ZONAL MCCI:  MAN Attributes Rivers, Abuja industrial zones poor performance to multiplicity of taxes by Government agencies, poor access to forex, amongst others

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The Manufacturers Association of Nigeria (MAN) in the Manufacturers Confidence Index (MCCI) index constructed to measure changes in quarterly pulsation of manufacturing activities in relation to movement   in the macroeconomy and Government policies has disclosed that of the14 industrial zones, Index scores for 12 zones were above 50 points benchmarks while the other two, Rivers and Abuja fell below the benchmark in the quarter under review.  The report further stated that the Index is therefore barometer used by MAN to aggregate the views of CEOs of manufacturing companies on changes in the economy. The Association gave insert the items that make up MCCI processes to 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 also measures changes in key macroeconomic indicators including sector specific factors that represent Government activities and policy measures in the economy. Consequently, the effects of movements in Foreign Exchange, Lending Rate, Credit to the manufacturing sector and Capital Expenditure of the Government were also measured.  In addition, it gauges the outcome of changes in business operating environment factors which include Over-regulation, Multiple taxes/levies, Access to seaports, Local raw-material sourcing, Government patronage of Nigerian manufactured goods and Inventory of unsold manufactured products.

 

The MCCI is administered on the 400 Chief Executive Officers (CEOs) of MAN member-companies across the six geo-political zones and Sectoral Groups of the Association through MAN’s branch networks.

 

The performance of the 14 industrial zones of MAN spread across the six geo-political zones of Nigeria were also measured to ascertain the specific level of confidence of CEOs of manufacturing concerns operating in each of the zones using the same diffusion factors deployed for Sectoral groups. The perspectives of these zones are presented in Figure ‘iii’.

According to the report, of the 14 industrial zones, Index scores for 12 zones were above 50 points benchmarks while the other two, Rivers and Abuja fell below the benchmark in the quarter under review. Index score of Rivers fell to 47.5 points from 53.4 points obtained in the third quarter of 2021. In similar vein, Index score for Abuja decreased to 43.3 points in the fourth quarter of 2021 from 48.6 points recorded in the preceding quarter.

 

MAN disclosed that the contributory factors to the dwindling performance of Abuja and Rivers industrial zones include multiplicity of taxes triggered by excessive drive of Government, poor access to forex for importation manufacturing inputs, triple rise in cost of transportation of goods due to refusal of transporters in Lagos to take cargos to industries in these locations due to insecurity, rising cost of production and the general reduction in disposable income of consumers. While there is growing confidence in the economy in the majority of the industrial zones, despite prevailing economic and COVID-19 related challenges, the perspectives of manufacturers in Rivers and Abuja indicate no level of confidence in the economy.

 

 

“Movement in the key manufacturing sector indicators discussed above show that the macroeconomic environment is gradually improving as the impact on   the indicators in the quarter under review generally receded. However, there is still the challenge of employment in the sector while cost of shipping is still high and escalating.  It is therefore imperative that Government should evaluate the current processes for allocation of available forex to ensure it is allocated to the productive sectors of the economy, particularly at official rate for importation of raw-materials and machines that are not currently produced or available in the country.

 

Nevertheless, MAN said Manufacturing performance is still below the mark, notwithstanding the marginal improvement in the operating environment during the quarter under review, as the sector is still plagued by numerous familiar constraints.  Some of these challenges enumerated by manufacturers are clearly presented in this report.

 

Consequently, Association said, in order to improve the performance of the sector, Government needs to intentionally put in place mechanism that will address these challenges permanently by considering and implementing the following recommendation:

  1. Further incentivize investment in the development of raw-materials locally through the Backward Integration and Resource based industrialization initiates. Government should call for more investor to key into these initiatives with appropriate and definite incentives. For instance, there is need for urgent investment and production of Active Pharmaceutical Ingredients (API) in the country; investment and production of machines; iron and steel; petrochemical materials, etc to support manufacturing activities.

 

  1. Give specific attention to the security of life and investment in industrial areas; properly delineate and upscale security infrastructure in the various industrial areas in the country, particularly in the northern part of the country for priority attention. Government should also quickly invest in modern security such as drones, camera, etc. for robust monitoring of the areas.

