Manufacturing Inventories Rise as Costs Pressure Nigeria’s Firms

Manufacturing inventories across sectors listed on the Nigerian Exchange Limited, NGX, reached about N1.77 trillion as companies entered the second quarter of 2026.

Financial Vanguard findings show that combined inventories rose 10.6 per cent year-on-year from N1.597 trillion in Q1 2025. At the same time, combined cost of sales climbed 13.7 per cent, from N1.261 trillion to N1.434 trillion.

The figures point to a difficult operating environment. Manufacturers are holding more unsold goods while also dealing with higher costs of producing and selling their products. The rise in manufacturing inventories cuts across consumer goods, building materials, agriculture, food processing and other related sectors.

However, the figures vary widely between companies. Changes in stock levels appear to reflect different production needs, consumer demand, input costs and individual business conditions.

Among the companies reviewed, Dangote Cement had the largest inventory at N703.58 billion in Q1 2026, up 4.8 per cent from N671.55 billion a year earlier. UACN recorded one of the biggest increases, with inventory jumping 231.8 per cent to N189.55 billion from N57.13 billion.

Okomu Oil Palm’s inventory increased 90.3 per cent to N39.90 billion, while Livestock Feeds rose 35.9 per cent to N9.14 billion. PZ Cussons recorded a 29.7 per cent increase to N69.37 billion, while Beta Glass rose 28.8 per cent to N25.21 billion. Vitafoam’s inventory increased 12.3 per cent to N23.20 billion.

Other increases included Lafarge at 7.3 per cent to N110.64 billion, Presco at 3.6 per cent to N58.90 billion and International Breweries at 2.2 per cent to N95.83 billion.

Some manufacturers, however, recorded lower stock levels. Northern Nigeria Flour Mills’ inventory fell 34.6 per cent to N31.46 billion, while NASCON Allied Industries declined 17.1 per cent to N14.34 billion. Cadbury Nigeria dropped 16.9 per cent to N27.14 billion, Unilever Nigeria fell 7.7 per cent to N23.42 billion, Nestlé Nigeria declined 7.3 per cent to N167.84 billion and Nigerian Breweries dropped 6.7 per cent to N171.92 billion.

The pressure becomes clearer when production expenses are considered. While manufacturing inventories increased by 10.6 per cent, cost of sales grew faster, at 13.7 per cent. If that pattern continues, manufacturers could see their gross margins come under further pressure unless they raise selling prices or achieve stronger efficiency.

Dangote Cement recorded cost of sales of N448.73 billion, up 10.2 per cent from N407.27 billion. Nigerian Breweries’ cost of sales increased 7.4 per cent to N233.16 billion, while Nestlé Nigeria’s rose 10.8 per cent to N194.07 billion.

UACN posted the largest percentage increase in the dataset, with cost of sales rising 226.8 per cent from N41.75 billion to N136.41 billion. PZ Cussons recorded a 51.1 per cent increase to N25.04 billion, while Champion Breweries rose 90 per cent to N8.20 billion.

Some companies managed to cut costs. NASCON’s cost of sales fell 21.1 per cent to N18.89 billion, while Northern Nigeria Flour Mills recorded a 35.9 per cent decline to N5.95 billion. Okomu Oil Palm reduced its cost of sales by 24.5 per cent to N11.70 billion, while International Breweries recorded a 9.1 per cent fall to N103.61 billion. Cadbury Nigeria and Unilever, however, recorded increases of 15.4 per cent and 15.8 per cent respectively.

Fiona Ahimie, President of the Chartered Institute of Stockbrokers, CIS, said the rise reflected both supply and demand pressures. She stated: “The increase in inventories reflects a combination of supply side and demand side factors. Many manufacturers have made significant investments to improve production capacity over the past year as operating conditions became more stable and access to foreign exchange improved. As a result, production has increased.

“However, demand has not expanded at the same pace. Although inflation has moderated, prices remain elevated relative to household incomes, which have continued to weigh on consumer spending.

‘‘Many households are still prioritising essential goods and cutting back on discretionary purchases. Businesses are also becoming more cautious with inventory management and procurement decisions.

“There is also a degree of deliberate inventory buildup by some manufacturers who expect stronger demand in the coming quarters.

‘‘So, while higher inventories may suggest slower sales in some cases, they can also reflect strategic positioning in anticipation of improved market conditions.”

On production costs, Ahimie said manufacturers continued to face a high-cost environment despite improvements in some economic indicators.

