MAN, attributes industrial zones decline to unbridled disruption of manufacturing activities by insecurity, unfriendly environment among others

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The Manufacturers Association of Nigeria (MAN) through Manufacturers CEO’s Confidence Index (MCCI) issue a quarterly research and advocacy publication of the Association, which measures changes in pulse of operators and trends in the manufacturing sector quarterly, in response to movements in the macroeconomy and Government policies using primary data mined through direct survey on over 400 Chief Executive Officers of MAN member-Companies.

READ ALSO THIS: MAN identify ongoing invasion of Ukraine negative impacts on Nigeria economy

According to he Preliminary Report & Highlights of Findings released recently disclosed that contributory factors to the decline in the Index score for the First Quarter, 2022 include eroding disposable income of consumers, high interest rate, excessive drive for revenue by Government, obvious neglect of the economy for politics, the persistent acute shortage of  Forex; insecurity, the immediate impact of  the Russian Invasion of Ukraine as seen in the hike in price of Diesel, wheat and other imported manufacturing inputs

 

The report further stated that standard diffusion factors deployed in the MCCI analytic processes include the Current Business Condition, Business Condition for the next three months. Current Employment Condition (Rate of Employment), Employment Condition for the next three months and Production Level for the next three months.  MCCI has a baseline index of 50 points that suggests a stationary point in the economy and affirms the level of confidence and performance in the quarter under review. Points above 50 points indicates that manufacturers have confidence in the economy and improvement in manufacturing performance, while any index point below 50 points indicate otherwise, it added.

 

Since, the Second Quarter of 2021, the report noted that MCCI score has remained above the 50 neutral points, reaching 55.4 points in the Fourth Quarter. The score indicted sustained confidence of manufacturers in the economy and improved manufacturing performance over the period, it added. The Index of score of the First Quarter of 2022 however stood at 53.9 points, which is a decline of 1.5 points from 55.4 points Index score of Fourth Quarter of 2021. The slight decline still confirms sustained confidence of the sector on the economy despite slight reduction in performance in the quarter.  

 

“The Aggregate MCCI score declined to 53.9 points in Q1 2022 from 55.4 points recorded in Q4 2021.  Although, on the overall, the score suggests fairly stable confidence in the economy driven primarily by improvement in current business condition. Although the performance was affected by declining employment and production conditions arising from familiar supply-side constraints. The general decline in the index point and the dimmed outlook for the second quarter evidenced by expectations of lower production, employment and unfriendly business condition, is a cause for concern. This obviously calls for the crafting of a National Response and Sustainability Strategic Plan to avert the looming economic crisis and shortages that would arise from the impact of the Russia invasion of Ukraine.

 

Findings from Sectoral analysis shows that operations of manufacturing concerns in the Wood & Wood Products, Electrical & Electronics and Motor Vehicle & Miscellaneous Assembly groups were heavily challenged in the Q1 2022.

 

Index Score of Wood & Wood Products sectoral (48.9 points); Electrical & Electronics (49.9 points); and Motor Vehicle & Miscellaneous Assembly (49.2 points) were all below the 50 base points. Affirming low confidence in the economy, poor performance and the struggling status of these manufacturing sectoral groups.

 

Analysis based on Industrials zones shows that out of the 13 Industrial Zones in Nigeria, Bauchi/Benue/Plateau, Abuja and Rivers struggled in the First Quarter of 2022. The performance of the afore-mentioned zones was clearly depicted by the Index scores of 48.3, 44.8 and 46.0 points respectively, in the period under review which fell below the 50 neutral points threshold Index score.

 

In broad terms, the lackluster performance recorded in Bauchi/Benue/Plateau, Abuja and Rivers industrial zones is attributed to the unbridled disruption of manufacturing activities by high level insecurity, rising operating cost and the general manufacturing unfriendly environment. In specific terms, peculiar contributory factors for Rivers State include the prevailing low interest in the productive sector evidenced by shrinking industrial landscape, low support for the manufacturing sector and the overly concentration on trade and services.

 

In conclusion in recapitulation, available facts and recent experiences have shown that the emergence of a challenge in one country can became a major constraint with spiral effects for the entire world.  The learning curves from recent development include the need for leaders all over the world to jointly manage global peace and deepen the cord of interdependence of countries along the line of development priorities of nations and the obvious reality that when disruption occurs in any part of the global economy, only countries with automatic stabilizers and strong internal economic mechanisms will be able to respond appropriately.

 

The trend observed in the first quarter 2022 MCCI resonates with a priority expectation, the oscillatory trajectory of the macroeconomy and fluctuating manufacturing performances observed in the last two years. In fact, the performance recorded is largely similar but with slight differing magnitude when compared with what was obtained in the last quarter of 2021. Clearly, the report noted that the prevalence of familiar  binding constraints to the steady growth of the manufacturing sector, the reverse effects of COVID-19 pandemic and the food shortages, rising inflation, foreign exchange parity, economic uncertainty, general increase in price of petroleum products, supply chain disruptions and the growing concern of future increase in the prices of  wheat and fertilizer manufacturing inputs occasioned by the Russian invasion of Ukraine are contributory factors that impacted the aggregate MCCI.  All of these clearly shows that the ongoing invasion of Ukraine will continue to have negative spiral effects on every sector of the economy if not halted as soon as possible. The implication of allowing the invasion to continue for the manufacturing sector will include enormous decrease in capacity utilization (as factories begin to experience stock-out situations), inflation, dwindling sales, lower productivity, unemployment and heightened insecurity. Certainly, all of these would also have severe implications for economic and social wellbeing of over 200 million Nigerians.

http://www.manufacturersassociation.org.ng

Although the first quarter 2022 MCCI index score of 53.9 points fell below that of the last quarter 2021, the overall result shows that even though the economy recorded positive improvement despite unstable macroeconomic fundamentals, the manufacturing sector is still largely under severe pressure, its health very well in the fringes and below the desired performance threshold. In addition, feedbacks from manufacturers identified Limited supply of electricity; High cost of local  and imported raw-materials; Persisting  acute shortage of forex for importation of machine, raw materials not available locally and persisting insecurity in the country as the first our out of the challenges limiting the performance of the manufacturing sector in the period under review. As customary, MAN will include findings in the advocacy submissions to the Government backed with detailed recommendations on measures to address identified challenges inhibiting scale and competitive production in the sector.

 

Undoubtedly, the precarious situation that the manufacturing sector is currently in and the looming dangers ahead calls for a National Response and Sustainability Strategy to guarantee the survival of sector and avoid further de-industrialization.


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