Nigerian manufacturers have expended at least N7.9 trillion to import raw materials over the course of the last three years.
This substantial figure reflects the challenges faced by the manufacturing sector due to a shortage of foreign exchange (forex) and the resulting reliance on expensive parallel market rates for sourcing foreign currency.
Analysis of foreign trade reports from the National Bureau of Statistics highlights a concerning trade imbalance. Nigeria managed to export raw materials worth N1.77 trillion during this period, resulting in a trade deficit of N6.1 trillion.
Delving deeper into the data, the second quarter of 2020 saw manufacturers import raw materials worth N570.6 billion. This figure escalated to N710.2 billion in the third quarter of the same year and further increased to N715.7 billion in the fourth quarter.
In 2021, raw material imports reached N2.9 trillion, but this slowed to N2.4 trillion in 2022. The first quarter of 2023 saw the importation of N555.4 billion worth of raw materials.
Notable raw materials imported during this period included cane sugar from Brazil, milk preparations from Ireland, mixtures of odiferous substances from Ireland and Swaziland, as well as lubricating oils from The Netherlands.
The Manufacturers Association of Nigeria (MAN) Bi-Annual economic report revealed that the manufacturing sector’s utilization of local raw materials averaged 52.8 percent, slightly up from the 51.5 percent recorded in 2021. The increase is attributed to the growing difficulty in sourcing forex, which has prompted manufacturers to explore local sourcing despite the associated higher costs.
The report stressed the importance of the government’s role in supporting the local development and production of raw materials, particularly in the pharmaceutical sector. The absence of local production of Active Pharmaceutical Ingredients (APIs) due to inadequate funding of the Raw Materials Research and Development Council was noted to have negative implications for pharmaceutical production.
Director-General of MAN, Segun Ajayi-Kadir, emphasized that addressing forex volatility was crucial for manufacturing production. The shortage of forex results in higher costs of imported inputs and production, ultimately leading to increased prices of goods.
Ajayi-Kadir recommended that the government set a fixed rate for calculating import duty on production inputs like raw materials, machines, and spares that are not available locally.
Experts, including former president of MAN, Mansur Ahmed, and Deputy President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, pointed out the over-reliance on imported raw materials as a result of the failure of Nigeria’s import substitution strategy. They highlighted the importance of diversifying both import and export options to mitigate the forex challenges faced by manufacturers and the economy as a whole.
