Manufacturers call for fair power pricing amid macroeconomic headwinds

…Food, Beverage and Tobacco subsector holds AGM

Manufacturers in Africa’s most populous country have called on the federal government to provide equitable power pricing for the sector to sustain manufacturing operations in Nigeria.

The manufacturers who made the call during the Annual General Meeting of the Food Beverage and Tobacco subsector discourse them Cultivating Value: Employing Quality, Standards and Innovation in Strengthening Food, Beverage and Tobacco Manufacturing’ held recently in Lagos, said power accounts for at least 40 percent of their production costs.

“Power is somewhere between 26 to 40 percent of our cost of work, depending on how power-intensive the manufacturing process is,” said Segun Ajayi-Kadir, director general of the Manufacturers Association of Nigeria (MAN).

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“We need power but we can’t pay for power and die. So we need power at a fair price,” he noted.

Ajayi-Kadir highlighted MAN’s efforts to foster a conducive economic environment for the manufacturing sector’s growth and profitability.

“The production value of the sector increased and despite the growth, local raw material sourcing declined from 70 percent in the second half of 2022 to 66.8 percent in the same period in 2023,” he said.

He acknowledged the resilience of the Food, Beverage and Tobacco subsector in the face of macroeconomic and infrastructure challenges, particularly the rising electricity tariffs.

“The performance we are seeing is an eloquent demonstration of resilience in the face of daunting macroeconomic and infrastructure inadequacies,” he said.

He also shared the frustration and frequent complaints from industry players about the rising costs and urged stakeholders to remain resilient and adapt their processes for greater efficiency.

Also, Ekuma Eze, head of corporate affairs and sustainability at Rite Foods in his speech emphasised the subsector’s importance. “The food and beverage industry contributed 34 percent to the entire manufacturing sector as of 2022 and about 5 percent to our GDP,” he said.

“The sector has immense potential for growth due to our large population,” he noted.

“Three sectors make up about 78 percent of the entire manufacturing sector, with food and beverage being the largest. Yet, our manufacturing sector remains far from competitive on a global scale,” he added.

Eze pointed out several obstacles hindering the subsector’s growth, including poor infrastructure, high inflation, energy issues, forex liquidity, unpredictable regulations, insecurity, and high tax burdens.

“The subsector’s tax contribution as a percentage of gross profit has hovered around 35 to 41 percent over the last four years, severely affecting profitability.”

However, he advocated for strategic government intervention to enhance the subsector’s competitiveness, particularly in the context of the African Continental Free Trade Area (AfCFTA).

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Eze recommended policies to streamline customs procedures, harmonize regulations, invest in critical infrastructure, and provide targeted financing options for manufacturers.

“Manufacturing should be a key driver of economic growth, creating jobs, generating income, and contributing to the GDP,” he said. “Our policies must encourage manufacturing to ensure economic progress.”

His call to action stressed the need for holistic thinking in economic policy-making. “Recent Central Bank policies have seen interest rates skyrocket, making it impossible for manufacturers to borrow money and progress. We need policies that encourage manufacturing, as it creates employment, generates taxes, and drives economic growth.”

Similarly, Aina Olugbenga Steven, deputy director at NAFDAC and chairman of the Nigerian Institute of Food Science and Technology (NIFST), Lagos chapter, described the Nigerian business environment as – VUCA environment—volatile, uncertain, complicated, and ambiguous.

“Thriving in this environment means dealing with challenges such as electricity and foreign exchange,” he added.

He emphasised the importance of maintaining value, high standards and innovation in manufacturing.