 

  • Ensure effective allocation of available forex to productive sectors, particularly the manufacturing sector for importation of raw materials and vital machine and equipment that are not available locally. Government also needs to expressly direct the Central Bank of Nigeria to consult with the Ministries of Industry Trade & Investment and effectively engage MAN on measures for improving forex supply to manufacturing concerns.

 

  1. Direct the Ministry of Science Technology and Innovation to inaugurate the Secretariat that will implement the strategies for the Executive Order and SON to designate local manufacturers of LPG Gas Cylinders as priority provider of the 10 million Cooking Gas Cylinders to be procured by the Government for 12 States in the Federation.

 

  1. Return Milk and other Dairy Products to the National List in the Fiscal Policy Guidelines to maintain consistency with the Backward Integration Programme, which has spurred heavy investments in the diary production.

 

  1. Unify academic curriculum with industrial skill needs and requirements to guarantee sustainable development of skilled manpower for the industries. Government should as a matter of urgency synchronize the curricular of tertiary institutions, particularly the Polytechnics with skills requirements of industries. The various government vocational and training centers should also be re-engineered to offer those skills that are needed by the industries.

 

  • Revisit the resuscitation of the existing national refineries to produce fuels locally, embark on the rehabilitation of major highway corridors, improve trade facilitation infrastructure and deepen the ongoing development of rails system to change narrative on operating environment from being high cost to low production cost environment.

 

  • Government should ensure that industrial policies in the country are allowed to gestate with proper monitoring and evaluation rather than jettisoning or altering them unduly frequently. The continuous infractions on the original   EPZ and   tariffs for the Motor Vehicle and Assembly sector should be quickly remedied to the development of the zones and motor vehicle assembly in the country.

 

Other recommendations include the following:

 

  • Sustain the Eligible Customer initiative to ensure that more electricity is supplied to the manufacturing sector;
  • Strengthen the Bank of Industry (BOI) and Bank of Agriculture (BOA) to adequately provide liberal finance for the manufacturing sector;
  • Monitor the implementation of Executive Order 003 to ensure compliance by MDAs so as to boost activities in the manufacturing sector;
  • Publish the list of approved harmonized taxes and levies for the manufacturing sector by the Joint Tax Board (JTB) to address the issues of multiples taxes and levies;
  • Rationalize Government Ministries, Departments, Agencies, parastatal and Commissions to resolve the issues of over-regulation and duplication;
  • Improve the time taken to clear machines and raw-materials at the national ports while making the link road accessible;

 

MAN, therefore noted that the fourth quarter of 2021 highlighted a gradual improvement in the macroeconomic economic and manufacturing operating environment buttressed by marginal recovery of some key manufacturing indicators. Although, changes in almost all manufacturing indicators as measured in this report are still not as desired, the performance in the fourth quarter is better than what obtained in the preceding quarter, it stressed.

 

The resilience of manufacturers, the seasonal transactions and passive policy support sustained manufacturing in the quarter despite the prevalence of familiar and emerging excessive tax related challenges faced by manufacturers. Overall, the sector recorded a mixed grilled performance occasioned by meagre improvement in the operating environment indices and macroeconomic ambience evidenced by the high points, which cumulatively triggered the increase in the aggregate MCCI score for the quarter to 55.4 points from 54.0 points recording the preceding quarter

 

“An interesting finding from the outcome of the survey is the decrease in the Index scores of Imo/Abia, Edo/Delta and Kano zones. Even though, the indexes of the three zones were above the 50 points benchmarks, the scores decreased in the quarter under review as against what obtained in the preceding quarter.  Index for Imo/Abia zone declined by 8 points from 61.3 points obtained in the preceding quarter. Similarly, Index for Edo/Delt zone fell by 9.2 points   in the period under review from 62.5 points recorded in the third quarter of the year.  In the same vein, Index for Kano zone declined by 3.1 points in the quarter from 57.5 points obtained in the third quarter of the year.  It is therefore imperative that proper examination be done to ascertain contributory factors and proactive advocacy be initiated to address issues responsible for the reduction in the performance of these zones before it will slide below the 50points benchmark”


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