By Merit Ibe

The Manufacturers Association of Nigeria (MAN) has described the alarming upward  inflationary trend in the country as a threat to the envisaged manufacturing and industrial sectors’s growth.

The association  also complained that the unstable naira- dollar exchange rate has made it difficult for medium-long term planning, no matter how short the transaction period.

Director-General of MAN, Segun Ajayi-Kadir, who commented on the trend said it was adversely affecting the operations of the manufacturing sector, pointing out that elevated inflation served as a significant sign of underlying macroeconomic weaknesses the authority has neglected.

It is important to note that addressing inflation is a complex and long-term endeavor that requires a coordinated effort from various stakeholders, including the government, central bank, private sector.

“It appears evident that the continuing inflationary pressure experienced in the country is attributable to the fallout of recent government policy and measures, including removal of fuel subsidy and the unification of exchange rates. Additionally, concerns about increasing energy costs and widespread insecurity in food-producing regions are exacerbating the inflationary pressures.

“Furthermore, the ongoing rise in inflation erodes savings and incomes, prompting the CBN to raise the country’s benchmark interest rate to its highest level in nearly twenty years. The apex bank’s effort was aimed at arresting the soaring inflation and defending the naira which has continued to drop in value both at the official and parallel markets.

The increase, he revealed, has led to a rise in the cost of production, higher costs of raw materials, labour and other production inputs and reduced profit margin leaving manufacturers to pass on higher costs to consumers in the form of higher prices.

Ajayi-Kadir noted that the resulting weak consumer spending would worsen the high stock of inventory that the manufacturing sector was already confronted with.

“The manufacturing sector has been struggling from the combined effect of COVID-19, deteriorating infrastructure, high regulatory compliance cost and tax obligations.

“So, rising and high inflation, perennially high interest rates and scarce/high rate of forex has compounded the downturn in the sector.

He explained that the concerted efforts of government to recover the economy would have to address the challenges, advising government to intensify efforts at stabilising the consumer price level through growth in agricultural output and diversification of the Nigerian economy to guarantee stable prices in both agricultural and manufactured goods.

Ajayi-Kadir also pushed for the resuscitation of moribund industries in the country to boost output, thereby reducing prices.

“Government should also partner the MAN to accelerate the success in the resource based industrialisation initiative of the association, assist manufacturing productivity with credit at competitive price.

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“This could be in the form of concessions and enhancing existing special credit window

For the  Centre for Promotion of Private Enterprise (CPPE),  tackling inflation requires urgent government intervention to address the challenges bedevilling production, productivity and insecurity in the economy.

Director of the centre, Dr Muda Yusuf, made the assertion following the persistent inflationary pressures in the economy which continue to be a  major cause for concern, especially due to the acceleration effect on poverty.

With the headline inflation which rose to 26.7 percent in September as against 25.8 percent in August and  food inflation which maintained its uptrend rising to 30.64% in September, Yusuf viewed that the  economic growth may remain subdued while the risk of stagflation heightens.

Yusuf lamented  that the purchasing power had continued to slump over the past few months,  recommending that the real sector of the economy needs to be incentivised to ensure moderation of production costs.

“The government could tweak the tariff policies by granting concessionary import duty on intermediate products for industrialists. The same is true of investors in logistics sector.

“The effects of high energy cost is devastating.  We need a declaration of state of emergency in the energy and power sectors.

It will be very difficult to tame inflation if we do not fix power, logistics and forex.

“Regrettably,  there are no quick fixes in these areas.  But it is important to prioritise these issues and drive accelerated progress with the right strategies.”

He pointed out that key inflation drivers were not receding, if anything, “they have become even more intense.”

The key inflation drivers he listed include the depreciating exchange rate, surging

transportation costs,  logistics challenges,   forex market illiquidity, astronomical hike in diesel cost,  climate change,  insecurity in farming communities and structural bottlenecks to production.

“These are largely supply side issues. Elevated inflationary pressures also aggravate pressure on production costs, weakens profitability, erodes shareholders value and dampens investors confidence.

Not many producers or service providers can transfer cost increases to their consumers.  The implication is that manufacturers and other investors are taking a big hit. Products with high demand elasticity are more vulnerable.