Gloomy days for Nigerian manufacturers as Covid-19 spreads
Many manufacturing companies struggled in 2019, but the spread of the novel Coronavirus could be the biggest hit on their margins in several decades.
The outbreak of the pandemic started in China, a major manufacturing hub and one of Nigeria’s largest trading partners. It has spread to 151 countries already.
Countries are yet to contain the pandemic as the number of infected persons and death continues to rise on daily basis.
As a result, there has been an abrupt interruption in the supply of raw materials, goods, tools and machinery for manufacturing companies, forcing many of them to limit their operations.
According to a statement on the impact of Coronavirus on the economy from the Lagos Chamber of Commerce and Industry (LCCI), signed by the director-general, Muda Yusuf, the pandemic has disrupted the global supply chains which will cause a setback in the operations of many manufacturing companies.
“Many manufacturers and service providers in the country are already experiencing acute shortage of raw materials and intermediate inputs. This has implications for capacity utilisation, employment generation [and retention] and adequacy of products’ supply to the domestic market,” Yusuf stated.
Nigeria has 65 positive cases as of Friday, March 27. There are indications that the entire country may be shut down within the shortest possible time.
Sales have dipped as Nigerians focus of being alive and keeping themselves away from the deadly virus.
Manufacturing firms are not selling, and the possibility of another recession means some manufacturers may go under except there is a stimulus that will go round.
Nigeria’s manufacturing Purchasing Managers’ Index (PMI), a gauge for manufacturing sentiments, slowed in March 2020 to its lowest in almost three years, according to data by the Central Bank of Nigeria (CBN).
The PMI for March stood at 51.1 index points, representing a sluggish growth when compared to the 58.3 points achieved in February. According to analysts, the slow growth depicts the impact of the disruption in economic activities brought about by the outbreak of Covid-19.
The production level index and new orders metrics slowed down as supplier delivery time, employment levels and raw material inventories recorded their first contraction in over 20 months.
A statement by CSL Stockbrokers on the PMI report stated that “the virus has affected global supply chains as countries across the globe have implemented a total lockdown and restricted cross border movement of people as well as goods and services.”
The statement said this had resulted in the shutdown of factories as manufacturers could no longer import raw materials required for production even as demand from customers remained constrained by the ‘stay at home’ policy amidst loss of jobs.