By Kingsley Ani
The moderation in Nigeria’s headline inflation has yet to translate into lower production costs for manufacturers, with the Manufacturers Association of Nigeria (MAN) warning that structural cost pressures remain entrenched.
DEVELOPMENT
Director-General of the MAN, Mr. Segun Ajayi-Kadir, acknowledged the decline in headline inflation from 15.43 percent in July as positive for business planning, investment and consumer welfare.
He, however, said that the improvement remained fragile and cautioned against equating slower headline inflation with cheaper production.
Manufacturers continue to face high energy and logistics costs, expensive foreign exchange, elevated raw material prices, financing pressures and multiple fiscal and regulatory charges.
DATA
Ajayi-Kadir also said that transport contributed 1.64 percentage points to inflation, highlighting the cost implications of moving raw materials and finished goods between ports, industrial clusters, agricultural production zones and markets.
He also noted that weak consumer purchasing power was limiting manufacturers’ ability to pass higher production costs to consumers, squeezing margins and increasing working capital requirements.
SIGNIFICANCE
The distinction between headline inflation and manufacturers’ operating costs is becoming increasingly important for investment and industrial output.
Ajayi-Kadir said that high energy, financing and logistics costs were constraining capacity utilisation and making investors cautious. Some manufacturers, he warned, could reduce production where additional shifts or higher input purchases become commercially unsustainable.
Persistent cost pressures could also weaken the competitiveness of locally manufactured goods and constrain manufacturers’ ability to expand and create jobs.
NEXT MOVE
MAN is calling for targeted measures covering energy, transport, taxation, foreign exchange and industrial finance.
Ajayi-Kadir urged government to provide reliable electricity to major industrial clusters, prioritise gas access for industrial users, incentivise efficient captive power and renewable energy investments, and review electricity tariff structures affecting productive industries.
He also called for priority rehabilitation of transport corridors connecting ports, industrial clusters, agricultural production zones and markets.
On taxation, he urged implementation of the new tax laws in ways that promote equity, fairness and transparency, while eliminating multiple taxation and overlapping levies.
OUR LENS
The deeper issue is that disinflation does not automatically deliver industrial competitiveness.
Ajayi-Kadir urged government to use the period of moderating inflation to implement cost-reduction and productivity-enhancing measures that enable manufacturers to produce more at lower cost, attract investment and create jobs.
He also called for effective implementation of the Nigeria First Policy to encourage procurement and consumption of locally manufactured goods.
For manufacturing finance, he advocated a targeted, long-term funding window at below-market rates for working capital, machinery and productivity-enhancing investments, particularly for micro, small and medium enterprise (MSME) manufacturers.
The central policy challenge, therefore, is converting lower inflation into lower unit production costs. Until energy, logistics, financing, FX and input costs ease, the benefits of headline disinflation may remain largely statistical rather than operational for manufacturers.
Kingsley Ani is a journalist who has over the years been covering capital markets, corporate results, economic and public-interest developments with a focus on clear, factual reporting.
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