Nigeria\u2019s manufacturing sector is turning inward for survival as the impact of the naira devaluation and foreign exchange scarcity continues to reshape supply chains across the country.\n<\/p>\n
This is according to a new report by Financial Times on Sunday, which highlighted how volatility in the forex market is forcing companies to reduce their dollar reliance and turn to local raw material sourcing. According to the report, firms that previously depended on raw material imports are increasingly embracing local supply chains to ease pressure on foreign exchange.\n<\/p>\n
This decision followed the Central Bank\u2019s decision to float the naira, part of President Bola Tinubu\u2019s reform agenda aimed at reviving growth and attracting investors, which triggered unprecedented volatility. Manufacturers, who contribute about nine per cent of Nigeria\u2019s GDP, were left scrambling as the naira tumbled and dollar inflows dried up.\n<\/p>\n
It sparked turbulence across industries, leaving many manufacturers unable to source raw materials from abroad. The Manufacturers Association of Nigeria said about 800 companies shut down operations last year as a result of soaring input costs and shrinking access to dollars.<\/p>\n
Multinationals, including Procter & Gamble, Unilever, GlaxoSmithKline, PZ Cussons, Bayer, and Sanofi, have also scaled back operations in recent years, citing Nigeria\u2019s macroeconomic challenges. For firms that stayed, the reforms have been both disruptive and transformative. At Chemical and Allied Products, a leading paint producer, executives say the crisis was a wake-up call.\n<\/p>\n
\u201cFrom a supply chain point of view it was the worst period I have ever witnessed because we would wake up and give a purchase order and within five seconds it was rejected because [foreign exchange] prices were so unstable,\u201d the company\u2019s Chief Supply Officer, Lekan Aluko recalled of early 2024, when the currency was devalued for the second time in eight months.\n<\/p>\n
Facing ever-rising input costs and the threat of stock shortages, some companies used last year\u2019s shock as a catalyst to reduce their reliance on imported materials. \u201cIn an environment where FX is so volatile, it was a nudge to us as costs were rising and the naira was depreciating a lot,\u201d said CAP chief executive Bolarin Okunowo.<\/p>\n
The previous administration of the late Muhammadu Buhari had pegged the naira against the US dollar to avoid \u201ckilling\u201d the currency, arguing that a devaluation would hurt the country\u2019s poorest people.\n<\/p>\n
Tinubu\u2019s administration, which took over in 2023, acknowledged, like most observers, that the policy had become highly problematic: overvaluing the Nigerian currency and contributing to a scarcity of dollars as inflows dried up. Shrinking oil production, the country\u2019s leading generator of foreign receipts, added to the shortage.\n<\/p>\n
For Nigeria\u2019s manufacturers, which had long followed a tried and tested formula of buying raw materials from far-flung places and turning them into finished products sold domestically, it had become a struggle to obtain the foreign currency needed to pay for imports.\n<\/p>\n
Immediately following the devaluation, however, there was chaos. It sent the naira tumbling even as the greenback remained scarce. Manufacturers were left trying to buy fixed inventory in dollars with a slumping naira. \u201cIt wasted a lot of management time,\u201d Aluko reflected during a tour of CAP\u2019s sprawling facilities in Ikeja, the capital of Lagos state.\n<\/p>\n
CAP now works with three local vendors to source calcium carbonate, a chemical compound used in paint manufacturing to provide bulkiness and improve opacity.\u00a0 About 90 per cent of the compound calcium it needs is procured locally; previously, it relied on imports from South Africa, Egypt, Tunisia, and elsewhere. <\/p>\n
The company estimates it has saved nearly 60 per cent in calcium carbonate costs in the 10 months to June 2025. \u201cIt has kept us in a net position,\u201d said Okunowo. \u201cIf we had not taken this measure, we would have had to increase pricing by an additional 50 per cent, but 1755505767 we can keep our costs below real inflation.\u201d\n<\/p>\n
Shelves stacked with white sacks of raw materials, with signs listing items such as calcium carbonate and titanium dioxide The use of local raw materials in the manufacturing sector increased to an average of 57.1 per cent last year, up five percentage points from 2023, according to MAN.<\/p>\n
\u201cMost manufacturers are becoming more innovative with how they procure their raw materials, how they process those materials, and how they distribute them, and we have seen an increased use of collaboration [across supply chains],\u201d said Dumebi Oluwole, an economist at Lagos-based data analytics firm Stears.\n<\/p>\n
In instances where some key raw materials are not available domestically, companies are finding other clever ways of keeping costs down. Soda ash, also known as sodium carbonate, is a compound used in glass manufacturing to lower the melting point of silica and achieve energy efficiency.\n<\/p>\n
It is not produced in Nigeria. But Beta Glass, a manufacturer of glass bottles for drinks makers, pharmaceutical companies, and food producers, has found a roundabout way of reducing costs by ceasing direct imports.\n<\/p>\n
It instead works with international suppliers that import the soda ash to Nigeria and, perhaps most importantly, invoice the company in naira to avoid direct exposure to foreign exchange fluctuations. Importing directly was a strain on company resources, especially at a time of dollar scarcity, said Beta Glass\u2019s chief executive, Alex Gendis.\n<\/p>\n
Using hard-won dollars to source raw materials felt like Beta Glass was \u201cworking for the banks\u201d in a country where the lending rate is higher than 25 per cent, he added. The big supply chain shift has not been without its headaches.\n<\/p>\n
Executives say local suppliers sometimes struggle with the capacity required to meet the demands of big manufacturers. Decades-old concerns about insufficient electricity infrastructure and bad roads in Nigeria still hamper suppliers and their customers.\n<\/p>\n
Regulatory uncertainty still bedevils business, although executives are hopeful that a new tax law signed by Tinubu and set to take effect next year would streamline the onerous burdens on them.<\/p>\n
Even so, the fight to localise supply chains has been worth it for those who succeeded.\u00a0 The naira has also stabilised since last year\u2019s devaluation, as Tinubu\u2019s reform agenda shows signs of bearing fruit.\n<\/p>\n
\u201cBusiness confidence has been going up in the measures that we look at [such as consumer spending forecasts] and that shows us that things are trending in the right direction,\u201d said Gendis. He said he was hopeful \u201cthat we are 1755505767 going in the right direction.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Nigeria\u2019s manufacturing sector is turning inward for survival as the impact of the naira devaluation and foreign exchange…\n","protected":false},"author":2,"featured_media":353740,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3090],"tags":[51,1700,16,15],"class_list":{"0":"post-353739","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-uk","11":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115048832259489015","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/353739","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=353739"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/353739\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/353740"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=353739"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=353739"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=353739"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}