Local manufacturers are in for a bad year as the impact of the coronavirus continues to hinder the possibilities of having a successful business year.
This is highlighted in the Manufacturers CEOs Confidence Index (MCCI) conducted by the Manufacturers Association of Nigeria (MAN) in the first quarter of 2020, where 86 percent of the respondents who are chief executive officers (CEOs) of manufacturing companies complained that the coronavirus was digging a hole in their margins, causing a significant decline in their level of production. Seventy-five percent of the CEOs also said that investments in the sector had reduced drastically
Furthermore, 79 percent of the CEOs reported decline in sales, while 43 percent of the CEOs said the level of unsold manufactured products had not reduced in the last three months, leaving the companies to incur debts especially those producing goods with short shelf lives.
On the average, local manufacturers recorded a 21.5 increase in their cost of production, 19.8 percent decrease in productivity and 14.2 percent decline in sales.
The root of these challenges is majorly due to the scarcity of raw materials and production equipment, especially as China, which is the major hub where these things are sourced, closed down its economy to arrest the pandemic, In addition, the lockdown and restrictive movement, which was enforced by the government, hindered the availability of workers and forced some companies to execute a temporary shutdown.
This simply aggravates the problems of these manufacturers who are functioning in an unfriendly business environment laced with infrastructure deficit, epileptic power supply, overregulation, among other business challenges.
According to MAN, “Covid-19 pandemic has affected a number of operations in the global and the national economic space, a development that the manufacturing sector is not immune to.”
Consequentially, experts say that the imbalance between the increase in cost of production and the decline in sales may lead to shut-down of some of these companies as many of them are already neck deep in debt.
As a recovery recommendation, MAN posits that there is a need for the government to provide palliative measures to protect the manufacturing sector from sinking beyond recovery, by prioritizing the needs of the sector and addressing its challenges in order of necessity and resource availability.
“There is a need for an effective collaborative framework for government and private sector operators to rub minds on suitable stimulus packages that would enable the manufacturing sector ramp-up production to effectively meet domestic consumption requirements and in readiness for export.” MAN says.
MAN adds that provision of basic infrastructure should be paramount; power supply to the sector should improve while maintaining the prevailing electricity tariff. It adds that foreign exchange allocation to the sector should be prioritised to ease the importation of machines and raw materials that are not locally available.
