Manufacturing investments decline 74 percent in first half 2020
Investment inflows into Nigeria’s manufacturing sector declined significantly in the first half of 2020 by 74 percent to N62.08 billion from N248.45 billion in the same period of 2019, according to data from the Manufacturers Association of Nigeria (MAN). The decline was attributed primarily to the outbreak of the Coronavirus pandemic, which disrupted economic activities globally and locally.
“The manufacturing sector was set for better performance with high expected for 2020. Unfortunately, COVID-19 pandemic came with its distortionary impact, leading to the worst performance of the sector in decades. The extreme measures taken to stem the spread of the pandemic, peculiarly the lockdown on economic activities that was most detrimental to the sector.
“The huge decline in investment in the period was attributed to the onslaught of the COVID-19 pandemic and the associate measures implemented to contain the spread including the economically abrasive lockdown that brought manufacturing activities to a near halt,” MAN stated in its most recent half year economic review.
The drop in investments also affected the overall performance of the sector, especially as many manufacturing firms were forced to either suspend or shut down operations during the period under review, thereby reducing the number of players in the sector.
Consequentially, the sector slowed by -4.1 percent during this period according to the GDP data released by the National Bureau of Statistics (NBS).
Furthermore, with Nigeria ranking 131st out of 190 countries surveyed on the 2020 World Bank’s ease of doing business index, business experts assert that due to the recurrent challenges in Nigeria’s business environment and insecurity challenges, investors are forced to take flight for the proverbial greener path, scaring away prospective investors.
Despite the drop in manufacturing investment inflow in the first half of 2020, Lagos the largest commercial hub in Nigeria and Ogun state maintained their positions as choice locations for investors during the period.
Experts however believe that investment inflow will improve in the medium to long term following the partial border reopening and the implementation of the African Continental Free Trade Area (AFCFTA)
“The reopening of the land borders should provide succor to the manufacturing sector even as the kick-off of AFCFTA serves as an avenue for manufacturers to penetrate new African markets and for investors to flood the market” Jide Babatope, a Lagos-based analyst said.
In H1 2020, Lagos, which includes Apapa and Ikeja industrial zones got investments valued at N22.47 billion out of the total N62.08 billion worth of investments recorded while Ogun followed closely with N21.32 billion. Kwara and Kogi also seemed to ignite the interest of investors as it achieved N7.69 billion worth of investment during this period.
Ambrose Oruche, acting DG, MAN said manufacturers are more attracted to locations that will make business easy to run, adding that some factors are responsible for investors preference which include available infrastructure, security, ease of doing business, port availability and proximity.
“Lagos and Ogun state provide access to markets driven by its population, in addition, Lagos promises high security which many investors appreciate, Ogun state also is ranked the highest in the ease of doing business with its business-friendly policies and environment,
“Another important factor is the availability of the ports in Lagos which makes it easier to receive goods especially when the market is of close proximity. Long-distance between ports and market or consumers will affect competitiveness, quality, and quantity of the goods” Oruche added.
For the sectoral investments, the chemical and pharmaceutical subsectors topped the charts for investment inflow, as it gulped N26.6 billion worth of investments during this period while the food beverage and tobacco subsector followed closely with N18.76 billion.
According to experts, the two sectors managed to get more investment attention because they are providers of essential items which, became highly preferred by consumers following the outbreak of the pandemic. The pulp, paper, printing, and publishing sector also recorded investments worth N7.85 billion.
The review also showed that the N62 billion worth of investments was made in land and building, plants and machines, furniture, and equipment, motor vehicles as well as assets under construction.
“Analysis of investment in the sector in the first half of 2020 shows that Land & Building ranked first with investment valued at N19.91 billion, Plant and Machinery ranked second with investment worth N18.85 billion, investment in Asset under construction stood at N17.61 billion, Furniture and Fittings stood at N4.54 billion and Motor vehicle, N1.16 billion.” it stated.