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Monday, June 17, 2024

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How To Heal Ailing Manufacturing Sector And The Broader Economy – MAN

‘The Nigerian economy has encountered significant challenges in recent years, including foreign exchange volatility, escalating energy costs, and food insecurity. These challenges have intensified inflationary pressures, adversely impacting consumers’ purchasing power and impeding the growth of the manufacturing sector.’

Siaka MOMOH

Manufacturing in Nigeria is in dire straits and needs urgent rescue, there is no other way put it.

The Nigerian economy has encountered significant challenges in recent years, including foreign exchange volatility, escalating energy costs, and food insecurity. These challenges have intensified inflationary pressures, adversely impacting consumers’ purchasing power and impeding the growth of the manufacturing sector. Consequently, production levels have declined, leading to reduced competitiveness within the industry.

These issues that we are very familiar with, came up in a recent Manufacturing Association of Nigeria’s (MAN) parley with the press in Lagos.

 The MAN CEO’s Confidence Index (MCCI) presented at the parley confirmed, according to MAN’s Director General Segun Ajayi Kadiri, “a moderate improvement in the Aggregate Index Score (AIS)” evidenced by the “meagre increase from 51.8 points to 53.5 points for the first time in the last six quarters”.

 There is nothing to celebrate in a performance that shows that the “manufacturing sector is set on the path of restoration and recovery, at least to the level recorded in Q3 2022 with the hope of improvement in the next quarter”.

We are told, “This is further buttressed by mild performance recorded at the sectoral and zonal levels as well as the positive projections of confidence recorded indices for the next quarter, even though emerging policies are pointing to the contrary and may imperil this positivity.”

Watch the words: “mild performance recorded”, “positive projections of confidence”. Projections – may be or may not be.

MAN tells us further: “Clearly, this performance is attributable to the undying resilience (for how long?)  of manufacturers, the reasonable gains recorded by the Naira in the latter part of the first quarter and the expectation of reasonable reduction in diesel price. Others include the hope that the presidential intervention funds for the manufacturing sector will be disbursed seamlessly, and the policy direction of the Government will become clearer.”

All these are premised on conditionalities.

It is true that the manufacturing sector remains the most sustainable driver of steady economic growth, inflow of foreign exchange and enduring shared prosperity. MAN is therefore right to expect that Government will intentionally prioritize the manufacturing sector by implementing the sector-specific recommendations contained in its MCCI report and providing the required policy support and incentives – the surest way of revamping the sector and repositioning the economy towards sustainable growth and development.

MAN President, Otunba Francis Meshioye said the manufacturing sector plays a pivotal role in the economic growth and development of our nation, and this report sheds light on the current state of the industry, its challenges, and the opportunities that lie ahead.

He recalled the Monetary Policy Committee of the Central Bank of Nigeria met few days ago and made certain critical decisions which have far-reaching implications on the manufacturing sector. He said the Nigerian economy has encountered significant challenges in recent years, including foreign exchange volatility, escalating energy costs, and food insecurity, that “these challenges have intensified inflationary pressures, adversely impacting consumers’ purchasing power and impeding the growth of the manufacturing sector”.

 He argued that “Consequently, production levels have declined, leading to reduced competitiveness within the industry”.

For Otunba Meshioye, “As the umbrella body for manufacturers in Nigeria, the Association acknowledges the efforts of the Monetary Policy Committee (MPC) in confronting the economic challenges facing the country, notably the fluctuations in inflation and exchange rates. While MAN understands the reason behind the MPC’s decision, it is crucial for the committee to thoroughly assess the potential impact on the real sector and the multiplier effect on the nation.”

For him also, “Collaborating with fiscal authorities is essential to reinforce the sector’s traditional role in driving significant employment, heightened productivity, steady forex earnings, and sustained economic progress.

“It is notable that the strategy of raising the Monetary Policy Rate (MPR) has persisted for nearly two years without yielding positive results. MAN had hoped that the Central Bank of Nigeria (CBN) would explore alternative measures, particularly in addressing the underlying causes of inflation, primarily cost-push factors.”

This is the issue. We are in a fix with forex supply. We do not have enough inflow of foreign exchange because our economy is import oriented. We need to produce and export, export value-added products, among other things to close this gap.

What MAN wants done, according to Otunba Meshioye: “… earnestly urges the MPC to carefully evaluate the effects of these monetary policy actions on both the manufacturing sector and the broader economy. Achieving a delicate equilibrium between addressing macroeconomic challenges and fostering the growth and resilience of the manufacturing industry is crucial…

The Association advocates for robust collaboration between monetary and fiscal authorities and suggests considering the following policy measures:

•   Implement targeted interventions aimed at mitigating the underlying cost-push factors driving inflation, thereby alleviating the financial burden on manufacturers.
•  Prioritize forex and credit allocation to the manufacturers and fast track the proposed recapitalization of the banking sector.
• Emphasize the development of infrastructure within industrial hubs and bolster nationwide investments in renewable energy sources to alleviate logistical expenses and enhance competitiveness.
•  Further reduce the reliance of the country on imported products and raw materials by providing incentives for investment in backward integration and local sourcing to reduce the pressure on the dollar to the barest minimum.



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