Dangote refinery expected to boost manufacturing growth in 2025

According to a CardinalStone assessment, the multibillion dollar Dangote refinery would contribute to the material expansion of the manufacturing sector, which has been beset by numerous macroeconomic challenges.

According to the Lagos-based research and investment firm’s 2025 prediction, the 650,000 barrels per day facility is anticipated to increase exchange rate stability and trigger a central bank easing cycle, which will benefit the manufacturing sector this year.

“With the help of the Dangote Refinery, which increased effective refining capacity from almost zero to 650,000 barrels of crude oil per day prior to the old Port Harcourt Refinery’s rejig in November 2024), the relative stability of the foreign exchange market, and a potential rate cut by the CBN, we anticipate the sector to experience material growth in 2025,” the report said.

Recent reform-induced FX and interest rate pressures, notably inflationary pressures that reduce consumer spending and accumulate unsold inventories, exposed Nigeria’s manufacturing sector’s continued vulnerability to macroeconomic headwinds.

The Manufacturers Association of Nigeria (MAN) reports that during the first half of 2024, unsold goods totaling N1.24 trillion have accumulated in warehouses, a 357.57 percent increase over the same period the previous year.

According to MAN, there are three primary reasons why people aren’t purchasing as much: growing costs, the government’s elimination of fuel subsidies, and the depreciating value of the naira, Nigeria’s currency.

The richest man in the nation also cautioned that no company can sustainably create jobs with an interest rate of more than 30 percent, since almost 65 percent of the manufacturing companies listed on the NGX suffered foreign exchange losses in H1 ’24.

With prices reaching 34.6 percent, the highest level in almost 30 years, and the naira losing more than 40 percent of its value in 2024, crucial interest rates are rising, making it harder for manufacturers to borrow money and restricting the growth of their businesses.

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In an effort to stabilize persistently rising inflation and stabilize the currency rate, the CBN maintained its hawkish stance throughout 2024, raising the monetary policy rate (MPR) to 27.5 percent for the sixth consecutive time.

Although these measures were insufficient to bring the economy to more stable conditions, analysts anticipate that this year’s inflation will slow, suggesting that interest rates may be lowered.