Dangote, BUA, Others Increase Investments By 30%

In the first half of 2024, leading manufacturing giants in Nigeria, including Dangote Group, BUA Group, and Flour Mills of Nigeria, raised their investments by 30 percent, capitalising on emerging opportunities within the country’s challenging economic environment.

According to a recent half-year (H1) review from the Manufacturers Association of Nigeria (MAN), the total investments in the manufacturing sector reached N250.13 billion in H1 2024, marking a 29.63 percent increase year-on-year. However, MAN highlighted that the significant rise in investment figures was primarily driven by the depreciation of the naira, which inflated the costs of importing machinery and essential production assets.

“In real terms, investment spending did not increase, as manufacturers were primarily focused on maintaining existing production levels rather than expanding, due to the difficult economic conditions,” said MAN.

The trend of rising investments in the manufacturing sector started in 2023, with manufacturers increasing their investments by 32 percent to N427.18 billion, compared to N323.98 billion in 2022. The surge in investment spending revealed growing confidence in the Nigerian economy, despite persistent inflation and devaluation pressures.

“While the real value of these investments has been impacted by inflation and the exchange rate float of 2023, the sector remains optimistic for a resurgence in 2024,” MAN noted.

At the sector level, food, beverages, and tobacco manufacturing saw a notable 57 percent increase in investment, amounting to N93.16 billion. Other significant sub-sectors that contributed to the rise in investment include chemicals, pharmaceuticals, and vehicle assembly.

However, when comparing the 2023 investments to a decade ago, it becomes evident that there has been a significant decline in the real value of investments in the manufacturing sector. Investment figures dropped by 38.2 percent from 2014 to 2023, with manufacturing companies investing N691.77 billion in 2014, compared to just N489.55 billion in 2015 and N427.18 billion in 2023.

Several prominent Nigerian manufacturers were behind the surge in investments. Dangote Cement, Dangote Sugar, BUA Cement, and Flour Mills of Nigeria were among the leading contributors. In addition, companies like Nestlé, FrieslandCampina WAMCO, Nigerian Breweries, Guinness, and Emzor Pharmaceutical Industries also made notable investments.

In 2023, Emzor secured €13.85 million from the European Investment Bank (EIB) to fund a $23 million plant aimed at combating malaria. Meanwhile, Nestlé committed N61 billion to expanding production lines across its three factories in Agbara, Sagamu, and Abaji. BUA Cement secured a $500 million loan from the International Finance Corporation (IFC) to boost the capacity of its cement plants in Kalambaina, Sokoto State. Similarly, Dangote Industries began work on a new six-million-ton cement plant in Ogun State, in partnership with China Sinoma International Engineering.

Despite these investments, Nigerian manufacturers continue to contend with significant challenges. High energy costs, the scarcity of foreign exchange, policy instability, insecurity, and logistical bottlenecks remain major concerns for the sector.

Despite these challenges, the manufacturing sector is maintaining a cautiously optimistic outlook. With a 30 percent increase in investments in the first half of 2024, manufacturers are preparing for a potential recovery, driven by a combination of external investments and government efforts to stabilise the economy.

The continued investment by major players such as Dangote, BUA, and Flour Mills of Nigeria suggests that while the sector faces ongoing challenges, confidence remains high among key industry stakeholders, offering hope for a more stable and prosperous future.