Economy, Featured
As Nigerians and virtually every sector are struggling to survive in this harsh economic environment, more tariff hikes from the customs, the telecommunications as well as the energy sector are daily introduced to worsen the burden of Nigerians. Perhaps, the federal government needs to urgently engage with various stakeholders before introducing some of these policy measures in order to avoid misapplication and derailing of governance wheel.
By Goddy Ikeh
DESPITE the acknowledgment by President Bola Tinubu during the 64th Independence broadcast of the economic difficulties Nigerians are going through, including rising living costs and unemployment and urged Nigerians to remain patient, assuring them that the reforms were beginning to yield positive results.
Unfortunately, the Nigerian economy in 2024 and beyond has been characterised by a mixed bag of poor performance of the manufacturing sector, closure of factories, exit of some foreign firms, fluctuating oil prices, depreciating naira, rising fiscal deficits, high food prices and transportation cost, while the entertainment, telecommunications and service sectors showed signs of strong and sustained growth.
The negative trajectories were attributed to the unfortunate, but bold policy moves of the federal government such as the full subsidy removal and foreign exchange market reforms.
Although the aims of the reforms were targeted at stabilising the economy by improving the government’s fiscal position and enabling more foreign capital inflows, but the country ended up with significant social and political trade-offs, with escalating inflation, driven by surging food and energy prices, placed a heavy burden on households and businesses, underscoring the urgency for robust social protection measures. Nigerians, no doubt responded with street protests against these anti-people policies of the federal government with Endbadgovernance protests.
Reviewing the nation’s economy in 2024 and beyond as it affects the manufacturing sector, the President of the Manufacturers Association of Nigeria, MAN, Francis Meshioye, lamented that manufacturers were and are still faced with high inflation, depreciating value of the Naira, rising interest rates, escalating electricity tariffs, low sales, multiplicity of taxes and levies and militating security concerns.
Speaking at the 2025 edition of the MAN Media Personality of the Year Award/Presidential Media Luncheon on Wednesday, January 22, 2025 in Lagos, Meshioye said that the Nigerian manufacturing sector encountered a myriad of macroeconomic and infrastructural challenges that severely impacted its performance.
According to him, these factors collectively strained the sector’s profitability and curtailed its contributions to the nation’s GDP.
He lamented that inflation in the country reached an alarming 34.6% by November 2024, diminishing consumers’ purchasing power and causing a decline in demand for manufactured goods.
Local media reports quoted the President of MAN as saying that the manufacturing sector that struggled in 2024 and still struggling in 2025 could only make minimal impact in the country’s GDP with its share of the economy dropping significantly from 16.04% in Q4 2023 to 12.68% in Q2 2024.
In its review of the performance of the Nigerian economy in 2024, the ACIOE Associates said that Nigerian economy in 2024 grappled with inflationary pressures, naira depreciation and fiscal deficits amidst transformative policy reforms like fuel subsidy removal and foreign exchange unification.
Despite these challenges, the GDP growth averaged 3.09% in the first 3 quarters of 2024, driven by a robust services sector and improved trade balances.
However, the structural weaknesses in agriculture, manufacturing and infrastructure remained key hurdles to economic diversification and resilience.
In its views on the country’s economy in 2024, the Nigerian Economic Summit Group, NESG, stated that three broad sectors recorded growth in the second quarter of 2024. However, the economic growth in the quarter was largely driven by the Services sector (with a growth of 3.8 per cent), followed by Industry (3.5 per cent) and Agriculture (1.4 per cent). The perennial insecurity challenges continued to slow down the crop production sub-sector, which grew by 1.65 per cent in first quarter of 2024Q1 relative to 1.82 per cent and 1.71 per cent in 2023Q2 and 2024Q1, respectively.
According to the NESG, this suggested that unless proactive steps were taken to curtail insecurity in the food-producing regions, food inflation was likely to resume its upward trend going forward. It explained that the Industrial sector received a boost from the sustained growth recorded by the crude petroleum and natural gas sub-sector.
