By Merit Ibe, [email protected]
Nigeria’s manufacturing sector, like every other segment of the economy, continued on the downward trajectory, with multiple challenges confronting operators persisting in 2023.
Infrastructure decay, insecurity, poor electricity supply, foreign exchange shortages, and multiple taxation, continued to drag the growth of the sector and combined to make the Nigerian manufacturers very uncompetitive.
Worse still, several manufacturing firms had shut down due to the harsh operating environment while some others are just holding on by the strings. The business environment in the year under review witnessed developments that made it more challenging.
With an economy characterised by high operating cost influenced by deregulation of fuel prices and floating of the exchange rate, the business environment became tougher and could not allow operators breathe.
Generally, the Nigerian economy in 2023 was significantly influenced by global and domestic developments. Some of the impacting global developments included Russia- Ukraine war, rising coups and coup attempts in Africa, Israel -Hamas war, elevated global inflation, sharp tightening of monetary policy, slow China’s recovery, global capital flight and overlapping shocks of the corona virus pandemic.
On the local economic developments, the economy experienced elections and election-related activities, persistent inflationary pressures and very high monetary policy rates, foreign exchange crisis, high levels of fiscal debt, low GDP growth, redesign of the currency and heightened insecurity foretold serious challenges for the sector in 2023.
All theses challenges made the economy strive with low confidence level in 2023 and denied the sector the capacity to achieve significant growth craved for.
Director General, Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, said manufacturers have been bedevilled by increasing cost of energy, acute shortage of forex and the continuous depreciation in the value of naira, including other familiar challenges of the sector.
According to him, the primary driving forces that sustained production in the outgoing year have been the patriotism and resilience that the Nigerian manufacturers possess; the optimism that these challenges would eventually be addressed.
He noted that most manufacturers embarked on strategic measures to minimise the impact of the inclement operating environment on their activities such as cost cutting; products selection and prioritisation; expanding their investment in the development and production of raw materials locally; increased resort to self-energy generation and energy mix to complement the inadequate electricity supply from the national grid and dissaving retained earnings to support the current crippling condition.
He called on government to heed to the lamentations of the operators, noting that to a large extent, part of the hindrances experienced in the productive sector are largely caused by policy inconsistency and somersaults, which leave no room for proper planning and projection, thereby killing businesses and the sector.
A report by the Public Affairs and Advocacy Committee (PAAC) of the Lagos Chamber of Commerce and Industry (LCCI), showed that the slow growth and sharp drop in the manufacturing sector growth was as a result of weakened production by the interaction of strong inflationary pressure and high energy costs.
“High import tariffs and the difficulty in obtaining raw materials are other problems that have hampered the performance of the manufacturing industry.” “Despite the position of LCCI to be a devout advocate of fuel subsidy removal, we are very cognizance of the accompanied implication of twin effect of subsidy removal and exchange rate devaluation.
Hence, the PAAC advised the government to intensify its support to the vulnerable, as well as promote palliatives and infrastructures that would reduce the cost of transportation and food.”
Furthermore, while the government and stakeholders in the industry were anticipating humongous savings from subsidy removal, the twin effect of inflation that was amplified by the removal of subsidy and exchange rate depreciation increased the burden of Nigerians as well as the cost of doing business.
Former chair of MAN, Frank Onyebu, noted 2023 has been obviously challenging. “With the exception of a very small percentage of the population, everyone is feeling the pinch. The rot obviously started before 2023.
Onyebu lamented that there were huge expectations prior to the general elections that things were going to start getting better, “Much of these expectations have since dissipated.”
He pointed out that the gains expected from the removal of fuel subsidy and the liberalization of the foreign exchange market did not materialize, saying the policies created much suffering without the expected benefits mainly because the government has not invested the dividends of these policies in a positive way.
“Much of these benefits have gone into wasteful expenditure and corruption.
“The operating environment has been tough, very tough and in dire need of urgent government intervention. Unemployment, poverty and inflation are soaring while money supply, purchasing power and consumer demand are declining. The economy has continued to nosedive.
“It is my expectation that the year 2024 will be better than 2023. Having hit the rock bottom, the government really has no choice but to take urgent action to salvage this very dire situation.”