The Manufacturing Association of Nigeria (MAN), has listed; High and unstable exchange rate, Prolonged foreign exchange scarcity, Escalated cost of energy, Unstable import duty rate, high cost of borrowing and further rise in inflation as reasons for decline in investment in Nigeria.
This was revealed in a survey conducted by the Manufacturers Association of Nigeria (MAN).
The survey’s report, titled, “Manufacturers’ CEO Confidence Index (MCCI),” covered the impact of macroeconomic environment on key manufacturing indicators such as production and distribution costs, capacity utilization, volume of production, investment, employment, sales volume and cost of shipment in the first quarter of 2024 (Q1’24).
The report revealed: “All of these grossly escalated the cost of manufacturing operations, distorted the manufacturing value chain, discouraged investments, increased job losses, and reduced sales volume.”
“Production and distribution costs surged further by 20.7% in the quarter under review from the 21.73 per cent increase witnessed in the preceding quarter,” It added.
While, capacity utilization declined further by 9.76% in Q1 2024 from 3.81% witnessed in the preceding quarter.
“The volume of production slid further by 10.14% in Q1 2024 from a contraction of 4.6% recorded in the previous quarter.”
The report added, “manufacturing investment dipped further by 5.16% in Q1 2024 from 2.8% contraction recorded in the preceding quarter.”
While the “Manufacturing employment further declined by 5.27% in Q1 2024 from the 4.46% contraction recorded in the preceding quarter.
“Sales volume fell by 7.16% in Q1 2024 compared to the decline of 1.62% witnessed in the preceding quarter.
“Cost of shipment rose further by 22.16% in Q1 2024 from the 19.48% increase recorded in Q4 2023.”
The disaggregation of macroeconomic effect by sectoral groups, according to the report, showed that, “Food, beverages & tobacco, chemical & pharmaceuticals, electrical & electronics and motor vehicle & miscellaneous assembly groups were worst hit by the effects of unstable macroeconomic environment on production and distribution cost, capacity utilization, production volume, investment employment, sales volume and cost of shipment.”
The report also provided insight into the governments’ poor performance in the productive utilization of capital expenditure.
The report stated, “Adequate government capital expenditure is required to provide the big-push funding for the infrastructure development needed to reduce logistics costs and promote the competitiveness of the manufacturing sector.”
It, however, added, “unfortunately, government capital expenditure has failed to increase productivity in the manufacturing sector due to inadequate capital budget allocation, poor implementation, low domestication of capital projects and inability to prioritize infrastructure in industrial hubs.
“The delay in making further amendments to the Public Procurement Act and failure to highly domesticate capital projects through local supply of building materials are some of the long-standing obstacles.
“Also, the slow implementation of the 2023 capital budget has delayed the implementation of the 2024 budget four months after its approval. “Moreover, the low financial dependence of many sub-nationals has highly linked the execution of their capital projects to the Federal Government budget.”
The survey also covered perspectives of manufacturers on the implication of the operating environment on manufacturing activities in Q1 2024 by focusing on multiple regulation, multiple taxes, access to the national ports, local sourcing of raw materials, inventory of unsold manufactured goods, and patronage of Nigerian manufactured goods by government MDAs.
According to the report, 82.2% of the chief executive officers of manufacturing firms that participated in the survey “confirmed that over-regulation by the government depresses manufacturing productivity.
“Also, 85.1% attested that multiple taxations depressed productivity in the sector and 66.7% affirmed that port gridlocks negatively affect productivity in the sector.”
The manufacturers, therefore, urged the government to place the development of the manufacturing sector at the front burner of its economic policies as the sector is the most essential for sustained economic growth and shared prosperity.
Although the manufacturers association acknowledged the efforts of government aimed at revitalizing the manufacturing sector, it however stated that, “It must be made clear that most of these policy initiatives have not resulted in a win-win situation.”
