Worried about limited access to raw materials, local producers have urged the government to unveil incentives that will encourage and deepen local raw materials sourcing, especially in the form of backward integration.

According to the manufacturers, the manufacturing sector is generally faced with limited investment in domestic production of raw materials for utilization in most of the sub-sectors, which is as result of limited funding and policy incentives in the country.

They identified the need to restrict the exports of maize, cassava, wheat, food related products and other manufacturing inputs, suspend the 15 percent charges on imported wheat; and encourage growth in domestic investment in Agriculture.

“Government needs to incentivize investment in local development of raw materials; give attention to domestic production of Active Pharmaceutical Ingredients (API) and basic chemicals by incentivizing investment in the area; refocus on Backward Integration and Resource-Based Industrialization; reverse the duty for Annealed Cold roll back to 45 percent from the new five percent.

“Government should also commission the resuscitate of the existing national refineries to produce fuels locally; review the gas price for domestic consumption to be in tandem the with the export price which is about $3.25 per cubic meter”, the Manufacturers Association of Nigeria (MAN) added.

Latest data from MAN showed that the manufacturing sector’s local raw materials utilization steepened to 52 percent (year-on-year) in the first half of 2022 down from 53 percent of corresponding half in 2021; thus, indicating 1 percentage point decline over the period.

However, utilization increased by two percentage points (half-on-half) when compared with 50 per cent recorded in the second half of 2021.

Operators noted that the Basic Industrial Chemical sub-sector faced severe inactivity in the first six months of 2022 due to lack of domestic production of basic chemicals, necessitating the need to resuscitate local refineries to encourage investment in petrochemical development in the country.

Similarly, MAN said that its production value has recorded a 9.00 per cent increase to N3.99tn in the first half of 2022.

The Executive summary of the H1 2022 Economic Review report of the association showed that the manufacturing sector factory output value increased to N3.99tn in the first half of 2022 (year-on-year) up from N3.66tn recorded in the same half in 2021. thus, indicating N0.33tn rise during the period.

“It also increased by N0.26tn equivalent to 7.0 per cent (half-on-half) when compared with N3.73tn achieved in the second half of 2021,” the report said.

The report explained that production was majorly limited by a lack of forex for the importation of raw materials that are not available in the country in all the sectoral groups, except for the food sub-sector which has undergone a significant level of backward integration.

The report reads in part, “The N10 increase of excise duty on non-alcoholic drinks grossly affected production in that segment of the sector. In addition, the implementation of migration of the National List to Chapter 99 of ECOWAS Common External Tariff (CET) is perverse with bureaucracy and complexities among government agencies, leading to delay in getting raw materials to factories.”

It added that the basic metal group is heavily challenged by the lowering of duty to Annealed Cold roll to 5 per cent from the previous 45 per cent, which made domestic manufacturing of the product uncompetitive.

The report explained that the motorcycle assembly sub-sector was severely affected following the suspension of motorcycles in some areas across states, particularly in Lagos.

“Moreso, the increase in the duty of paper from 5 per cent to 20 per cent adversely affected productivity in the paper products sub-sector in Flourmills unveils new product in the period under review. “

The country’s manufacturing sector also grew by 0.8 per cent in the first quarter of the year. However, the down risks in the manufacturing sector remain the disruption of global supply and the increasing commodity prices, which were the off-shoots of the Russian-Ukrainian war.