The number of jobs lost in the manufacturing sector rose to the highest in three years for the first half of 2023, according to the Manufacturers Association of Nigeria (MAN).
In MAN’s latest half-yearly review report, the number increased by 108.7 percent to 3,567 in H1 from 1,709 in the same period of 2022. It also grew by 31.7 percent to 2,708 in H2 of last year.
The number of jobs created in the sector declined by 32.8 percent to 6,428 from 9,559 in H1 2022.
“The decline in the number of jobs created in the sector during the period further highlighted the unfriendly business environment resulting from the hasty policies and residual effect of the currency redesign policy that led to naira crunch,” MAN said.
Femi Egbesola, national president of the Association of Small Business Owners of Nigeria (ASBON), said about 25 percent of manufacturing businesses “has gone under” this year because of the multiple challenges facing Micro, Small and Medium Enterprises, particularly manufacturers.
Africa’s biggest economy, with more than 200 million people, had an all-time high unemployment rate of 33.3 percent in the fourth quarter of 2020 but it fell to 4.1 percent in Q1 2023 following the new methodology adopted by the National Bureau of Statistics (NBS).
“The harsh reality has pushed some manufacturers to shut down, which is increasing unemployment in the country,” Olamide Adeyeye, a Lagos-based human development researcher, said.
He added that it is quite unfortunate because manufacturing is one of the biggest employers of labour and the index of infrastructural development. “When things get tough, the employees are the ones that will be affected.”
In recent months, households and businesses have been affected by reforms of President Bola Tinubu, including the floating of the naira.
The foreign exchange reform, which allows the naira to trade more freely, has led to the currency depreciating to 773.54 per dollar on Thursday from 463.33/$1 as of May 25 at the official market.
At the parallel market, the naira fell to 1,007/$1 from N762/$ on May 25.
The high cost of FX and the implementation of a 7.5 percent value added tax on diesel imports pushed its pump price to as high as N1,200 per litre last month.
This increased the country’s inflation rate to an 18-year high of 25.08 percent in August from 24.08 percent in the previous month, according to the NBS.
According to the latest Purchasing Managers’ Index, business activity in Africa’s most populous nation improved marginally in September for the first time in five months.
The Stanbic IBTC Bank’s PMI data, showed the headline index increased to 51.1 from 50.2 in the previous month, the lowest point over the past five months.
“New orders increased for the sixth month running in September as some firms signalled an improvement in demand. Three of the four monitored sectors saw output expand, the exception being manufacturing,” the index report said.
BusinessDay reported last month that the impact from the petrol subsidy removal and naira devaluation dropped the outlook of Nigeria’s employment conditions for Q3.
Data from the latest aggregate Manufacturers CEO’s Confidence Index of MAN showed that the projected employment conditions deteriorated below the 50 benchmark points to 46.6 points, the lowest in 30 months from 47.8 points in the previous quarter.
The indicator, which declined for the fourth straight quarter, is the lowest compared to others such as current business condition (48.9), current employment condition (50.2), business condition for the next three months (58) and production level for the next three months (59.8).
“The decline underscores the persistent harsh operating business environment for manufacturers which was occasioned by escalating energy cost as well as necessary but poorly coordinated subsidy and exchange rate reforms,” manufacturers said.
According to Israel Odubola, a Lagos-based research economist, 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.
“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 challenging macroeconomic issues impacted the sector’s growth rate in Q2 as its growth rate slowed to the lowest in three years. Data from the NBS shows that the real GDP growth of the sector stood at 2.2 percent in Q2, the lowest since Q2 2020.
The Q2 growth rate is however higher than the 2.31 percent recorded in the previous quarter, when the country experienced an unprecedented cash crunch that dampened business activity.
“Though the sector’s growth rate improved slightly to 2.2 percent compared with 1.61 percent in Q1, we believe conditions will worsen in the second half of the year,” analysts at CSL Research said in a recent note.
In July, the Nigerian Association of Small and Medium Enterprises told BusinessDay that about 10 percent of the 40 million Micro, Small, and Medium Enterprises in the country had shut down since the subsidy removal.