Manufacturing indices dip in 2020 as COVID-19, FX shortage crimp operations
The confidence level of manufacturers dropped below the benchmark of 50 points in 2020, following a year the COVID-19 pandemic coupled with acute FX shortage and several other challenges in the business environment stunted operations significantly.
The Manufacturers CEOS Confidence Index (MCCI) for 2020 conducted by the Manufacturers Association of Nigeria (MAN), which measures the confidence of business owners in Nigeria’s manufacturing sector averaged 42.49 points representing a 17 percent drop from the 51.45 points achieved in same period of 2019.
“The macroeconomic environment in the quarter was characterized with high commodity prices which eroded household and firms purchasing power and affected sales in the sector significantly. In addition, the effect of COVID-19 and END-SARS still lingers, particularly as it affects employment and prompt payment of salaries,” the report explained.
Among the five indices surveyed, in 2020 production level topped the chart with FMCGS, chemicals & pharmaceuticals and pulp & paper ramping up production to meet demand amid the COVID-19 heat, while manpower availability performed the least following the move by some manufacturing firms to lay off workers as a cost-cutting measure.
According to the respondents, in the fourth quarter, acute FX shortage, increase in electricity tariff together with poor power supply and high cost of logistics due to the increase in the price of PMS were the top three concerns battled with in 2020. Asides the other problems induced by the pandemic and the Endsars protest like supply cut, lockdown, and decline in demand.
“Manufacturers have been facing Foreign exchange challenges since the second quarter of the year 2020 due to significant decline the in inflow of FX into the country. The situation worsened in the fourth quarter despite the FX injection into the market through BDCS and other interventions, manufacturers still find it extremely difficult to source FX for the importation of raw materials and machinery that are not locally available” the report added.
Speaking on the performance of the sector during a media Luncheon held recently, Mansur Ahmed, MAN president said “The trend is a strong indication of lack of confidence of manufacturers in the economy in the whole of 2020 and that the manufacturing sector is indeed gasping for breath,
As we project for improvement in 2021, it is imperative that the management of the macroeconomy is approached more pragmatically and the development of the productive capacities of a nation is intentionally enhanced.”