LAST week, the Manufacturers Association of Nigeria (MAN) disclosed that its members were groaning in pain as all the major performance indicators in the sector declined in the second quarter of 2023 (Q2’23). The association, which made its feelings known in the MAN CEO’s Confidence Index (MCCI), lamented that the slow recovery from the dire impact of the naira crunch caused about 30 percent decrease in sales for consumer goods and cement respectively. According to the association, “manufacturers are extremely groaning in pain due to these issues that are frustrating their contribution to the economy.” It said that the operating environment impacted most negatively on the activities of motor vehicles and miscellaneous assembly, which deteriorated further below the benchmark of 50 points from 48.6 to 46.7 points. Operators, it said, were adversely affected by the exorbitant new premium rate for motor insurance and the abrupt subsidy removal which significantly worsened sales performance and increased consumers’ preference for fairly used vehicles as a result of low purchasing power.
It said: “Production and distribution costs escalated by 17.3 percent in the quarter under review. Capacity utilisation nosedived further by 5.6 percent from a contraction of 5.0 per cent witnessed in the preceding quarter. The volume of production contracted by 6.1 percent in the quarter under review from a contraction of 13 percent recorded in the previous quarter. Manufacturing investment dipped further by 5.6 per cent in the second quarter of 2023 from 3.0 percent contraction recorded in preceding quarter. Manufacturing employment reduced further by 5.7 percent in the second quarter of 2023 from 3.0 percent contraction recorded in the preceding quarter. Sales volume plummeted by 6.3 percent in the second quarter of 2023 against the 13 percent contraction witnessed in the preceding quarter. Cost of shipment rose by 14.3 percent in the second quarter of 2023 though it witnessed a slowdown from the 20 percent increase recorded in the first quarter of 2023.” The association deplored the slow recovery from the cash crunch, high cost of energy, high transportation cost and the abrupt removal of subsidy towards the end of the second quarter of 2023.
Even if the MAN had not rolled out the foregoing damning statistics, Nigerians bearing the brunt of the unfavourable socioeconomic climate know that the situation in the country is unfavourable and unbearable. Manufacturing being at the core of a nation’s production and productive capacity, it is indeed unfortunate that the already terrible situation in the country, especially following the COVID-19 crisis, was compounded by a currency redesign crisis and accompanying cash crunch that nearly crippled companies, with adverse decreases in sales. Even at the moment, manufacturers have to go the extra mile in sourcing for forex and the cost of production is literally up in the skies.
To say that the Nigerian operating environment has become negative on account of the abrupt and peremptory petrol subsidy removal and the unification of foreign exchange rates by the present government, which were done without commensurate action to offset the deleterious effects on the people, is to state the very obvious. It is safe to say that the country and the government are in a quandary, which would have been anticipated if only serious contemplation and reflection had undergirded the pronouncements of the new policies. The significance and centrality of manufacturing to the workings of any human economy in providing engagement for people and supply of goods ought to have propelled the government to ensure the healthy continuation of manufacturing activities even within the context of the policies to be introduced. That the government and the society are now faced with dwindling production and productive engagement while the government is pretending to reenergize the economy with the new policies is a sad commentary on the depth of thought that informed the current policies. We believe that it is important for the government to speedily and positively respond to the lamentations of the manufacturers and arrest the gradual depreciation affecting the sector.
If manufacturers are to be assured of a chance of sustaining their businesses, the government must prioritise achieving a low and stable foreign exchange rate and sustainable prices for energy rather than seeking to leave matters in the hands of market forces as it thought it wanted to do.
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