There is growing worry that many of Nigeria’s manufacturing firms will collapse under the weight of anti virus measures that have dislocated trade and supply chains leading to a severe squeezing in output.
Manufacturers fear that banks and creditors may swoop on them from the third quarter of the year as their hope of paying back loans dims due to a worsening economy caused by a ravaging virus.
Many factories are still under lock and key for fear of coronavirus spread among workers, while logistics remains a big challenge with security agencies refusing to allow inter-state movement of raw materials and locally manufactured products.
Patronage is at rock bottom with many workers unpaid, according to manufacturers, and limited number of market days means their supplies are interrupted and returns low. Food, beverage and drug firms were allowed to operate during the lockdowns aimed at curbing the spread of the virus, but they could not function properly without ancillary industries which were not in operation.
“There is no written report on this, but our members have been complaining that they can’t pay salaries and that banks may close in on them, which may lead to takeover,” Ambrose Oruche, acting director-general, Manufacturers Association of Nigeria (MAN), said.
A less strenuous situation occurred in 2016 when foreign exchange inflows into Nigeria fell by more than 50 percent. Fifty-four firms shut down in 2016/17, according to Frank Jacobs, then MAN president. More than 200,000 jobs were reported lost during this period.
The current situation is worse with import and export stalled and price of Bonny Light and Bent Crude falling below $30 per barrel.
Mansur Ahmed, president, MAN, explained that the sector needs an urgent government intervention to avoid many companies running aground.
He said federal and state governments must urge security agencies to allow movement of manufacturers’ vehicles to avoid the looming danger.
”Think about agro-based products used by manufacturers. With the current logistics nightmare, a lot of materials will go bad before they reach the factories,” he said. “Logistics is still a challenge; you can’t move goods easily.”
Ahmed said CBN’s recent announcement of interventions shows Federal Government’s commitment to manufacturing, stressing that the association would sit down with the CBN to discuss modalities for accessing the funds.
Nigeria’s economy risks plunging into a recession, its worst in three decades, according to the International Monetary Fund (IMF), which predicts that the economy will shrink by 3.4 percent in 2020. With firms sacking workers on the back of COVID-19, the unemployment rate, currently at 23 percent, may near 30 percent, say experts.
Manufacturers will be among the hardest hit as their production cost continues to spike and poverty ravages nearly half of the Nigerian population, who are their potential customers.
Toki Mabogunje, president, Lagos Chamber of Commerce and Industry (LCCI), said the current situation presents an opportunity for Nigeria to stimulate and promote import substitution – a strategy whereby local industries are established with a view to producing goods that replace imported ones.
“We have to change the narrative from the base, mobilising resources and galvanising critical stakeholders and actors to reach consensus to commit to creating an economy that will not only produce significant proportion of its major commodities (intermediate and finished goods), but equally be competitive on a global scale,” Mabogunje said.
A recent Manufacturers’ CEO Confidence Index, prepared by MAN, shows the CEOs’ confidence fell from 51.9 percent to 44.4 percent in the first quarter of 2020. Eighty-five percent of the CEO respondents, who head various manufacturing companies in the country, reported decline in capacity utilisation on account of the pandemic, while 75 percent of them interviewed reported making low investments in the quarter.
Similarly, 79 percent reported decline in volume of sales as 86 percent said they had decline in output.
“It is imperative that the government in conjunction with the Manufacturers Association of Nigeria jointly develop potent strategies that will save manufacturing from completely going under, facilitate the restoration of the sector to the path of sustainable production and position the sector to leverage opportunities provided by the pandemic,” the report, released last Friday, said.
