The first half of 2025 witnessed a significant surge in the cost of sales for major manufacturing companies in Nigeria, painting a challenging picture of the sector’s operational landscape. A comprehensive analysis of the unaudited financial statements of twelve prominent companies listed on the Nigerian Exchange Limited revealed a collective 19.68% increase in cost of sales, rising from N2.18 trillion in the first half of 2024 to N2.6 trillion in the same period of 2025. This escalation is primarily attributed to a confluence of adverse economic factors, including rampant inflation, persistent foreign exchange pressures, and persistent logistical bottlenecks, which have collectively driven input and operational costs to unprecedented levels. The companies surveyed represent a diverse range of industries, encompassing food and beverage, cement, and consumer goods, providing a broad perspective of the challenges faced by the Nigerian manufacturing sector.
A closer examination of individual company performance reveals a varied landscape of escalating costs. Dangote Cement Plc, the industry giant, registered the highest cost of sales, reaching N853.56 billion, a marginal increase of 2.43% compared to the previous year. This modest rise underscores the company’s sustained high production levels despite grappling with elevated input costs. Dangote Sugar Refinery Plc experienced a more substantial increase of 36.38%, with its cost of sales reaching N378.53 billion, largely due to soaring raw material prices and intricate supply chain complexities. Nestlé Nigeria Plc also faced significant cost pressures, witnessing a 27.43% increase to N356.17 billion, reflecting the pervasive impact of inflation and rising operational expenses.
BUA Cement Plc and BUA Foods Group, both prominent players in their respective sectors, experienced notable increases in their cost of sales. BUA Cement’s costs rose by 15.66% to N294.55 billion, reflecting sustained growth in cement production, while BUA Foods Group saw a more substantial 38.74% surge to N292.03 billion, driven by a combination of expanded operations and elevated raw material expenses. Other notable increases include International Breweries Plc at 36.62%, UAC of Nigeria Plc at 27.28%, and Cadbury Nigeria Plc at 32.36%, each grappling with the escalating costs of inputs, logistics, and packaging materials.
Nascon Allied Industries Plc and Presco Plc also experienced considerable increases of 43.56% and 13.62% respectively, attributed to higher production costs and inflationary pressures on input materials. FTN Cocoa Processors Plc presented a unique case, recording a staggering 1,427.52% increase in cost of sales, albeit from a relatively low base, indicative of a significant expansion in its operational scale. Finally, Champion Breweries Plc saw its cost of sales rise by 38.48%, another victim of the pervasive economic headwinds.
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, identified several key challenges confronting manufacturers in Nigeria. The volatile exchange rate, with its inherent impact on imported inputs, significantly affects manufacturers reliant on foreign machinery and spare parts. The exorbitant cost of financing, with bank interest rates exceeding 30%, further exacerbates the situation, adding a substantial burden to both cost of sales and overall operational expenses. High logistics and energy costs, driven by the price of diesel, inadequate road infrastructure, and import duties, compound the challenges faced by manufacturers, increasing the overall cost of doing business.
To navigate these challenges, Yusuf advocates for a strategic shift towards backward integration, encouraging import substitution and increased local production to mitigate exposure to foreign exchange fluctuations. He also recommends exploring alternative energy sources, such as solar and gas, to alleviate the burden of high energy costs. Furthermore, Yusuf suggests reducing dependence on expensive bank loans by exploring alternative financing options like commercial paper, offering a potentially more cost-effective approach to capital acquisition. These strategic measures, according to Yusuf, can enhance manufacturers’ competitiveness in a challenging economic environment by reducing costs and improving operational efficiency.
Tunde Amolegbe, CEO of Arthur Stevens Asset Management Limited, attributes the current inflationary wave to a sharp rise in energy costs and other operational expenses. He highlights the pervasive impact of higher energy costs on various facets of business operations, from transportation to staff remuneration, further aggravated by increased finance costs resulting from the naira’s devaluation. Amolegbe notes that many companies have responded by adjusting their pricing structures upward to offset these financial strains, resulting in increased revenue, a natural consequence of currency devaluation and escalating energy costs. This intricate interplay of economic factors underscores the complex challenges faced by Nigerian manufacturers and the need for strategic adaptation to survive and thrive in the current economic climate.