It noted that in the second quarter of 2024, key activity sectors, including Manufacturing and Construction, continued to struggle with growth at 1.3 per cent and 1.1 per cent, respectively. In the energy sector, it noted that in spite of the commencement of the Dangote Refinery, the oil refining sub-sector was yet to recover as it contracted further by 35.4 per cent in the second quarter of 2024, suggesting the need to speed up efforts at revitalising the government-owned local refineries.
Despite a record of sustained growth in the second quarter of 2024, the Services sector experienced a slowdown on a yearly and quarterly basis. This performance was driven by the subdued performance in the key activity sectors, including Information and Communications Technology (which grew by 4.4 per cent in 2024Q2 down from 8.6 percent in 2023Q2), Trade (0.7 per cent down from 2.4 per cent) and Real Estate (0.8 per cent down from 1.9 per cent). The sustained performance of the Finance sector at 28.8 per cent growth in 2024Q2 could be attributed to the recent drive by some commercial banks to raise their capital base ahead of the CBN’s recapitalisation deadline of 2026. Headline inflation, averaging 32.92%, and exchange rate volatility significantly strained household incomes and business operations.
The sustained growth in the oil sector was driven largely by the improvement in domestic crude oil production and global oil prices. The average domestic crude oil production rose to 1.4 million barrels per day (mbpd) in Q2 of 2024 from 1.2mbpd in Q2 of 2023. On the other hand, global oil prices increased by 8.7 per cent (year-on-year) in 2024Q2.
The country’s real sector struggled with productivity. While the country’s entertainment, telecommunications, and service sectors have shown signs of strong and sustained growth, the manufacturing sector has performed poorly. The manufacturing sector’s productivity gap was attributed to high import costs, high foreign exchange dependency, low domestication of heavy technology, and high local operating expenses.
According to local media reports, about five notable multinational companies exited Nigeria in 2024, a development attributed to the country’s economic challenges, particularly the declining value of the naira, acute inflation and prohibitive interest rates, and declining consumer purchasing power.
Although small and medium-scale businesses were the most hit by the country’s harsh economic climate, big multinational companies were not spared.
The multinationals that exited Nigeria in 2024 included: Kimberly-Clark (K-C), global giant in marketing of personal care products; Pick n Pay, South African retail company, exited Nigeria after selling its 51% stake in a joint venture with A.G. Leventis; Diageo, a global company in the alcoholic beverages sector, announced its decision to exit Nigeria by selling its 58.02% stake in Guinness Nigeria Plc to Singaporean Tolaram Group; and Holcim, a Swiss building materials giant, which also exited Nigeria in the year after selling its 83.81% stake in Lafarge Africa PLC to Huaxin Cement Co., a Chinese company.
team players, who must recognize the private sector as stakeholders.
We should agree that the 2024 economic performance was unsatisfactory for the private sector. All data, metrics and consequent statistics confirm that the Nigerian private sector has borne fully, the negative burdens of the current economic reforms.
“While in contrast, the Nigerian Public sector continues to thrive and expand. All economic benefits of the recent economic reforms have been translated to the public sector through high capital transfers and revenues. The private sector faced higher inflation, higher cost of borrowing/repayment for existing loans, the $2.4 billion CBN unpaid forwards, currency devaluation and higher costs in all sectors of the economy.
“This continued imbalance caused by increased public sector expenditure has destroyed value in the private sector due to excessive fiscal deficits which are financed through government borrowing at very high unsustainable interest rates. We are, therefore, making recommendations and suggestions that may be considered in the short to medium term,” he said.
According to him, fiscal deficits arise when public sector expenditure exceeds public sector income. The funding of these fiscal deficits through borrowing results in high interest rates and high inflation.
“The solution to high interest rates and high inflation is for the public sector to spend less and to start becoming an efficient productive unit. “We also need to debunk the myth of the government earning more revenue under the pretext of improved productivity. For the avoidance of doubt, payment of customs duties and taxation are not due to improved government productivity.
“These revenues are purely private sector revenues which constitute a transfer of wealth and capital from the productive private sector to an ever-expanding unproductive public sector. The public sector does not own factories nor does it produce any goods and services sold to the customers. Rather it extracts value from the citizens through regulatory fiat. Awarding contracts is not the same as enhancing production,” he added,
For the President of ASBON, Femi Egbesola, 2024 was the most challenging year in recent times for micro, small and medium enterprises, MSMEs.
