Dr Muda Yusuf, Founder, Centre for the Promotion of Private Enterprise (CPPE) says
the outlook for the manufacturing sector in 2024 will depend largely on the stability of the foreign exchange market.
Yusuf, who said this in an interview with the News Agency of Nigeria (NAN) on Tuesday in Lagos, said it would also be on the availability of foreign exchange liquidity.
Yusuf said that 2023 witnessed significant transitions, both politically and economically, accompanied by recent reforms such as the exchange rate unification, fuel subsidy, among others.
Both transformations, he said, offered new opportunities for economic growth and prosperity, though there were also some inherent shocks and challenges, especially around new inflationary pressures.
The CPPE founder, however, stated that there was good chance that the economic headwinds and shocks of 2024 would not be as severe as what was experienced in 2023.
“This is premised on a number of considerations such as the current efforts of the Central Bank of Nigeria (CBN) in clearing the foreign exchange mature obligations, removal of policy impediments to foreign exchange inflows.
“Also, the import substitution effects of domestic refining of petroleum products would have a considerable positive impact on the economic outlook for 2024.
“The efforts of government to curb the menace of oil theft and boost crude oil output would also positively impact on the outlook for foreign reserves and the stability of the exchange rate,” he said.
Yusuf stressed that challenges of insecurity, crude oil theft, rising recurrent expenditure and the social outcomes of economic reforms were potential risks to the outlook.
He said that the biggest challenge to the manufacturing sector was the huge exposure to the external sector, specifically imported raw materials.
He noted that if the CBN continued to prioritise the stabilisation of the foreign exchange market, the manufacturing sector’s outlook may improve in 2024.
Yusuf explained that the rising prospects of heightened domestic refining of petroleum products was expected to generate better backward integration and import substitution outcomes for the economy in 2024.
“The expected increase in domestic petrochemical output will hopefully ease the pressure of importation of raw materials by manufacturers.
“There are also demand side factors that could improve outlook including import substitution effects of the improved prospects of domestic refining of petroleum products.
“The prospects of growth in domestic petrochemical output would reduce import dependence by domestic manufacturing firms thus easing foreign exchange demand pressure.
“Also, the recent depreciation of the Naira exchange rate is driving an inward looking strategy by many firms and households. This may ease foreign exchange demand in the medium to long-term,” he said.(NAN)
