Odiri Erewa-Meggison, chairman of the Manufacturers Association of Nigeria Export Promotion Group (MANEG), has said the manufacturing sector is experiencing the toughest period in the history of its existence as a result of the prevailing economic situation.
Speaking at MANEG’s sixth Annual General Meeting on Wednesday, Erewa-Meggison said, although, manufacturers are still trying to recover from the effect of low local sales of goods especially in the southeast region where the sit-at home order hold sway every week leading to sales, the problem of insecurity also ravage the northern part of the country.
“Apart from the above enumerated factors, policies of government on non-oil export incentive, exchange rate policy, which led to further depreciation of the naira and scarcity of foreign exchange, hike in the price of diesel and other energy sources further culminated in low performance of the manufacturing export sector,” she added.
Segun Ajayi-Kadir, director general of MAN, said this is not a good time for manufacturers in the country.
“A lot of people have said we should move away from our comparative advantage and focus on exports driven development. This is why MAN for more than five decades concentrated on making Nigerian manufacturing competitive,” he said.
He added that the theme of the event is so special to the association as it is looking at manufacturers’ competitiveness even in the midst of rising production costs.
“You all agree with me as businessmen that one of the most difficult things to do in Nigeria is to drive down your cost because inflation continues to head north and profitability is heading south. This is the reality we are facing daily,” Ajayi-Kadir said.
The country’s currency has depreciated above N1,000/$ on the parallel market, for the first time ever, making it difficult for businesses in the manufacturing sector to thrive. While some have stopped operations, others are not producing optimally.
The high cost of dollars and the implementation of a 7.5 percent value added tax on diesel imports have pushed its pump price to as high as N1,200 per litre.
Inflation in Africa’s most populous nation rose to an 18-year high of 25.80 percent in August from 24.08 percent in July. Rising inflation increased manufacturers’ inventory of unsold finished goods by 45.4 percent to N272 billion in the first half of 2023 from N187.1 billion in the same period of last year.
The latest aggregate Manufacturers CEO’s Confidence Index of MAN also shows that manufacturers’ confidence in the economy dropped to the lowest in nearly two years Q2.
The index declined for the third straight quarter to 52.7 points in Q2 from 54.1 points in the previous quarter.
“In order to place the sector in a position to benefit maximally from the African Continental Free Trade Agreement, it must encourage production of raw materials, by boosting agricultural activities and research and development,” Adeolu Adewuyi, professor of Economics and dean of School of Business at University of Ibadan, said.
He said it will reduce import of raw materials; promote local sourcing and reduce import demand pressure in the foreign exchange market. “It will also promote consumption of locally made goods so as to reduce import demand pressure in the foreign exchange market that leads to exchange rate depreciation.”