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Stories by Merit Ibe
Manufacturers have decried increase in production and distribution costs to 31 per cent in the last quarter of 2020 from 27 per cent recorded in the third quarter.
The Manufacturers Association of Nigeria (MAN) explained in its Manufacturers CEOs Confidence Index (MCCI) that the persisting effect of the pandemic, its second wave, lingering backlashes of the #Endsars protests and other challenges confronting the sector affected its performance.
According to MAN, the depreciation in value of the Naira reduced manufacturing production, as observed in the various foreign exchange crises, adding that high cost of import bill for the productive inputs decreased working capital and fed into commodities’ prices, thereby making the sector less competitive.
The local producers explained that the forex crisis in which Naira value depreciated among convertible currencies such as the US dollar, strangulated and reduced the size of manufacturing in the country, and caused manufacturing raw-materials and machinery imports to be more expensive.
On the effects of the pandemic on the macroeconomic ambience, as far as production and distribution of goods were concerned, the survey indicated that 96 per cent of the manufacturing CEOs that responded reported an increase in production and distribution costs in the sector due to the prevailing macroeconomic environment.
“This is supported by the rising aggregate prices, the continuous erosion of the value of Naira, increase in electricity tariff, increase in price of PMS, high cost of gas and the distortion caused by the Endsars protest in the period.
“Production and distribution costs increased to 31per cent in the fourth quarter of 2020 from 27 percent recorded in the third quarter of the year.
“In the fourth quarter of 2020, manufacturing investment declined by 19 percent from 18 percent recorded in the third quarter of the year.”
In the current survey (Q4 2020 MCI), most manufacturers also reported not being able to adequately source foreign exchange for importation of productive raw-materials and machinery that are not available locally.
“There is no doubt that the macroeconomic ambience that prevailed in the last quarter was still influenced by the onslaught of COVID-19 as business activities sluggishly resumed in the period.”
The manufacturers, however, noted that in the post-lockdown easing and emergence of second-wave of COVID-19 periods, it is important that government begins to critically consider ensuring that forex is allocated to manufacturers at the official rate, particularly for importation of machines and raw-materials that are not at the moment produced in the country.
The manufacturers said “it is important that government ensures modalities and access to COVID-19 stimulus to manufacturing companies.”
The manufacturers had issues with the lending rate which they complained had remained at two digits, and 71 per cent of the CEOs agreed that this did not encourage productivity in the manufacturing sector in the period under review.
They want the central bank to “fast-track” the move toward a single exchange rate to ensure transparency in the market.
“The cost of borrowing in the country remains at double digits even amidst the reforms that are meant to culminate in lower rates to engender the country’s economic recovery process.
“Special single digit loans offered by development banks are still hard to leverage on as conditions to access the loans through commercial banks are often overwhelming and laden with additional charges that will eventually make the interest rate double digit.”
The manufacturers, therefore called on government to give significant attention to the experiential challenges identified by manufacturers and recommendations made to fully restore manufacturing activities to the path of sustained growth.
“In 2021 therefore, it is imperative that the management of the macro-economy is approached more pragmatically and the development of the productive capacities of the nation enhanced intentionally.
“It is therefore, pertinent that economic managers of the country pay attention to the measures and recommendation contained in this report to address the identified challenges and points of low confidence with a view to restoring manufacturing to the path of meaningful growth in 2021,” MAN added.
