Taking Nigerian Manufacturing to the Next Level: Key Takeaways From MAN’s 2022 Review

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,Otunba Francis Meshioye, President, Manufacturers Association of Nigeria(MAN)

The Manufacturers Association of Nigeria (MAN) recently released its second-half 2022 Executive Summary Bi-Annual Economic Review, which shed light on the challenges faced by the Nigerian manufacturing sector and provided recommendations for addressing them. The report highlighted various factors that significantly impacted the industry, including the war between Ukraine and Russia and the Central Bank of Nigeria’s (CBN) policy on Redesigning the Naira.

The invasion of Ukraine and subsequent war had far-reaching consequences on global supply chains, as both countries played vital roles in supplying agriculture produces, energy, and other essential commodities worldwide. As the conflict escalated, production in Ukraine and Russia suffered, leading to a rise in global commodity prices and subsequent global inflation.

Nigeria, too, experienced the immediate effects in the second half of 2022. The cost of wheat and other food inputs increased, fuel prices, especially diesel, rose by over 50 percent, and transportation logistics costs surged. These challenges compounded the difficulties already posed by the ongoing COVID-19 pandemic. Additionally, the CBN’s Naira policy, aimed at bringing N3 trillion under the control of the banking system, resulted in a cash crunch that severely affected economic activities, particularly in the manufacturing sector.

The survey conducted by MAN aligned with the GDP reports from the National Bureau of Statistics, which revealed a decline in the manufacturing sector’s output growth. It recorded a -1.91 percent decline in the third quarter of 2022, followed by a slight recovery to 2.83 percent in the fourth quarter. It became evident that addressing the challenges identified by manufacturers was critical for the sector’s revival.

To combat the obstacles, MAN recommended several key measures. The first recommendation focused on improving forex availability, particularly through the official market, to support industries’ raw material and machinery needs. It suggested enhancing forex allocation to the industrial sector and improving the efficiency of designated banks in processing manufacturers’ forex applications. Granting concessional forex allocations for the importation of necessary inputs not locally available and unifying various forex windows in the country were also proposed.

Energy and power supply emerged as another crucial area for improvement. The report emphasized developing and implementing a roadmap for improved power supply, emphasizing off-grid solutions and independent power projects led by the private sector. It called for increased investment in the electricity value chain and the commitment to add 10,000MW to the country’s current electricity distribution. Furthermore, the adoption and support of renewable energy sources like solar and wind, the resuscitation of national refineries for local fuel production, and optimizing crude oil and gas production were recommended.

Resuscitating domestic refining was also highlighted, urging a review of the current status of the national refineries and commissioning the Japanese company CHIYODA Group, responsible for their construction, to rehabilitate them. The report stressed the need to review the Nigerian energy policy, encourage private sector investment in gas aggregation, and revive the petrochemical industry.

To strengthen raw material production, supply, and utilization, MAN suggested incentivizing investment in local development and production, particularly for Active Pharmaceutical Ingredients (API) and basic chemicals. Backward integration and resource-based industrialization were recommended, along with a reversal of duty on Annealed Coldroll back to 45 percent.

Taxes, government regulations, infrastructure, funding, and economic/industrial policies were other areas of concern. MAN called for the publication and implementation of approved harmonized taxes and levies, the reduction of excise duties, and the development of frameworks to facilitate the transition of informal sector operators to the formal sector. It stressed the importance of investing in transportation infrastructure, resuscitating rail tracks, streamlining port operations, and ensuring the efficient disbursement of development funds for the industries.

In conclusion, MAN’s Bi-Annual Economic Review for the second half of 2022 provided valuable insights into the challenges faced by the Nigerian manufacturing sector. The report’s recommendations aimed to address these issues and revitalize the industry, emphasizing the importance of improving forex availability, energy supply, raw material production, tax regulations, infrastructure, funding, and stable economic policies. Implementing these recommendations would be crucial for the sector’s recovery and future growth.

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