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By Merit Ibe, [email protected]
The Manufacturers Association of Nigeria (MAN) has indicted the federal government’s hostile policies for the downturn in the manufacturing sector’s contribution to the Gross Domestic Product (GDP) in the third quarter of 2024.
The MAN quarterly economic report on Q3 2024 performance indicated a sluggish year-on-year growth of 0.92 percent in the manufacturing sector, coupled with a quarter-on-quarter deceleration of 0.35 percent.
Similarly, its contribution to GDP in Q3 was 8.21 percent, lower than the 8.42 percent recorded in Q3 2023 and lower than the 8.46 percent recorded in Q2 2024.
The association agreed that the global economy is experiencing a slowdown, driven by ongoing geopolitical tensions, rising inflation, and monetary policy tightening.
However, it decried that while some economies, such as the United States, China, and India, were turning the corner, Nigeria’s macroeconomic headwinds have persisted.
Director General of MAN, Segun Ajayi-Kadir, noted that since May 2023, Nigerian policymakers have embarked on bold economic reforms that have ignited macroeconomic crises, with inflation, unemployment, poverty, and hunger rising at alarming rates.
He said though necessary, the reforms are bereft of proper planning and policy coordination, as evidenced by the negative ripple effects on the populace, especially vulnerable individuals as well as Small and Medium Industries (SMIs).
Ajayi-Kadir highlighted that in particular, the fuel subsidy removal and exchange rate liberalization have resulted in high costs of borrowing, exorbitant exchange rates, and escalated energy prices that have taken a heavy toll on households and businesses, especially manufacturers who have been worst hit.
“At the heart of the economic turmoil are obvious contradictions of monetary and fiscal policies that have rather compounded the prevailing structural challenges. Sequel to the backlashes of the reforms, the Central Bank of Nigeria is saddled with an unenviable task of stabilizing the economy while managing public perception.”
He pointed out that the economy is currently at a critical juncture where policy misalignments must be urgently addressed, especially in the areas of inflation control, foreign exchange management, fiscal discipline, and growth enhancement.
Ajayi-Kadir said the prolonged macroeconomic headwinds, despite numerous interventions by the CBN, are clear indications that excessive adoption of monetary policies is not sufficient to tackle the inherent challenges, as they only provide limited temporary succor without addressing the issues of high energy prices, infrastructure deficits, insecurity, low industrial productivity, and limited export diversification.
“Therefore, the growing call for monetary-fiscal policy synergy is highly justified, as it is the first step to addressing the country’s economic and structural problems.”
The DG emphasized the need for policymakers to expediently pause interest rate hikes to allow for an impact assessment; honor the unsettled $2.4 billion Forex forward contract to further increase market confidence and FDI; and fast-track the passage and implementation of the four tax reform bills aimed at restructuring and streamlining tax processes, establishing a unified revenue service, and simplifying financial obligations for businesses and citizens.
On the sector performance output, growth, and contribution, Ajayi-Kadir noted that the economy is highly dominated by services, which accounted for 56.7 percent of GDP, while Agriculture and Industries contributed 24.3 percent and 19 percent, respectively.
He viewed that the dominant contribution of the Service Sector was majorly driven by sectors such as Information & Communication, Trade, and Financial & Insurance, noting that the dominance of the Service Sector portends a drawback for the country’s industrialization agenda and aspirations of reducing forex demand pressures, promoting value addition, generating mass employment, increasing export earnings, driving industrial-led growth, and ensuring sustainable development.
He explained that at 46.5 percent of industrial output, the manufacturing sector remains the leading contributor to the industrial sector. “However, its overall contribution to GDP declined year-on-year and quarter-on-quarter from 8.42 percent in Q3 2023 and 8.46 percent in Q2 2024 to 8.21 percent in Q3 2024.”
He noted that this underscores the harsh effect of hostile economic policies, which have largely constrained the country’s goal of rapid industrialization and have left the economy struggling for survival.
