Manufacturers’ confidence in Nigeria’s employment conditions for the first quarter of 2023 dropped to the lowest in 21 months on the back of growing macroeconomic challenges.
According to the latest aggregate Manufacturers CEO’s Confidence Index (MCCI) of the Manufacturers Association of Nigeria (MAN), employment conditions for the first three months of the year dipped below the 50 benchmark points to 48.8 points in the fourth quarter of last year, down from 49.2 points in the previous quarter.
“Employment decisions by manufacturers are so difficult due to the unpredictability and difficulty in macroeconomic movement,” MAN said.
It said although the current employment condition (rate of employment) scored above 50, it declined to 51.3 in Q4 from 51.9 in Q3. “Production level in the next three months scored above the benchmark points though with a decline in the period.”
The MCCI is a quarterly research and advocacy publication of MAN, which measures changes in the pulse of operators and trends in the manufacturing sector quarterly, in response to movements in the macro-economy and government policies, using primary data mined through a direct survey of over 400 CEOs of MAN member-companies.
It is computed using data generated on standard diffusion factors of current business condition, business condition for the next three months, current employment condition, employment condition for the next three months and production level for the next three months.
It has a baseline score of 50 points and scores above the baseline indicate improvement in manufacturers’ confidence in the economy, while an index score of less than the baseline suggests deterioration in the operating environment.
Lami Adekola, director of policy and public affairs at EnterpriseNGR, said the decline in the confidence level for employment conditions is a fair expectation and that it is largely linked to the election period and the slowdown in economic activities that usually occurs during the start of every year.
“Generally, a slowdown in economic activities led to a reduction in recruitment processes. And the slowdown would worsen more by the naira redesign policy,” he said.
Adekola said after the elections, there would be more clarity on where the country is going and that both local and international investments would increase, leading to a rise in employment opportunities.
The Purchasing Managers’ Index (PMI) contracted in February for the first time in over two years on the back of naira scarcity across the country.
The PMI index published by Stanbic IBTC Bank dropped below the 50.0 no-change mark in February, posting 44.7 compared to 53.5 in January.
“The steep decline is attributed to the cash shortage challenges experienced across the country during the month,” Muyiwa Oni, head of equity research, West Africa at Stanbic IBTC Bank, said.
He said this consequently resulted in a contraction in both outputs and consumer orders, which made firms scale back on purchasing and hiring activities.
The MCCI also revealed that the aggregate confidence level in the Nigerian economy declined to 55.0 points in Q4 from 55.4 points in the previous quarter.
Manufacturers said Q4 2022 was more difficult for them than the preceding quarter due to persisting rise in the consumer price index, high cost of energy, unabated erosion in naira value and difficulty in sourcing foreign exchange and the harsh effect of the Russia-Ukraine war.
“The decline in the aggregate score underscored the persisting challenges and the waning confidence of manufacturers in the economy in Q4.”
The manufacturing sector is one of the major job-creating sectors of the economy and the decline in the employment level does not bode well for the economy at large, Damilola Adewale, a Lagos-based economic analyst said.
“The high cost of diesel and foreign exchange crisis is affecting the operations of the sector, thereby weakening its job-creating capacity,” he added.
Africa’s most populous nation, which has an all-time high unemployment rate of 33.3 percent and an underemployment rate of 22.8 percent, is being roiled by internal crises.
Households and businesses are being whipsawed by a severe petrol scarcity that has lingered since November and a chronic shortage of cash occasioned by the naira redesign policy of the Central Bank of Nigeria.
The cash scarcity associated with the currency redesign policy will likely motivate a slowdown in economic growth as many productive activities have been halted due to the inability to access cash, according to a recent report by the Nigerian Economic Summit Group (NESG).
It said a slowdown in economic growth could mean fewer job opportunities, increasing poverty incidence, thus adversely impacting the collective economic health of the population.
“A lack of employment opportunities could impede access to education and healthcare, leading to a decreased standard of living,” the group said.
In January, the NESG predicted that the country’s unemployment rate would rise to 37 percent in 2023.
“This is due to weak performance in the job-elastic sectors, low labour absorption of sectors that will drive growth, and population growth estimated at 3.2 percent will lead to a decline in real per capita income,” it said.