Rising Demand Not Translating To Higher Manufacturing Margins – Expert

The managing director and chief executive officer of Coleman Technical Industries Limited, George Onafowokan, has said that while demand in Nigeria’s manufacturing sector has improved in 2026, rising input and operating costs continue to squeeze profit margins.

Onafowokan, who spoke while assessing manufacturing activities in the third quarter of 2026, said the improvement in the Purchasing Managers’ Index (PMI) was a positive indication of increased industrial activity.

He noted that the PMI had risen from 50.6 to 52 for industry, showing that manufacturers were buying more and experiencing increased demand.

According to him, however, increased demand and turnover have not automatically translated into improved margins as manufacturers continue to contend with higher operating costs.

“Demand actually has improved. Anybody that says demand has not improved in 2026 as an industry is either inefficient or something is wrong with their actual structure or strategy,” he said.

Onafowokan explained that manufacturers were recording higher volumes of orders but were unable to fully pass increased input costs to consumers, resulting in tighter margins.

He said the situation has forced manufacturers to focus on increasing production volumes and capacity utilisation to achieve economies of scale and sustain their businesses.

On financing costs, he described the reduction of the Monetary Policy Rate (MPR) from 26.5 per cent to 23 per cent as a ‘reset’ rather than a cut, saying the move would help businesses better project their costs.

He said the reduction has already begun to provide some relief, noting that improved liquidity among banks has increased competition and created room for customers to negotiate more favourable lending rates.

Onafowokan projected that average interest rates could eventually move to between 18 and 20 per cent, a development that would reduce financing costs and ease pressure on businesses.

He also said the stability of the naira has improved business confidence and made it easier for manufacturers to plan investments over longer periods, adding that relative stability in the foreign exchange market has reduced currency-related risks and encouraged new investments into the industrial sector.

He said Q3 2026 showed signs of greater stability and growth in manufacturing, although tight margins remain a major concern.