A new report from the Manufacturers Association of Nigeria (MAN) has revealed that the ongoing difficulties in accessing foreign exchange (FX) have led Nigerian manufacturers to increasingly source raw materials locally.
According to the findings of a survey conducted on the manufacturing sector for the first half of 2024 (H1’24), local sourcing of raw materials has become a strategic response to the challenges posed by FX scarcity.
The report highlights a noticeable shift in sourcing strategies, with manufacturers leaning more towards locally produced materials to circumvent the hurdles created by the limited availability of foreign currency.
This move comes as a result of the high cost and unpredictability of the FX market, which has made importing essential raw materials increasingly difficult for manufacturers.
“The difficulties in accessing foreign exchange have forced manufacturers to explore local options for raw materials, especially in the first half of 2024,” the report states. MAN further noted that this shift has resulted in a slight improvement in the manufacturing sector’s local raw material sourcing, which increased to 56.03% in H1 2024, up from 55.4% in the same period of 2023.
However, while this trend towards local sourcing has been observed in many sectors, it has not been uniform across all subsectors. Some industries, particularly those involved in the production of non-metallic mineral products, textiles, clothing, and footwear, have seen a decline in local sourcing, as these sectors remain highly dependent on imported raw materials.
The textile and footwear industries, for example, have faced particular difficulties in reducing their reliance on imports due to the lack of sufficient local production capacity and the limited availability of high-quality raw materials in the domestic market. Similarly, non-metallic mineral producers have continued to struggle with sourcing the necessary materials locally, which has resulted in a mixed impact on the overall trend of reducing import dependency.
MAN emphasized that while the shift towards local raw materials is a positive development in mitigating the impact of the FX crisis, more efforts are needed to build local production capacities in key sectors.
The association called for stronger government support in creating a more enabling environment for local raw material production, including improving infrastructure, providing incentives, and encouraging investment in raw material production technologies.
Despite these challenges, the overall trend of increasing local sourcing is seen as a positive step toward reducing Nigeria’s reliance on imported goods and boosting domestic production.
The ability of manufacturers to adapt to the FX crisis and prioritize local sourcing is expected to improve the resilience of the sector and help strengthen Nigeria’s industrial base in the long term.
In the broader context, the shift to local sourcing also aligns with the government’s broader economic agenda to promote self-sufficiency and reduce the country’s trade deficit.
However, experts argue that without deeper structural reforms, such as improving the ease of doing business and addressing infrastructure bottlenecks, the reliance on imports will remain a challenge in the most raw material-intensive industries.
The report also called for more focus on innovation and the development of new technologies that can help reduce the costs of local production and enhance the competitiveness of Nigerian manufacturers in both local and international markets.
MAN has consistently advocated for more robust policy support and infrastructure development to make local sourcing more feasible and sustainable in the long term.
Overall, while the increase in local raw material sourcing offers a glimmer of hope for the manufacturing sector in the face of the FX crisis, the report underscores the need for continued efforts to improve local production capacity, diversify raw material sources, and create a more competitive manufacturing environment in Nigeria.
