The importance of manufacturing sector cannot be overemphasised because it fuels economic growth, especially for emerging and developed markets economic. No economies will grow without robust manufacturing. The sector is also the largest employer of labour after the agric sector.
While manufacturing PMI in the month of September stood at 56.2 index points, from 57.1 in August, indicating expansion in the manufacturing sector for the eighteenth consecutive month, low consumer purchasing power, epileptic power supply, bad roads, high interest rate environment, influx of cheap and substandard product, and Apapa gridlock, have hindered firms from growing top lines sales and bottom line (profit).
It is generally accepted that companies make money in the form of increased sales when consumers open their bourse strings, but this isn’t so because the economy is growing sluggishly while Nigerians are getting poorer as unemployment rates spike amid growing population.
According to a recent World Bank data, 92.10 percent of Nigerians live at below $5.50 a day. The reality is that most people cannot afford to buy a packet of Spaghetti or proteins.
Nigeria with a population of 180 million people has 87 million people, nearly half its population, in extreme poverty, as high inflation environment continues to erode discretionary income.
More worrisome is that the country’s population is expected to hit 400 million by 2050, making it the third most populous nation in the world.
Nigeria’s economy remains fragile as GDP grew by 1.50 percent in the second quarter of 2018, a downturn from 1.95 percent in the first quarter.
Inflation figure increased to 11.44 percent in December 2018 from 11.28 percent in November, the highest increase in seven months. Even the inflation figure is lower than the central bank’s 6 percent and 9 percent range.
The Nigerian Industrial Revolution Plan, published in 2014, identifies weak purchasing power as an obstacle to industrialisation in Nigeria.
The insurgency in some parts of the country- which has claimed millions of lives and displaced farmers- has hindered companies, especially operators in the food and beverage from shipping their products to these crisis region hence resulting in loss of significant market share.
Apapa gridlock is also another key issue. Honeywell, a major player in the industry, attributed the key impediment to growth to the Apapa traffic gridlock, which has virtually crippled business activities in Lagos State.
Its management said the dilapidated road infrastructure and chaotic traffic situation in and around the nation’s premier port made it inordinately difficult, and enormously expensive to transport goods out of the factory in Tincan Island, adding that the challenge resulted in an effective freight cost increase of about 25 per cent last year.
The management of Dangote Group says its sugar and salt companies lose about N2 billion monthly to the perennial traffic gridlocks on Apapa port roads every month.
Former president of the Manufacturers Association of Nigeria (MAN), Frank Jacobs, said that these challenges are still manifesting in the form of high inventory of unsold finished products, inadequate electricity supply, frequent increases in electricity tariff in the face of poor services from distribution companies and abnormally high interest rates.
The cumulative average stock (inventory) turnover ratio of the largest consumer goods firms fell to 2.83 times or 234.05 days between 2018 and 2017 from 3.70 times or 144.52 days recorded in the period of between 2017 and 2016.
Politicians are busy politicking and turning a blind eye to the plight of manufactures oblivious that if the sector collapses, the economy will shudder. It will be disheartening and disappointing to see a repeat of the 2016 recession when a severe dollar scarcity crippled business activates.
While the introduction of a foreign exchange policy in 2017 and the rebound in crude oil production that helped the country exist recession in the third and fourth quarter of 2017, whoever is elected president is saddled with the responsibility of formulating policies, removing infrastructure bottle neck, to help propel the manufacturing industry to growth.
According to the National Bureau of Statistics (NBS), nominal GDP growth of manufacturing in the third quarter of 2017 was 10.32 percent (year-on-year), 13.25 percent points higher than growth recorded in the corresponding period of 2016 (-2.93 percent), but -5.65 percent points lower than the preceding quarter growth of 15.97 percent. Quarter on quarter growth of the sector was 3.21 percent.
The contribution of manufacturing to nominal GDP in the current quarter was 8.55 percent , lower than figures recorded in the corresponding period of 2016 at 8.60 percent and for second quarter of 2017 at 9.02 percent, NBS report added.
BALA AUGIE
