MAN says Nigerian manufacturing sector, grew by 4.9 percent in 2022’s Q1

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The Manufacturers Association of Nigeria (MAN) said Nigerian manufacturing sector, grew by 4.9 percent in the first quarter of the year. However, he noted that in Nigeria, the down risks in the manufacturing sector remains the disruption of global supply and the increasing commodity prices, which were the off- shoots of the Russian-Ukrainian war.

 

Segun Ajayi-Kadir, Director General of MAN in his Executive Summary of H1 2022 Economic Review released stated that capacity utilization in the manufacturing sector increased to 57.9 percent (year-on-year) in the first half of 2022 from 52.2 percent recorded in the same half in 2021; thus, indicating 5.7 percentage point decline over the period. However, he noted that it declined by 1.1 percentage points (half-on-half) from 59 percent recorded in second half of 2021.

 

“The oscillatory and sub-optimal capacity utilization of the sector in the period under review aligned with the risks and difficulties posed by the lingering effect of COVID-19 pandemic and the adverse impact of the Russian-Ukrainian war such as the rising commodity prices and disruption of global supply chain in the period.

 

“However, notwithstanding the challenges in the period, more capacities came up in the Cable sub- sector with the commencement of optical fibre production by Coleman Technical industries, the first of its kind in the whole of ECOWAS region.

Manufacturing sector factory output value increased to N3.99 trillion in first half of 2022 (year-on-year) up from N3.66 trillion recorded in the same half in 2021; thus, indicating N0.33 trillion or 9.0 increase over the period. It also increased by N0.26 trillion or 7.0 percent (half-on-half) when charmed with N3.73 trillion achieved in the second half of 2021. He revealed that production was strongly hampered by lack of forex for importation of raw materials that are not available in the country in all the sectoral groups, safe for Food sub-sector which has undergone a significant level of backward integration.

 

However, MAN DG stressed that the N10 increase of Excise Duty on non-alcoholic drinks grossly affected production in that segment of the sector. In addition, the implementation of migration of National List to Chapter 99 of ECOWAS Common External Tariff (CET) is perverse with bureaucracy and complexities among Government agencies, leading delay in getting raw materials to factories, he added.

 

Specifically, he said the basic metal group are heavily challenged by the lowering of duty to Annealed Cold roll to 5 percent from the previous 45 percent, which made domestic manufacturing of the product uncompetitive.

 

Also, activities in the Motor Cycle Assembly sub-sector was severely affected following the suspension of motor cycles in some areas across States, particularly in Lagos.

 

Moreso, the increase in the duty of paper from 5% to 20% adversely affected productivity in the Paper products sub-sector in the period under review.

 

Ajayi-Kadir pointed out that manufacturing sector local raw materials utilization steepened to 52 percent (year-on-year) in the first half of 2022 down from 53 percent of corresponding half in 2021; thus, indicating 1 percentage point decline over the period.

However, it increased by 2 percentage points (half-on-half) when compared with 50 percent recorded in the second half of 2021, he added.

In his words: The manufacturing sector is generally faced with limited investment in domestic production of raw materials for utilization in most of the sub-sectors, which is as result of limited funding and policy incentives in the country. The Basic Industrial Chemical sub-sector faced severe inactivity in the first six months of 2022 due to lack of domestic production of basic chemicals. This therefore, demands for the need to resuscitate the local refineries to encourage investment in petrochemical development in the country.

 

Inventory of unsold finished products in the manufacturing sector steepened to N187.08 billion (year-on-year) in the first half of 2022 down from N214.83 billion recorded in the first half of 2021; thus, indicating N27.75 billion or 12.9 percent decline over the period. However, it shows an uptick of N17.33 billion or 10.2 percent when compared with N169.75 billion recorded in the second half of the year. Inventory of unsold manufactured product remained high in the period under review due to high commodity prices occasioned by high cost product; and low level of income among firms and households.

 

Manufacturing sector investment up ticked to N178.39 billion (year-on-year) in the first half of 2022 from N144.14 billion recorded in the corresponding half of 2021; thus, indicating N34.25 billion or 23.7 percent increase over the period. However, it increased by N17.51 billion or 10.8 percent (half-on-half) when compared with N24 billion recorded in the second half of 2021. Although statistics show that investment increased in the period, this was due to inflationary effect as investment was grossly affected by shortage of forex and limited funding in the period under review.

 

In addition, he said the increase in Royalty Rates on all solid minerals – limestone (233.3 percent), marble (33.3 percent), laterite (33.3 percent), clay (25 percent), Shale (20 percent), Gypsum (20 percent) and clay (100 percent) – by the Federal Ministry of Mines and Steel Development in the period. The increase has adverse consequences on the needed private sector investment in the development of solid mineral in the country, he noted.

 

According to him, in the line with the outcomes of surveys conducted by the Association since 2013, the total cumulative direct jobs created in the manufacturing sector was estimated at 1,679,984 as at the end of the first half of 2022. Specifically, he added that eight thousand, five hundred and forty-three (8543) jobs were created in the first half of 2022 as against 7602 jobs recorded in the corresponding half of 2021 and 8508 in the second half of 2021.

“The marginal increase in jobs created in the sector in the period under review was due to positive and continuous adjustments in manufacturing activities to accommodate the current economic hardship and sustain production by manufacturers.

 

He disclosed that electricity supply from the national grid to the sector degenerated in the period under review. Although, average daily supply to the sector increased to 12 hours in the first half 2022 from 11 hours of the second half of 2021, the average number of outage per day increased 6 times from 3 times recorded in the preceding half, which more than off-set the increase in supply in the period. The poor power supply from the grid fueled self-energy generation among manufacturers as expenditure on alternative energy source soared to N67.77 billion in the first quarter of 2022 (year-on-year) up from N32.18 billion recorded in the first half of 2021 and N45.04 billion of the second half respectively.

 

“Cost of Funds to Manufacturers Average lending rate to the sector from the commercial banks increased to 23.5 percent (year-on-year) up from 19 percent of the corresponding half in 2021, but declined by 0.5 percentage point when compared with 24 percent interest charged to manufacturers in the second half of 2021. The growing lending rate in the economy is underscored by among others the upwards review of the Monetary Policy Rate (MPR) from 11.5 percent to 13 percent by the CBN in May 2022 even though the asymmetric corridor at +100/-700 around MRP; Credit Reserve Ratio (CRR) at 27.5% and Liquidity Ratio at 30% remained unchanged; and the rising global interest rate due to the Russian-Ukrainian face-off.


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