Business confidence leaps as manufacturing investments reach N1.434trn

In spite of security concerns and a tepid business environment, local manufacturers are still upbeat about the Nigerian economy, having increased investments in the second half of 2013 (H2 2013) to N1.434 trillion, from N566.3 billion reported in the first half (H1 2013) of the same year.

Within the period, the sector employed additional 549,304 people as against 760,149 it engaged in the first half of the same year. In total, the manufacturing sector engaged 1,309,453 million Nigerians in 2013.

The outstanding records were achieved as a result of a leap in the business confidence index to 19.0 in the third quarter (Q3) of 2013, from 15.10 recorded in the second quarter (Q2) of the same year.

The confidence index rose as a result of the hike in the country’s Gross Domestic Product (GDP) to 6.93 percent in Q3 of 2013, from 6.18 percent reported in Q2 of the same year, a recent data from the Manufacturers Association of Nigeria (MAN) has shown.

The business confidence index is a yardstick for measuring the degree of optimism on the economy through investment and expenditure activities. According to MAN, the more confidence business owners and managers have in the economy, their companies and jobs, the more likely they are to make investments and purchases.

“This is a clear indication of increased business confidence and optimism which also resulted from the predictable macroeconomic environment, given the stability in all major indices, as well as the supportive incentive that government has been extending to the manufacturing sector,” said MAN.

“Specifically, the improved levels of sales, which were the result of innovations and improved packaging, particularly in the food and beverages sector (e.g., beer group and food processors) and the strategic inventory management of finished goods, were made possible through various investments in assets across the sectors,” it added.

One factor that increased the level of investment was the increased number of new entrants. This was in anticipation of the investment climate and the expectation of investors in the areas of automotive and heavy industrial concerns.

Investors in the basic metal, iron and steel sector pumped a total of N922.12 billion in H2 2013, while those in chemicals and pharmaceuticals invested a total of N218.77 billion. Domestic plastics and industrial rubber as well as pulp and paper added investments of N125.27 billion and N103.06 billion, respectively.

Furthermore, the direction of the investments favours plants and machinery, which reported N684.44 billion in H2 2013 as against N159 billion recorded at the end of H1 2013 in June.

By extension, investment in plant and machinery represents 47.7 percent of the total of N1.434 trillion recorded in the whole of 2013.

Ngozi Okonjo-Iweala, coordinating minister for the economy and minister of finance, recently said a total of 1.6 million jobs were created in 2013. Data from the National Bureau of Statistics (NBS) show that 385,913 jobs were created in Q4 of 2012, while 431,021 jobs were added in the first quarter of 2013. 

In the category of formal sector job generators, the manufacturing sector created 63.20 percent of jobs, while financial intermediation and real estate, renting and business activities reported 62.30 percent and 66.60 percent, respectively. But MAN said additional 760,149 workers were added in H1 2013, whereas 549,304 jobs were added in H2 2013, making a total of 1,309,453 and incremental rate of 30 percent within the last six months.

“The increase has been as a result of improved performance in production output and the corresponding increase in the rate of capacity utilisation,” MAN said.

There was also job addition by companies that were yet to commence operations, who put on ground some skeletal services, thereby engaging some personnel.

From its findings, MAN says it can double its addition to existing jobs, possible only under a single-digit cost lending rate, along with injection of more funds into the Bank of Industry (BOI); generation, transmission and distribution of at least 8,000 to 10,000 mega watts (MW) of electricity; granting and sustenance of sector/broad-based incentives to bona fide manufacturers, as well as stable macroeconomic stability.

“The recapitalisation of BoI is long overdue in view of enormous requests from manufacturers that are beyond the financial capacity of the bank. Any policy that will address the issue of funding, particularly to SMEs, is the ideal policy that will promote industrialisation and hence create value addition and jobs in the economy,” said MAN.

ODINAKA ANUDU