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Nigeria's increasing reliance on imports is adding strain to the country's foreign exchange and reserves, with the value of imported manufactured goods reaching N3.96 trillion in Q3 2023. This surge represents a 38.84% YoY increase, contributing to 46.8% of total imports for the period.
The rise is attributed partly to heightened importation of used vehicles in anticipation of the yuletide season. Import bills for used vehicles saw a significant YoY increase of 274%, reaching N952.85 billion in the first nine months of 2023.
The pressure on imported goods has also contributed to the depreciation of the Naira, which closed at N1,035/$ on January 3, 2024. Analysts project a decline in earnings from manufactured goods exports, citing strained manufacturing capacity and a drop in manufacturing activities.
Afrinvest Securities analysts anticipate a decrease in earnings from the export of manufactured goods in the fourth quarter of 2023. They attribute this projection to the existing strain on manufacturing capacity observed over the last two months.
The analysts point to a contraction in manufacturing activities, with the Purchasing Managers Index (PMI) readings registering at 49.1% in October and further declining to 48.0% in November. These indicators suggest a challenging environment for the manufacturing sector, contributing to the expected decline in earnings from manufactured goods exports in the last quarter of 2023.
David Adonri, Executive Vice Chairman at Highcap Securities, highlighted various factors contributing to the surge in import bills, including loss of competitive advantage for locally manufactured goods due to high production costs, seasonal trends, and traders building inventories for festive demand. Analysts emphasize the need for policy focus on boosting local production to address the economic challenges posed by rising import dependency.
