Market News

By : Tobi Awodipe

Secretary-general of the Pan-African Manufacturers Association (PAMA), Segun Ajayi-Kadir, has expressed concern about the future of manufacturing in Nigeria and across Africa amid escalating global tensions and attendant disruptions to production and costs.

While he had hoped that Q2 would deliver respite and recovery, the current reality falls far short of expectations. 

Across the continent, the convergence of persistent supply chain disruptions, elevated borrowing costs, volatile exchange rates and suppressed consumer demand is forcing industry players to decide whether to continue absorbing shocks or begin building new systems to circumvent them.

“The operating environment offers little comfort. Global manufacturing activity remains subdued, with purchasing managers’ indices hovering around the 50-point threshold that separates expansion from contraction. The World Trade Organisation (WTO) projects global trade growth of just 1.9 per cent for the year, weighed down by energy price uncertainty and geopolitical tensions,” he said.

Against this backdrop, African manufacturers are facing domestic challenges of their own, he said.

Revealing that West Africa remains the most acutely pressured subregion, he said the inflation decline in Nigeria and Ghana masks the structural persistence of high factory-floor costs.

Currency depreciation across markets has driven up the cost of imported raw materials, machinery, and capital goods, a burden Ajayi-Kadir said falls hardest on manufacturers with deep import dependence and limited FX access.

“High interest rates are compounding the challenge. Kenya held rates broadly within the 8.75 to nine per cent range through Q1, while Egypt implemented a modest reduction from 20 to 19 per cent. Despite the adjustments, borrowing costs across the continent remain elevated, constraining access to credit and curtailing the capital investment that growth in manufacturing output would ordinarily require,” he said. 

For small and medium-scale manufacturers, he said, the squeeze is severe.

The African Development Bank (AfDB) projects Africa’s GDP growth at approximately 4.3 per cent in 2026, driven primarily by domestic demand and regional economic activity.   East Africa, he said, has offered pockets of relative stability; Kenya and Ethiopia are containing inflation within ranges that offer some predictability for planning, even if logistics and energy supply inefficiencies continue to erode productivity.

The manufacturer said that the strategic question facing manufacturers is how to translate the uneven conditions into a coherent growth posture. 

Ajayi-Kadir said: “Industry analysts and economic observers are increasingly pointing to five interconnected imperatives. The first is moving from reactive cost-cutting to institutionalised cost intelligence, using real-time data to track input price movements, optimise procurement timing and reduce production waste, while restructuring sourcing strategies to favour local and regional alternatives where feasible.

“The second is extracting more from existing capacity through lean manufacturing principles, reducing downtime, improving machine utilisation and deploying digital tools that identify bottlenecks before they become production losses.

“The third imperative addresses the demand side. With consumer purchasing power still weak across many African markets, it would be best for manufacturers to adopt more segmented and adaptive market strategies, offering product resizing and price-point innovation to maintain volume among cost-sensitive buyers, while diversifying product lines to serve multiple income segments. Strengthening last-mile distribution networks and forging partnerships with digital platforms are increasingly viewed not as supplementary but as core to commercial survival.

“The fourth area of focus is export and regional market development. The African Continental Free Trade Area (AfCFTA) presents a live opportunity for manufacturers to expand beyond domestic markets under pressure, but only for those willing to invest in product standards, certification, compliance with rules of origin, and cross-border logistics. Export, analysts argue, must cease to be an afterthought and become a strategic anchor.”

Underpinning all of this is the fifth imperative, financial and operational resilience. Working capital discipline, diversification of revenue streams, cautious debt exposure and the flexibility to adjust production volumes or redirect supply chains are now baseline expectations for manufacturers that intend to weather what may be a prolonged period of macroeconomic volatility.

“Q1 has delivered a transition phase and for African manufacturers, the verdict is clear: the companies that move earliest and most deliberately from passive endurance to active strategy will be the ones that emerge from this period with market share, margin and competitive distance from rivals still waiting for conditions to improve,” he said.