Based on the capital importation report from the National Bureau of Statistics (NBS) released in H1 2023, total capital inflow into country’s manufacturing sector jumped by 88.17% y/y in H1 2023 reaching US$861.16m from US$457.67m in H1 2022. Q/q, inflow into the sector increased by 136.2% to US$605.04m in Q2 2023 from US$256.Thank you for reading this post, don't forget to subscribe!
1m in Q1 2022. The data further revealed that the share of inflow to the manufacturing sector to the total capital inflow for the six-month period rose to 39.81% in H1 2023 from 14.73% in H1 2022. Meanwhile, total capital inflow in H1 2023 was US$2.163bn. We believe the unusual growth could be due to a one-off event such as the purchase of an expensive equipment, as it is unlikely that the manufacturing sector will be attracting any significant capital inflow given the impact of current economic conditions on both production and demand.
The growth of the manufacturing sector has been weak and sluggish since its recovery from the Covid-19 Pandemic. The average annual growth of 2.5% in 2022, reflects the negative impact of CBN’s hawkish rendition. In fact, the sector contracted by 1.91% in Q3 2022, the first contraction since covid hit in 2020. With escalating global and domestic challenges, the growth of the Nigerian manufacturing sector has been hampered.
The fortunes of the sector have worsened with the latest reforms of the new administration such as the fuel subsidy removal and the unification of the exchange rates at the various windows. In Q1 2023, the growth rate reduced to 1.61% compared with 2.83% in Q4 2022 but rose slightly to 2.20% in Q2 2023.
The hike in the price of petrol since its deregulation and currency weakness due to the FX unification policy have prompted firms to increase output prices. To counter the effect of the high cost of production, firms would typically transfer increased costs to the consumers, and we expect further price increases across the manufacturing and non-manufacturing sectors.
However, considering the weakened consumer purchasing power, we have started to see a decline in volumes for some of the companies we cover, especially for manufacturers of non-essentials.