A recent report from the Manufacturers Association of Nigeria (MAN) has revealed that manufacturing activities in the fourth quarter of 2022 was adversely affected by escalation in the Consumer Price Index (CPI).
The report also said that continuous erosion in naira value and difficulty in accessing forex, high cost of energy, persisting insecurity and the consequences of lingering Russian Ukrainian war, also affected manufacturing activities.
MAN in its Manufacturers CEOs Confidence Index (MCCI) fourth quarter 2022, maintained that these issues among others are principally responsible for the difficult operating environment, which have led to the declining performance of the manufacturing sector in the quarter under review.
MCCI is an index constructed by MAN to measure changes in quarterly pulsation of manufacturing activities in relation to movement in macro economy and government policies.
According to the report, the Aggregate Index Score (AIS) of MCCI declined to 55.0 points in the fourth quarter of 2022 from 55.4 points obtained in third quarter of the year.
The index score of the current quarter though below that of the previous quarter, indicates that manufacturers generally still have confidence in the economy.
Across Sectoral groups, the report said, activities in the Pulp, Paper, Printing & Publishing with index score of 49.6 points and Motor Vehicle & Miscellaneous Assembly (48.4 points) are negatively affected by the challenge harsh operating environment in the quarter under review as their index scores fell below the 50 base points.
Similarly, among industrial zones, activities in Rivers/Bayelsa (48.0 points) and Cross Rivers/Akwa-Ibom (46.5 points) zones, were depressed by the high cost operating environment in the fourth quarter of 2022 as underlined by their index scores which fell below the benchmark points
Consequent upon the above trends, MAN said it is crucially important for the government to have a shift towards a better exchange rate management; and moderate the rising energy cost via better management of refined petroleum products imported into the country.
“These among other measures would no doubt help reduce the current high inflation, which is fast eating up the working capitals of businesses including manufacturing in the economy.
“The Index Score (IS) of fourth quarter of 2022 came up 55.0 points which is 0.4 points less than 55.4 points recorded in the third quarter of the year. Although the quarter recorded marginal change in IS, the performance indicates that manufacturers maintained their confidence in the economy.
“They are able to continue to navigate the harsh operating environment in the quarter to sustain production. However, the decline in the IS in the quarter is also a presage that operation in the sector is losing momentum in the face of the almost innumerable challenges. It is therefore critically important that the identified current challenges of the sector by manufacturers themselves should be quickly taken up by the government with priority attention.
“The issues of acute shortage of forex, high cost of raw materials, inadequate power supply, multiple taxes/levies, etc., should be addressed to so as not allow for further degermation in the activities of the sector. Therefore, the following recommendations are imperative:
“Prioritize forex intervention through the official market, particularly to support the raw materials and machine needs of the industries,” MAN said.
MAN further noted that there is the need to improve forex allocation to industrial sector and enhance the capacity of designated banks to efficiently process application of forex by manufacturers.
Also to grant concessional forex allocation at the official forex market to industries for importation of productive inputs that are not locally available, unify the various forex windows in the country; commit to upscaling electricity generation by at least 10,000MW; Egypt built 10000MW in 2 year.
MAN equally stressed the need to encourage further investment in electricity value chain, generation, transmission and distribution.
“Sustain the Eligible Customer initiative to improve electricity supplied to the manufacturing sector; embrace and support significant development of energy mix and renewables: the country has huge potentials for Solar and Wind energy sources; resuscitate the existing national refineries to produce fuels locally; allow gas to be supplied to domestic users including manufacturers at international export price plus $1; that $3.2+$1 rather than the current $8.76 per cubic metre,” MAN said.
