Inventory levels rise 30% as manufacturers anticipate consumption rebound

Nigerian manufacturers restocked their inventory of finished products in the first half of 2014 in anticipation of a rebound in consumption after a slowdown in preceding quarters.

Inventory of finished goods refers to stocks of manufactured products that are ready for sale.

Rebuilding depleted inventories has often played a key role in recoveries from economic downturns. The stronger the bounce in consumer spending, the greater the need for companies to restock inventories.

The first half of 2014 (H1 2014) saw value of inventories rise to N22.55 billion, from N17.34 billion reported in the second half of 2013 (H2 2013), according to latest data from the Manufacturers Association of Nigeria (MAN).

Compared with the corresponding period of 2013 (H1 2013), inventory saw a 4 percent increase from N21.75 billion just as output within H1 2013 was N353.20 billion.

“As much as manufacturers were very tactical and cautious about stock-piling finished products, recent survey revealed that consumers also reduced their level of consumption,” says MAN, in its report.

Experts have identified reasons for lower patronage of locally made products. One key factor is unfair competition in the Nigerian market, resulting from unbridled influx of products from Asia, which are cheaper and most times better packaged.

What worsens matters is that some of these goods that find their way into the country are even smuggled or have no duties paid on them, Remi Bello, president, Lagos Chamber of Commerce and Industry, said. These reduce competitiveness of locally produced goods both at home and international market.

Some countries have devised various ways of increasing patronage of local products. The United States of America, the United Kingdom, India and Australia, for example, enacted a two-pronged Procurement Acts, designed to ensure value for money in all public sector purchases and create demand for locally made goods.

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In the US, public funds are used to purchase certain commodities even if the comparative prices of the commodities produced by the domestic economy are 25 percent higher than the import prices, according to Akinola Owosekun, a professor of economics.

According to Owosekun, the challenge in this practice is to make Nigeria’s Procurement Act two-pronged – to check malpractices in purchases made by the public sector and to ensure that public funds are not expended on a whole range of goods and services that can be produced at home.

The second point was re-echoed by few surviving textile makers in the country as they say that government’s uniformed agencies do not patronise the local industry but prefer to make their orders and purchases from abroad.

“Government uniformed agencies do not patronise the industry. Government often gives out contracts to people who go abroad and import them, thereby ignoring the local players. This is not healthy for this industry,” Paul Jaiyeola Olarewaju, director-general, Nigeria Textile Manufacturers Association (NTMAN), told BusinessDay earlier.

But few experts urge local manufacturers to enhance quality of their products to compete better locally and internationally.

The data further show that inventory of finished goods in the food, beverage and tobacco rose to N3.21 billion in H1 2014, from N389.53 million in H2 2013 and N1.02 billion in H1 2013.

Similarly, inventory in the wood and wood products sub-sector rose to N4.07 billion within the period under review, from N25 million in H2 2013 and N67.5 million in H1 2013.

More so, inventory in the industrial plastics and rubber sub-sector had a significant rise to N2.68 billion in H1 2014, from N447.7 million in H2 2013 and N1.13 billion in H1 2013.

Again, inventory in the basic metal, iron and steel segment rose strongly to N5.13 billion within the period under review, from N3.50 billion in H1 2013. But this represents a fall when compared with N8.15 billion worth of inventories in H2 2013.

ODINAKA ANUDU