August inflation: Manufacturers seek cheaper power, finance, transport

Stanley Ihedigbo

Manufacturers Association of Nigeria (MAN) has called on the Federal Government to use the recent moderation in inflation as an opportunity to implement structural reforms aimed at reducing the cost of production and improving the competitiveness of Nigerian manufacturers.

MAN, in its position on the August 2026 inflation figures, acknowledged the decline in headline inflation from 15.43 per cent in July to 15.39 per cent in August, representing a marginal reduction of 0.04 percentage points.

The association described the development as positive, noting that price stability was important for business planning, investment and consumer welfare.

However, MAN cautioned that the small reduction indicated that the improvement remained fragile, stressing that a decline in the inflation rate should not be interpreted as a corresponding reduction in the cost of manufacturing.

According to the association, manufacturers continue to contend with high energy costs, logistics challenges, exchange-rate pressures, elevated raw-material prices, as well as multiple fiscal and regulatory charges.

MAN said the critical issue for manufacturers was whether the cost of producing goods was actually declining.

It noted that manufacturers were often unable to transfer the full increase in production costs to consumers because of weak purchasing power, thereby putting pressure on profit margins and increasing working-capital requirements.

“When input prices rise, manufacturers require more funds to purchase the same quantity of materials,” the association stated.

It further warned that high energy, financing and logistics costs could continue to make investment decisions cautious and reduce the attractiveness of expanding manufacturing operations.

According to MAN, capacity utilisation could also remain constrained as some companies may reduce production when the cost of operating additional shifts or purchasing additional inputs becomes commercially unsustainable.

The association also expressed concern that high domestic production costs could make locally manufactured goods less competitive against imported products, particularly where imported goods enter the market at lower costs.

It added that sustained cost pressures could affect employment growth by limiting manufacturers’ capacity to expand production and create additional jobs.

While describing the August inflation figures as a modest positive signal for the economy, MAN maintained that sustainable economic growth required more than a gradual decline in headline inflation.

It therefore called for an economic environment where manufacturers could access affordable energy, finance, foreign exchange and efficient logistics, while sourcing a greater proportion of their production inputs locally.

On energy, MAN urged the government to introduce measures that would reduce the cost of industrial production, including a dedicated and reliable electricity supply to major industrial clusters and priority access to gas for industrial users.

It also advocated incentives for manufacturers investing in efficient captive power and renewable-energy systems, as well as a review of electricity tariff structures affecting productive industries.

The association said the success of such measures should be assessed based on the reduction in the energy cost required to produce a unit of manufactured output, rather than merely increases in electricity generation.

On transportation, MAN noted that the sector contributed 1.64 percentage points to inflation, urging the government to identify major transport corridors connecting ports, industrial clusters, agricultural production zones and major markets for priority rehabilitation and maintenance.

It also called for greater collaboration between the Federal and state governments to eliminate unnecessary road charges and overlapping transport-related levies.

On taxation, MAN urged the government to implement the relevant provisions of the new tax laws in a manner that promotes equity, fairness and transparency.

The association called for the elimination of multiple taxation and overlapping levies, while urging authorities to ensure that tax reforms do not impose additional fiscal burdens on local production.

MAN further advocated effective implementation of the Nigeria First Policy to promote the procurement and consumption of locally manufactured goods, particularly through government procurement.

The association also called for the introduction of a targeted long-term manufacturing financing window at below-market rates to support working capital, machinery acquisition and productivity-enhancing investments, particularly for small and medium-sized manufacturing enterprises.

MAN said the objective of the proposed measures should be to enable the manufacturing sector to produce more at lower cost, attract greater investment, create more employment and strengthen Nigeria’s competitiveness.