Nigerian Manufacturers Grapple with a Crisis of Nearly $1 Billion in Unsold Inventory in 2024
Africa’s most populous country continues to battle inflation as government economic reforms impact the manufacturing sector.
Nigeria’s rising inflation rate continues to weaken household purchasing power, making many essential and non-essential goods out of reach for a significant portion of the population. This trend has resulted in a 12.9% increase in the inventory of unsold finished goods held by manufacturers. According to the Manufacturers Association of Nigeria (MAN), the value of these unsold goods surged from $820 million (₦1.24 trillion) in the first half of 2024 to a record $925 million (₦1.4 trillion) by the end of the year.
“The manufacturing sector in 2024 faced a myriad of macroeconomic and infrastructural challenges that severely impacted its performance,” Meshioye stated. “Inflation in Nigeria reached an alarming 34.6 per cent by November 2024, diminishing consumers’ purchasing power and causing a decline in demand for manufactured goods. This inflationary burden also led to an accumulation of unsold inventory, which rose to N1.4tn across the manufacturing industries.”
The growing stockpile of unsold inventory underscores significant challenges not only for manufacturers but also for Nigeria’s supply chain and logistics networks. With declining consumer demand driven by inflationary pressures, manufacturers are forced to manage increasing storage costs, overburdened warehouses, and disrupted supply chains. The inability to move goods efficiently from production to the market exacerbates the strain on logistics systems, leading to inefficiencies and higher operational costs.
Multinational Companies Exit Nigeria Amid Economic Challenges
In the past two years, Nigeria has witnessed the exit of several multinational companies due to rising inflation, unfavourable government regulations, and challenging economic reforms. These factors, coupled with supply chain disruptions, have made the operating environment increasingly difficult, prompting many global firms to seek more stable and profitable markets.
According to Nairametrics, five major multinational companies departed Nigeria in 2024:
- Pick n Pay: The South African retail giant left the Nigerian market after divesting its 51% stake in a joint venture with A.G. Leventis.
- Kimberly-Clark (K-C): The global leader in personal care products ceased its operations in Nigeria, citing economic challenges and a need to refocus its global strategic priorities. After initially exiting in 2019 and re-entering in 2021 with a $100 million investment, the company announced in 2024 that it would no longer manufacture, market, or sell its products in the country.
- Diageo: In June 2024, the global alcoholic beverage company sold its 58.02% stake in Guinness Nigeria Plc to Singapore-based Tolaram Group, marking its exit from the Nigerian market.
- Holcim AG: The Swiss building materials giant sold off its 83.81% stake in Lafarge Africa Plc to Huaxin Cement Co., a Chinese firm expanding its footprint in Africa. The deal, valued at $1 billion, signalled Holcim’s departure from Nigeria.
- Equinor Nigeria Energy Company (ENEC): Norwegian energy company Equinor sold its 54% stake in the OML 128 oil and gas lease to Chappal Energies for $1.2 billion. This transaction marked the end of Equinor’s over 30-year presence in Nigeria.
These high-profile exits underscore the significant impact of inflation and regulatory challenges, which policymakers must address and stabilise to create an environment conducive to long-term investment and sustainable growth.
Two Major Economic Policies That Have Disrupted the Country’s Supply Chain Industry Since the Current Government Assumed Power
When President Bola Tinubu assumed office in 2023, two major economic policies were implemented which continued to disrupt Nigeria’s supply chain operations
Removal of the Petroleum Subsidy
The Nigerian government’s decision to remove the long-standing petroleum subsidy marked a pivotal shift in the country’s energy policy. While the subsidy had long been a financial burden on the government, its removal led to a sharp increase in fuel prices, significantly raising transportation, logistics, and production costs for businesses. The immediate fallout was an uptick in inflation, which diminished consumer purchasing power, reduced demand for non-essential goods, and weakened domestic consumption.
Floating of the Naira
The floating of the naira was a bold move to address Nigeria’s exchange rate challenges, shifting the value of the currency to be determined by market forces rather than a fixed peg. However, this policy led to sharp depreciation, causing the naira to lose significant value against major currencies. The result was increased import costs, a rise in inflation, and an unstable business environment. Companies reliant on imports faced soaring prices, while local businesses found it increasingly difficult to manage foreign exchange risks.
For other African nations, the key lesson lies in managing the removal of subsidies and stabilising exchange rates to avoid disruptions. Gradual reforms, coupled with targeted social safety nets, can help mitigate the immediate impacts on logistics, production costs, and distribution channels. Similarly, while a market-driven exchange rate system can enhance long-term economic stability, short-term volatility must be carefully managed to avoid destabilising supply chain operations. A strategic economic policy can navigate these changes more effectively, ensuring continuity and resilience in their supply chain processes.
