Ogun manufacturers decry N350bn unsold inventory

Manufacturers in Ogun State have decried the sluggish growth in the sector which has led to a stockpile of unsold finished goods valued at N350bn.

This challenge, they say, is part of a broader crisis tied to soaring costs, forex scarcity, and infrastructural decay that has hobbled productivity in recent years.

The Chairman of the Manufacturers Association of Nigeria Ogun State Chapter, George Onafowokan, speaking at the group’s recent 39th Annual General Meeting in Abeokuta outlined the severe challenges confronting the sector.

Onafowokan pointed to the “unavailability of foreign exchange and skyrocketing dollar rates” as the primary factors stifling manufacturers, describing it as “a daily dilemma” that has become an existential threat for many businesses.

Onafowokan revealed that, since the naira was floated in 2023, its value has plunged by nearly 70 per cent, reaching an all-time low of N1,900 per dollar in February 2024.

This drop has forced manufacturers to rely on the black market to meet their forex needs, where they pay a premium that doubles their production costs.

“Following these forex reforms, the sector has seen significant losses, with some 16 major manufacturers losing N792bn to currency depreciation alone,” Onafowokan stated.

In addition to forex issues, Onafowokan highlighted a capacity utilisation drop to 2.4 per cent.

“High costs and foreign exchange scarcity make it difficult for manufacturers to import essential raw materials, pushing many companies to shut down or cut jobs,” he said.

This has compounded the sector’s financial strain, leaving a massive inventory of unsold products as consumers grapple with inflationary pressures, he added.

Ogun’s poor road infrastructure also continues to hurt manufacturers.

“Many major expressways and link roads are in dire need of upgrades, and transportation costs have soared as haulage firms increase fares or refuse services entirely,” Onafowokan said.

While he lauded the state government for initiating repairs on key industrial routes like the Atan-Igbesa-Agbara road, he urged swift action on other roads to prevent further losses.

Onafowokan noted energy costs further exacerbated Ogun manufacturers’ challenges.

He explained that due to an unreliable electricity supply, manufacturers spend about 40 per cent of their production costs on energy, relying on expensive generators.

A recent 240 per cent hike in electricity tariffs, combined with rising diesel and gas prices, has made the situation nearly untenable, he posited, adding that “The sudden tariff increase and disconnections imposed by the Nigerian Electricity Regulatory Commission are only pushing our costs higher.”

Guest speaker and Managing Director of Skystone Finance Company, Ola Olabinjo, addressed manufacturers’ concerns over currency volatility, calling for a “predictable, stable exchange rate regime.”

Olabinjo added, “Manufacturers aren’t chasing extraordinary profits; they just want enough margin to cover production costs and pay workers a living wage.”

He criticised the government’s heavy tax expectations on manufacturers, noting, “Our businesses are stretched too thin to bear further tax burdens.”

Olabinjo advised manufacturers to adopt shorter cash conversion cycles, consider alternative local raw materials, and explore Nigeria’s debt capital markets for financing instead of depending on commercial bank loans.

“A strategic approach to financing and inventory can significantly ease the strain on manufacturers,” he said.

Meanwhile, Ogun State’s Commissioner for Industry, Trade, and Investment, Adeola Sofela, emphasised that the government is committed to improving the state’s business climate.

“We are focused on constructing critical infrastructure, like the Abeokuta-Lagos and Atan-Igbesa-Agbara roads, and harmonizing taxes to reduce the burden on manufacturers,” Sofela said.

He assured stakeholders of the government’s support, noting, “Our goal is to maintain Ogun’s status as Nigeria’s industrial capital.”