Nigeria's manufacturing sector, once a cornerstone of the nation's economy, is currently facing significant challenges. The sector's contribution to the Gross Domestic Product (GDP) has declined from 16.04% in Q4 2023 to 12.68% in Q2 2024, marking a 20.95% decrease over six months. This downturn underscores the urgent need for process optimization to enhance efficiency and competitiveness.

The High Cost of Inefficiency

Operational inefficiencies are costing Nigerian manufacturing firms millions annually. A study focusing on manufacturing firms in Rivers State revealed a significant positive correlation between process optimization models and operational efficiency. Specifically, real-time optimization and maintenance optimization were found to enhance cost minimization and capacity utilization.

Moreover, the adoption of Artificial Intelligence (AI) technologies has shown promise in optimizing manufacturing processes. Research indicates a substantial positive correlation between AI adoption and manufacturing efficiency, with AI facilitating enhancements in operational analytics.

Read more: Navigating Global Challenges Affecting Nigeria’s Manufacturing Industry 

Key Challenges Hindering Optimization

Several factors contribute to the inefficiencies plaguing Nigeria's manufacturing sector:

• Inadequate Infrastructure: Unreliable electricity supply and poor transportation networks disrupt production schedules and increase operational costs. Nigeria's national power grid frequently collapses, leading to significant economic losses estimated at $29 billion annually.
• Limited Technological Adoption: Many firms are yet to integrate modern technologies like AI and automation, which are crucial for streamlining operations and improving product quality. A study analyzing the impact of AI adoption on business process automation and competitiveness in the Nigerian manufacturing industry found that AI technology significantly improves operational efficiency and competitive advantage for companies.
• Skilled Labor Shortage: There is a deficit of adequately trained personnel capable of operating advanced manufacturing equipment and implementing process improvements. The Federal Government has highlighted that Nigeria has only 50% of the skilled workforce needed in the power sector, reflecting a broader issue of skilled labor shortages across industries.
• Policy and Regulatory Constraints: Unfavorable government policies and regulatory bottlenecks hinder the ease of doing business and discourage investment in process optimization initiatives. Importers report erratic application of customs regulations, lengthy clearance procedures, costly port docking and unloading costs, and corruption, making operations at Nigerian ports among the most expensive in the world.

The Path Forward

To reverse the declining trend and unlock the sector's potential, Nigerian manufacturing firms should consider the following strategies:

• Invest in Technology: Embrace AI and other advanced technologies to enhance operational analytics, predictive maintenance, and overall efficiency.
• Enhance Workforce Skills: Implement training programs to upskill employees, ensuring they can effectively utilize new technologies and methodologies.
• Infrastructure Development: Collaborate with government and private sectors to improve infrastructure, particularly in power supply and logistics.
• Policy Advocacy: Engage with policymakers to create a more conducive regulatory environment that supports manufacturing growth and innovation.

By addressing these challenges and embracing process optimization, Nigerian manufacturing firms can significantly reduce losses, improve efficiency, and contribute more robustly to the nation's economic growth.

Read more: AI Adoption: Redefining Efficiency and Innovation in Your Business

Conclusion

Process optimization in Nigeria’s manufacturing sector is no longer a luxury—it’s a necessity. As firms navigate with outdated systems, rising operational costs, and global competition, the cost of inefficiency continues to climb. By embracing digital tools, upgrading infrastructure, and adopting data-driven strategies, manufacturers can unlock new levels of productivity and profitability.

At Stransact Chartered Accountants, we support manufacturing businesses in identifying inefficiencies, optimizing operations, and achieving sustainable growth. From strategic audits to digital transformation advisory, our team helps you build a smarter, leaner, and more competitive enterprise.

Need help optimizing your manufacturing processes? Reach out to us at [email protected] for expert guidance.