Manufacturers make N3.79trn investments in 4 years

Total cumulative investments by manufacturers in Nigeria stood at N3.79 trillion between 2013 and 2016, data exclusively obtained from the Manufacturers Association of Nigeria (MAN) show.

“Manufacturers have invested and are still investing heavily in the economy, especially in backward integration,” said MAN, led by Frank Udemba Jacobs.

“But the manufacturing sector still stutters in the face of the prevailing economic challenges. The fact remains that manufacturing creates significant employment and maintains social stability. As such, there is need for credible policies to support the sector, especially in this challenging period. We would want a situation whereby the FX allocation to the sector is continuously secured and not allowed to be at the whims of the commercial banks alone,” MAN says in a separate report.

In 2016, manufacturers made N614.55 billion in new investments between January and December, despite foreign exchange and energy crises that engulfed the economy last year.

The 2016 investment was a 25.55 percent point increase from N489.45 billion recorded in 2015, implying that manufacturers’ investments in the two years amounted to N1.104 trillion.

This also means that manufacturers made investments worth N2.69 trillion between 2013 and 2014 when the economy was relatively stable, with comparatively smaller currency and political risks.

However, most of these investments were made in the second half of 2016 after the Central Bank of Nigeria (CBN) had introduced 60 percent FX allocation to manufacturers, MAN says.

Out of the N614.55 billion investments within the year, for instance, N448.94 billion was invested between July and December 2016, representing 73.05 percent of the total. Only N165.61 billion worth of investments were made in the first half of 2016.

The investments were made in new plants and machinery, land and building, assets, vehicles, furniture and equipment.

“Plant and machinery ranked highest, with investments worth N189.84billion, trailed by land and building worth N86.58 billion. Assets under construction were next, with investments worth N64.48 billion, while motor vehicle investments were valued at N58.05 billion. Lastly, furniture and equipment had investments worth N49.97 billion in the review period,” says MAN in the data.

The sector that got the highest proportion of investment was the non-metallic mineral products group, which included manufacturers of cement, ceramics and glass.

Investment in the sector surged to N221.27 billion in 2016 as against N18.82 billion total of 2015, indicating N202.45 billion increase over the period.

The sector is led by Dangote Cement, Lafarge Africa, West African Ceramics Limited, and Western Metal Products Company (Wempco) Limited, among others.

A dollar crisis hit Nigerian manufacturers in 2016, shutting down 54 firms last year. A total of 222 small-scale businesses closed shop in months preceding August 2016, leading to loss of 180,000 jobs, according to a survey carried out by NOI Polls Limited and the Centre for the Studies of Economies of Africa.

This was attributed to FX restriction, especially the failure of monetary authorities to sort out restrictions imposed on 41 items, which included some inputs.

Factory closures forced the Central Bank to introduce 60 percent FX allocation to the sector, which was heavily criticised by other sectors as discriminatory.

But Frank Jacobs, president of MAN, told BusinessDay in a recent interview, that the measure raised capacity utilisation in the sector and restored the confidence of manufacturers.

More dollars are now available, on account of new CBN rules but manufacturers worry that the midstream cancellation of the preferential FX allocation is ill-timed, in view of its impact on manufacturing projections and plans for 2017.

Manufacturers were also stifled by scarcity and high cost of gas, which halted production at factories and pushed them into resorting to more expensive Low Pour Fuel Oil (LPFO).

“We cannot find gas to do our production,” Micheal Ola Adebayo, chairman of MAN Gas Users Group, told BusinessDay, in the heat of gas crisis in August 2016.

“We buy at about $8 per standard cubic metre, whereas it is sold at less than $3 in the international market. We need a lower price, because we are facing a lot of challenges, especially with foreign exchange to import inputs,” said Adebayo, who called for modification of the Gas Subsidy Law of 2008 with a view to reclassifying gas supply to manufacturers from commercial to industrial.

 

ODINAKA ANUDU