact on the profitability of these manufacturers. Collectively, they reported a pre-tax loss of N406.7 billion in H1’24, a staggering 839.1% increase from the N43.314 billion loss recorded in H1’23. Despite a few companies managing to turn a profit—five out of 11 firms generated a combined profit of N158.802 billion—the remaining companies posted a combined loss of approximately N565.553 billion.

Even though the overall turnover for these firms rose by 66.8% to N2.5 trillion in H1’24, up from N1.5 trillion in H1’23, this increase in revenue was not sufficient to offset the rising costs. The companies found it challenging to raise product prices further, likely due to consumer resistance, despite the inflationary environment.

Manufacturers have cited multiple factors contributing to their struggles, including high inflation, exchange rate volatility, security issues, elevated input costs, and a weakening of consumer purchasing power. These challenges continue to create a difficult operating environment for the industry, leaving many companies vulnerable despite their efforts to navigate these economic headwinds.