The number of direct jobs created in Nigeria’s manufacturing sector declined by 20.8 percent in the second half of 2022 on poor operating environment, the Manufacturers Association of Nigeria (MAN) has said.
According to MAN’s latest half-yearly review of the economy, manufacturing employment dipped to 6,741 down in H2 last year from 8,508 and 9559 recorded in the corresponding half of 2021 and H1 2022 respectively.
“The decline in the number of jobs created in the sector during the period corroborates the poor operating business environment that was perverse with high energy cost, exorbitant cost of borrowing, high inflation, low sales due to limited cash and many more.
For full year analysis, the total number of jobs created now stands at 16,300 in 2022 from 16,110 in 2021 and 8,692 recorded in 2020. “Based on the survey cumulative manufacturing employment since 2013, was estimated at 1.7 million at the end of 2022.”
In February, the aggregate Manufacturers CEO’s Confidence Index (MCCI), said the current employment condition fell to 51.3 in the fourth quarter of last year from 51.9 in the previous quarter.
“Employment decisions by manufacturers are so difficult due to the unpredictability and difficulty in macroeconomic movement,” it 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.
The manufacturing sector is one of the major job-creating sectors in 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.
The MAN report revealed that factory output value dropped to N2.68 trillion in H2 from N3.73 trillion recorded in the corresponding half of 2021; thus, indicating N1.05 trillion or 28 percent declined over the period.
The output value also declined N1.31 trillion or 32 percent when compared with N3.99 trillion recorded in the preceding half. The value of manufacturing production totaled N6.67 trillion in 2022 as against N7.39 trillion recorded in 2021.
“Manufacturing production was severely affected in H2 by absence of implementation of new capital projects by the government as they focused on the election,” MAN said.
It added that production was also negatively affected by limited purchases by households due to the naira redesign policy, the high inflationary pressure in the country, high cost of energy, particularly diesel and gas, acute shortage of foreign exchange for importation of raw materials and machinery needs of the sector that are not locally manufactured in the time being and many more.
The association highlighted that investment in the sector dipped to N145.59 billion in H2 down from N160.88 billion recorded in the corresponding half of 2021; thus, indicating N15.29 billion or 10 percent decline over the period. “It further declined by N32.8 billion or 18 percent when compared with N178.39 billion recorded in the first half of the year.”
“Manufacturing investment totaled N323.98 billion in 2022 as against N305.02 billion recorded in 2021. Investment in the period was affected by the high debt profile of the government which particularly deters foreign investment, high cost of borrowing, high cost of energy, low consumption during the period and many more.
In H2, average lending rate to the sector from the commercial banks slowed to 22 percent from 24 percent in the corresponding half of 2021 and the first half of 2022 respectively, according to manufacturers.
“Commercial bank lending rate to the industries is grossly influenced by the incessant increase in Monetary Policy rate in quest to maintain an appreciable real interest in order to attract foreign investment inflow,” they said.
MAN recommends that it is critically important that the challenges identified by manufacturers in the course of the survey are adequately.
It said the Federal Government should improve FX availability by prioritising FX intervention through the official market, particularly to support the raw materials and machine needs of the industries.
“Develop and implement a roadmap for improved power supply focusing on off-grid solutions and independent power projects by the private sector to ensure adequate supply of energy for production and also attract and expand investment.
“Investment in the transportation sector (road, rail, waterways etc.) to mitigate the high cost of transportation logistics in the country and set up a monitoring and evaluation platform with private sector representatives to oversee the disbursement of the various development funds meant for the industries,” it added.
Others are to review the current status of the four national refineries to determine their current state, refocus on backward integration and resource-based industrialisation and widen the tax net rather than increasing the tax base or the tax burden of existing tax payers.