Worried about unhealthy state of manufacturing investment in the country, the Manufacturers Association of Nigeria, MAN, and the organised private sector have raised the alarm that the sector has been on a steady decline as its fortunes nosedived from N448.96 billion from 2016 to N176.69 in 2017.
The Director General of MAN, Mr. Ajayi Kadiri, who spoke to The Nation, noted that the recent survey conducted by MAN revealed that in the second half of 2017, manufacturing investment declined from N448.94 billion recorded at the corresponding period of 2016 to N176.69 billion.
This however indicates an investment loss of N272.25 billion, which implies that a whopping 60.6 percent of investors either closed shops or relocated out of the country.
Battling with recessionary recovery, the statistics have proven that if drastic measures are not put in place and adequately managed by the economic managers, more manufacturers would have closed shop by the last quarter of 2018 which would further deepen the economic woes.
According to MAN, investment further declined from by N152.59 billion which is 46.3 percent when compared with N329.28 the preceding half.
Sectorial group analysis has further shown that the highest proportion of total manufacturing investment in 2017 which represented 32.3 percent or N173.86 billion went to the Food, Beverage and Tobacco sector, investment the sector totaled N163.86 billion in the period under review against N221.27 billion of 2016, hence, indicating N57.41 billion or 25.9 percent decline over the period.
Kadiri however said that manufacturing responds to a lot of factors that deals with the economy, saying that manufacturing has become extremely difficult.
The MAN boss said, “There is a general anxiety on what the return on investment would be. Rate of electricity supply is still high. You have to pay more than 600 percent of what you used to pay for a container to be moved from the wharf to industrial zone. For instance, you have to pay between N850,000 to N900,000 to transport one container from the wharf to Agbara industrial zone.
“People are no more buying as consumers apathy due to disposable income has massively declined. People are not able to access credit despit the windows provided by the CBN and BOI. We have the challenge of high influx of smuggled goods.”
According to Kadiri, the existing industries form the barometer for determining how the environment is attracting investment, explaining that new investment is not coming because of the problems faced by the existing investors.
Echoing similar sentiments, a consultant to the United Nations Industrial Development Organisation (UNIDO), Dr. John Isemede, who was also the former Director General to Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), stated that the figures rolled out by MAN cannot be queried.
Isemede argued that the shortfall in the manufacturing investment could be traced to a number of trade agreements signed by the government with foreign countries without involving the manufactures who are the main players in the industrial sector.
He noted that these agreements have put the indigenous manufactures at the mercy of their foreign counterparts, who manufacture in an economy where cost of finance is at single digit rate.
The UNIDO consultant said, “Nigerian banks are killing businesses in the country, they prefer giving loans to traders and importers. Manufactures don’t get loans and support from the financial institutions. The CBN prefer giving forex to bureau de change, and when manufacturers approach them for foreign exchange, CBN would ask them to go to the black market.
“Look at the way Nigerians are treated in South Africa, Namibia, Ghana and the rest. These are the countries that Nigeria fought for. How many of these countries import from Nigeria. These are the issues the managers of the economy should consider.”
The Director General of the Lagos Chambers of Commerce and Industry, LCCI, Dr. Muda Yusuf pointed out that the numerous challenges facing manufacturers were responsible for the decline in manufacturing investment.
Yusuf stated that energy cost was one of the factors militating against industrial growth in the country, expressing that it was so because the cost of diesel has been continuously rising and it is affecting manufacturing competitiveness.
He noted that financing at over 25 percent is another challenge to manufacturers, adding that no manufacturer can be competitive at a very high cost of capital.
LCCI DG said, “Again, the problem of logistics is another problem forcing manufacturers either to shutdown of to relocate as the road infrastructure is in a very bad shape. Owing to this, evacuating raw materials from the port and distribution of manufactured products across the country becomes almost impossible as it will attract a very high cost.”
He maintained that the country has a very weak purchasing power, adding that if manufacturers manage to produce, it will be very difficult for consumers to buy as they do not have the economic power to purchase.