“While we were still grappling with the effects of fuel subsidy removal, floating of the Naira and many others in 2023, 2024 came with many more death dealing blows for the MSME ecosystem.
“This year (2024), we had hyperinflation, hike in electricity tariff and other government levies, electronic money transfer bank charges, increase in fuel price, free fall of Naira, high interest rates due to increase in MPR, and many more, resulting in the ailing and eventual death of a number of businesses.
“In the midst of this, towards the end of this year was the release of the long awaited federal government intervention fund, the proposed national tax bill and a pocket of other interventions, bringing some succour and relief to small businesses,” he said.
“Even in the middle of all of this, we are very hopeful of a better and brighter future, starting from 2025.
“We eagerly look forward to stronger collaboration with the government, particularly in areas of policy making and reforms relating to MSMEs,” he said.
For the President of the Lagos Chamber of Commerce and Industry, LCCI, Gabriel Idahosa, he emphasised the need for collaboration between the private and public sectors to ensure growth.
“Businesses must embrace innovation, digital transformation, and sustainability as growth strategies, while collaboration between the private and public sectors is critical to overcoming challenges and attracting investment. We need investments in the telecoms sector to drive the desired digital revolution, oil and gas investments to boost crude production levels, and the power sector to enhance power generation to support economic activities.
“We expect to see some ease in fuel prices in the first quarter as the price wars continue and a possible easing in interest rates in the second quarter of 2025,” he said.
According to Idahosa, inflation is expected to ease as monetary policies take effect, with trade, agriculture, and manufacturing poised to drive job creation.
In addition, the Director General of LCCI, Chinyere Almona, lamented that the persistent rise in the inflation rate continues to fuel a tense business environment as elevated prices constrain various business operations.
“With the persistent and unabated rise in inflation, businesses should prepare for more stress from the burden of higher interest rates as we enter the New Year.
“With the raging inflation rate, the unsuccessful attempt of CBN to reduce the currency in circulation, and approaching a high-spending festive period, we are set to contend with even higher interest rates as the expected outcome from the next decisions by the MPC of the apex bank.”
She, however, envisaged that the implementation of ongoing reform measures would lead to a boost in production in 2025.
‘’While we are all confronted with a weak impact of interest rates on curbing inflation, we see a better performance of the reform measures implemented to boost production. Hopefully, we may see more of the impact of these measures on fundamental indicators like inflation, interest rates, and exchange rates.
“We believe the ongoing reforms have the potential to pull through critical deliverables for the economy to return to a growth path and achieve positive levels of the critical economic indicators if sustained,” she stated.
However, a Nigerian economist introduced a different dimension to the analysis when he warned that Nigeria may go the way of Germany and Russia some decades ago. He recalled that Germany soon after the 2nd world war had its share of hard economic challenges when it removed its subsidy regime and applied some fiscal measures that brought so much hardship to the Germans and the government was forced to abandon its policies and changed its currency in order to recover from its turbulence which was caused by the implementation of the recommendations of some international financial institutions.
He suggested an urgent review of the government economic policies before Nigeria will be compelled to go the way of Germany and Russia in tackling its economic challenges.
Meanwhile, the Minister of Industry Trade and Investment, Jumoke Oduwole, has promised an impactful year for businesses in 2025.
She told members of the National Association of Chambers of Commerce Industry Mines and Agriculture (NACCIMA) in Lagos during a ministerial engagement that the ministry was going to work very well together with them.
The minister commended the commitment of the private sector to the Nigerian economy over the years and assured that 2025 would be an impactful year – a very important year for Nigeria.
“We want to commend your work and your resilience all through 2024 and before,” she said, emphasising that “communication and collaboration are what make things work.
“The ministry is here for you, to have a substantive discussion and to include you in the strategic thinking and agenda setting for 2025.
“I promise you that in 2025, one by one, we are going to work on all the issues that you have raised and we are going have actionable and measurable steps.
“NACCIMA is mentioned by name in my mandate as Minister of Industry, Trade and Investment to underscore how seriously President Bola Tinubu takes your matter,” she added.
A.I
Feb. 12, 2025
Tags: MAN others review performance of nation’s troubled economy
