Nigeria’s headline inflation raced to 34.8% in December 2024—its highest level since 1996—driven largely by food prices and energy shocks. Meanwhile, our once-booming manufacturing sector has seen growth plummet from 38.06% year-on-year in Q4 2023 to a mere 2.92% in Q4 2024. And despite countless reforms, the nation is still behind at 131st out of 190 economies in the World Bank’s Doing Business ranking.
Erratic power supply continues to force industrial plants to rely on diesel generators, now costing up to US$0.50/kWh—over six times the theoretical grid tariff of US$0.08/kWh. This makes it even more economical to import products like cement rather than produce them locally. CEOs are grappling with balance sheets where escalating input costs erode margins rapidly. Foreign exchange losses are mounting, and each unplanned outage further undermines profitability.
If you’re a board member or MD reading this, know this: unless you tackle these inefficiencies now, your factory could be the next headline in an exposé—and your bottom line will continue to be exposed to volatility.
The Hidden Drain: Where Money Disappears
1. Energy Shortages
What’s happening: Grid power meets barely 4,000 MW demand; the rest comes from generators. Most firms pay US$0.40–0.46/kWh for diesel backup, compared to US$0.08/kWh on paper. For a mid-sized plant consuming 500,000 kWh monthly, that’s an extra US$160,000 in fuel costs alone—before factoring in maintenance and spares.
Impact on your P&L: Energy costs can consume up to 30–40% of operating expenses, squeezing working capital and forcing product price hikes that erode competitiveness.
2. Foreign Exchange Volatility
What’s happening: The naira’s poor liquidity and steep devaluations erased ₦792 billion from the books of 16 leading manufacturers in 2023–24 alone. Many firms lack robust hedging strategies, so raw-material imports at N1,650/US$ (parallel market) can suddenly cost N2,000/US$ overnight.
Impact on your P&L: FX losses feed directly into cost of goods sold, creating unpredictable margins and choking investment plans.
3. Supply-Chain Gaps & Inventory Gluts
What’s happening: Leading FMCGs saw input costs jump 121% in H1 2024, largely due to FX pass-through and logistical snarls. Meanwhile, unsold inventory rose by 43% in early 2024, tying up ₦1.24 trillion in working capital.
Impact on your P&L: Excess inventory drives warehousing costs, idle cash, and write-downs, while stock-outs on critical SKUs dent market share.
4. Policy Inconsistency & Regulatory Delays
What’s happening: From sudden export bans to abrupt tariff changes, shifting policies force manufacturers into perpetual catch-up mode. Customs clearance can drag 5–10 days, double regional benchmarks, forcing many to pay demurrage and storage fees.
Impact on your P&L: Unplanned expenses, project delays, and lost customer trust as orders slip.
Practical Strategies for Reversal
Targeted, low-risk pilots can arrest these losses and lay the foundation for scalable improvement. Each approach below has been successfully adopted within similar emerging-market contexts and is ready for rapid adaptation to Nigerian conditions:
Hybrid Energy Micro-Grids with Smart Management
What to do: Combine solar PV, battery storage, and gas-fired generators to cut diesel consumption by up to 30% and guarantee uptime when the grid fails.
How we help:
- Technology Advisory designs and oversees the micro-grid, integrates smart monitoring, and automates controls.
- Audit & Assurance establishes baseline energy KPIs, tracks actual savings, and verifies performance.
- Tax Compliance identifies available capital allowance incentives and optimises gas-to-power tax treatment.
Digital Supply-Chain Enablement
What to do: Deploy cloud-based inventory platforms with real-time demand forecasting and automated replenishment to unlock working capital.
How we help:
- Technology Advisory manages rapid system deployment, ERP integration, and user training.
- Audit & Assurance audits stock accuracy, tightens procurement and warehouse controls, and builds KPI dashboards.
- Tax Compliance optimises customs classifications, VAT recovery, and local-sourcing incentives to cut import duties and FX risk.
Continuous Skills Development & Compliance
What to do: Institute monthly “best-practice” forums, targeted training in quality-control and maintenance, and simple digital compliance-tracking tools.
How we help:
- People & Regulatory Services design curricula, deliver workshops, and liaise with NAFDAC, NERC, and Customs.
- Audit & Assurance conducts mock audits, hazard assessments, and gap-closure reviews to ensure zero major findings.
Policy Engagement and Advocacy
What to do: Convene industry roundtables with government and regulators to secure practical reforms, such as 24-hour customs windows and predictable tariff regimes.
How we help:
- People & Regulatory Services draft position papers, coordinate stakeholder dialogue, and track policy implementation.
Financial Strategies
What to do: Implement layered FX-hedging programmes and tap development-finance or public-private funding for capex projects.
How we help:
- Audit & Assurance validates financial models, business cases, and ROI projections.
Read More: Strengthening Nigeria’s Manufacturing Industry with Independent Internal Audits
Conclusion: Charting a New Course for Nigerian Manufacturing
The margin for error in today’s manufacturing landscape is slimmer than ever. Escalating input costs, currency volatility, and shifting regulatory requirements demand more than incremental improvements—they require a strategic, integrated response. By deploying rigorously tested, context-specific interventions and partnering with advisors who bring both global best practices and deep local experience, manufacturers can not only arrest profit erosion but also build the foundations for sustained, scalable growth.
At Stransact, we’ve partnered with leading multinationals and fast-growing local champions to deliver precisely this kind of transformation. Our Audit & Assurance teams provide clear, data-driven diagnostics to reveal hidden inefficiencies and compliance gaps. Our Tax specialists optimize fiscal incentives and manage liabilities to improve cash flow. Through Technology Advisory, we implement digital platforms that free up working capital and enhance operational resilience. And our People & Regulatory Services ensure your teams are equipped, compliant, and ready to sustain continuous improvement.
Let us help you turn today’s disruptions into tomorrow’s growth engine. Contact us for a confidential consultation and a custom pilot design. Together, we will lead Nigeria’s manufacturing renaissance—transforming complexity into clarity and delivering measurable, long-term value.