She stated: “Energy remains one of the biggest cost drivers, with many companies still relying on alternative power sources. Transportation and logistics costs also remain elevated, while the prices of many raw materials, both imported and locally sourced, have remained relatively high.

“Interest rates have also stayed at elevated levels, increasing the cost of financing working capital and expansion. While exchange rate stability has reduced some of the uncertainty around imported inputs, businesses are still adjusting to the higher cost structure that followed the exchange rate reforms.

“These factors have combined to keep production costs under pressure, even though the pace of cost increases has become more manageable compared to previous periods.”

Ahimie called for better infrastructure, particularly electricity and transport networks, to reduce production expenses. “Reliable power alone would significantly reduce production costs for manufacturers that currently depend heavily on generators,” she said, while also stressing the need for consistent government policies.

She also urged authorities to improve access to affordable finance, particularly for manufacturers and small and medium-sized enterprises. Lower financing costs, she said, would support investment, productivity and competitiveness.

On demand, she said stronger job creation, better real incomes and sustained lower inflation would help restore household purchasing power.

“As consumers regain spending capacity, manufacturers will experience stronger demand, inventories will decline naturally, and production will become more efficient,” she stated.

David Adonri, Managing Director of Highcap Securities Limited, linked the inventory build-up partly to inflation and weaker consumer purchasing power.

He stated: “Inflation started spiking this year, resulting in erosion of purchasing power by consumers. Consumer pull was adversely affected. Nigeria’s economy is majorly import dependent and rising global inflation emanating from Iran War infiltrated into domestic manufacturing cost.

‘‘Rising domestic energy and distribution were other cost-push factors. Insecurity crippled several domestic sources of raw materials.’’

Adonri said reducing unsold goods and production costs would remain difficult without tackling inflation and supply constraints.

“Insecurity is another albatross stifling supply. Peace and progress go hand in hand. Without solving the insecurity challenge, the rural economy cannot function and help to close the supply gap notwithstanding an increase in public and private spending.

“After restoring a firm order nationwide, aggregate demand can be boosted in the strategic sectors of the productive economy.

‘‘These are what can revive the economy, lower production costs and enhance consumers’ purchasing power Steven Asset Management Limited, also attributed the rise,” he said.

Olatunde Amolegbe, Managing Director of Arthur Steven Asset Management Limited, also attributed the rise to both demand- and supply-side factors.

Although inflation had fallen significantly from a peak of 33.4 per cent in 2024 to 15.91 per cent in June 2026, he said the effects of earlier price increases continued to affect household purchasing power.

“Consumer demand is gradually recovering but remains below the pace required to absorb production, particularly for discretionary and non-essential goods,” Amolegbe said.

He noted that monetary policy remained restrictive, with the Monetary Policy Rate, MPR, at 26.5 per cent at the Monetary Policy Committee meeting of July 22, 2026.

“High financing costs continue to constrain consumption, inventory financing, and business expansion,” he said.

He added: ‘‘Many manufacturers have sustained production to preserve market share, meet distribution commitments and maintain efficient capacity utilisation.

‘‘However, sales growth has not kept pace with production, resulting in inventory accumulation.

‘‘Some manufacturers may also be maintaining higher inventory levels as a strategic buffer against potential supply chain disruptions or future increases in input costs’’.

Amolegbe said manufacturers still faced structural cost pressures despite greater exchange-rate stability. Earlier currency depreciation continues to affect companies that depend heavily on imported raw materials, machinery and industrial inputs.

He also pointed to high energy, logistics, transport and utility costs, alongside elevated interest rates that have increased the cost of financing working capital and investment.

Looking ahead, Amolegbe said government action would remain important for improving the competitiveness of Nigeria’s manufacturing sector. He called for continued investment in reliable electricity, transport infrastructure and logistics, as well as better access to affordable financing.

He also backed stronger local sourcing of raw materials through backward integration and targeted fiscal incentives for manufacturers.

“On the demand side, policies that promote employment, improve productivity, and support sustainable growth in real household incomes would strengthen purchasing power and stimulate consumer demand, helping manufacturers reduce inventory levels,” he stated.

The latest figures show that manufacturing inventories are rising at a time when companies are also confronting higher operating expenses and cautious consumer spending. Unless demand strengthens, manufacturers could continue to carry significant stock while facing consumer purchasing power help Nigerian manufacturers reduce their inventories and restore pressure on margins and cash flow.

Can stronger consumer purchasing power help Nigerian manufacturers reduce their inventories and restore healthier growth?