June 29 (THEWILL) — Three years after the naira was floated on June 14, 2023, the country’s manufacturing sector remains one of the clearest gauges of the policy’s far-reaching consequences. Introduced as part of broader economic reforms aimed at improving foreign exchange liquidity and attracting investment, the move ended years of exchange-rate controls and exposed manufacturers to market-driven currency pricing. The result has been a period of painful adjustment marked by job losses, factory downsizing, balance-sheet shocks and shrinking access to credit, even as some firms have begun to emerge stronger through local sourcing and operational restructuring.
The Manufacturers Association of Nigeria (MAN) estimates that more than 18,900 manufacturing jobs were lost during the period as companies grappled with surging production costs, foreign exchange volatility, weak consumer demand and rising borrowing costs.
The impact extended beyond employment. Manufacturers also struggled with declining sales volumes as inflation eroded household purchasing power. The consequence was a build-up of unsold inventory estimated at N1.04 trillion, one of the largest stock overhangs recorded by the sector in recent years.
At the height of the adjustment cycle, the most visible damage appeared on corporate balance sheets.
The sharp depreciation of the naira significantly increased the value of foreign-currency liabilities held by many companies, resulting in substantial exchange-rate losses. In 2024 alone, nine major listed companies, including Nestlé Nigeria, Nigerian Breweries and MTN Nigeria, collectively recorded more than N1.09 trillion in foreign exchange-related losses, pushing several firms into loss positions despite continued revenue growth.
Nestlé Nigeria became one of the most prominent examples of the pressure faced by manufacturers. The company’s foreign exchange translation losses reached N290.7 billion, contributing to a net loss of N164.6 billion and leaving shareholder equity in negative territory.
For many manufacturers, the challenge was not simply higher import costs but the speed and scale of the currency adjustment. Businesses that relied heavily on imported raw materials, machinery, packaging materials and dollar-denominated loans suddenly found themselves operating under a dramatically different cost structure.
The disruption was compounded by the broader economic environment.
As authorities tightened monetary policy to contain inflation and stabilize the currency, borrowing costs climbed sharply. Manufacturers increasingly found themselves battling two simultaneous pressures: a weaker naira and more expensive credit.
According to industry data, prime lending rates rose to an average of 24.4 percent, while maximum commercial lending rates ranged between 33.8 percent and 36.6 percent.
The effect on industrial financing was significant. Commercial credit extended to the manufacturing sector declined from approximately N10.88 trillion to N6.6 trillion as elevated interest rates discouraged borrowing and constrained expansion plans.
Access to foreign exchange also remained a challenge despite the liberalization of the market.
Data from MAN’s CEO Confidence Index showed that nearly 49 percent of manufacturers’ foreign exchange requirements were still unmet through official channels. As a result, many firms continued to source dollars through more expensive alternatives, further increasing production costs and squeezing margins.
While the immediate effects of the naira float were severe, the experience also triggered a strategic shift across much of corporate Nigeria.
Faced with the reality that the era of heavily managed exchange rates and relatively cheap dollar access had ended, manufacturers began restructuring their operations to reduce vulnerability to currency shocks.
Many companies accelerated efforts to localize supply chains, substitute imported inputs with domestic alternatives and reduce exposure to foreign-currency debt.
These adjustments have started producing measurable results.
A striking indicator of the sector’s adaptation is the earnings recovery recorded by several major firms. After collectively posting more than N1.09 trillion in losses during the height of the foreign exchange crisis, many of the same companies returned to profitability as exchange-rate volatility moderated and restructuring measures took effect.
Combined profit before tax among leading listed firms swung from a collective loss position in 2024 to approximately N2.76 trillion in profit, underscoring the extent of the turnaround.
Nestlé Nigeria’s recovery illustrates the shift.
By reducing foreign-currency exposure and repaying approximately $40 million in dollar-denominated obligations ahead of schedule, the company significantly lowered its vulnerability to exchange-rate fluctuations. Its audited accounts subsequently showed a return to profitability, with net profit rising to approximately N105 billion.
The company’s revenue also climbed to about N1.2 trillion, supported by operational adjustments and a greater emphasis on locally sourced inputs.
Local sourcing has emerged as one of the defining responses to the post-float environment.
Manufacturers increasingly turned to domestic agricultural and industrial supply chains as imported alternatives became more expensive. Nestlé expanded the use of locally sourced cassava starch and agricultural inputs, while Nigerian Breweries deepened the use of local sorghum and other domestic raw materials.
The shift has generated benefits beyond cost management.
Export activity among some manufacturers has improved as companies became more competitive in regional markets. Nestlé’s export sales, for instance, increased by 56 percent to N10.2 billion, demonstrating how localized production can create new revenue opportunities.
The sector’s performance nevertheless remains mixed.
Smaller manufacturers continue to face considerable pressure from high energy costs, infrastructure deficits, elevated financing expenses and constrained consumer demand. Unlike large multinationals with stronger balance sheets and access to capital, many medium-sized operators have struggled to absorb prolonged periods of economic volatility.
The sector also continues to wrestle with the lingering effects of reduced purchasing power among consumers. While inflationary pressures have moderated from peak levels, demand remains weaker than before the currency adjustment, limiting the pace of recovery in several manufacturing subsectors.
Another frequently cited indicator the decline in manufacturing value-added from approximately $45.2 billion to $21.84 billion requires careful interpretation.
While the figures suggest a sharp contraction when measured in dollar terms, much of the decline reflects the accounting impact of the naira’s depreciation rather than a corresponding collapse in physical production. The devaluation significantly reduced the dollar value of economic output generated in naira, creating a mechanical translation effect that amplified the apparent decline.
The more revealing indicators of operational stress remain employment losses, inventory accumulation, credit contraction and foreign exchange pressures, all of which directly affected manufacturing activity during the period.
As Nigeria approaches the third anniversary of the naira float, the manufacturing sector offers perhaps the clearest illustration of both the costs and consequences of economic reform.
The adjustment has been painful. Thousands of jobs have been lost, factories have scaled back operations, inventories have piled up and companies have absorbed substantial foreign exchange losses. Yet it has also accelerated a restructuring process that many industry observers argue was long overdue.
The era of cheap, state-supported dollars that sustained import-dependent business models has largely faded. In its place, manufacturers are increasingly building localized supply chains, reducing foreign-currency liabilities and seeking new efficiencies to remain competitive.
While high borrowing costs and lingering forex constraints continue to challenge the sector, the experience of the past three years suggests that survival has increasingly depended on adaptability. For investors, policymakers and industry operators, the story of the naira float is no longer solely about the initial shock. It is increasingly about how Nigeria’s manufacturers are rebuilding their business models to compete in a more market-driven economic environment.
Ogochukwu Onwaeze is a writer specializing in business and economic journalism. At THEWILL News Media, she translates market trends, financial developments, and policy shifts into clear and engaging stories.
