Aggressive revenue drive depresses industrial performance in Niger Delta zone

High operating expenses in some industrial zones, especially those in Rivers/Bayelsa and Cross-Rivers/Akwa-Ibom zones continue to depress manufacturing sector indices below the benchmark points, raising concerns for productivity and employment generation.

Indeed, local manufacturers had complained about the aggressive revenue drive by governments in the Niger/Delta region, citing it as a clog in the performance wheel of industrial firms in the regions.

Latest data from the Manufacturers Association of Nigeria (MAN) based on an observation of analysis of the 14 industrial zones showed that Index scores of Rivers/Bayelsa (48.0 points) and Cross-Rivers/Akwa-Ibom (46.5 points) fell below the 50 base points. The scores indicate that manufacturers operating in the zones have lost confidence in the economy due to persisting harsh operating environments in the zones.

Imo/Abia, Kaduna, Ogun, Apapa and Kwara/Kogi though have index scores above 50 benchmark points but declined in the quarter under review.

Edo/Delta, Oyo/Ondo/Ekiti/Osun, Kano, Ikeja, Anambra/Enugu and Bauchi/Benue/Plateau have index scores above the 50 base points with an increase in the quarter under review. The scores indicate continuous improvement of the confidence of manufacturers operating in the zones in the economy.

Index scores of Abuja zone increased to 50.7 points in the fourth quarter of 2022 from 43.5 points obtained in the preceding quarter. The score indicates a significant improvement in the confidence of the manufacturers operating in the zone.

Citing the adverse effect of the Consumer Price Index (CPI), continuous erosion in Naira value and difficulty in accessing foreign exchange, high cost of energy, persisting insecurity and the consequences of lingering Russian-Ukrainian war, local manufacturers have cited waning confidence in the business environment in Nigeria.

Using the Manufacturers CEO’s Confidence Index (MCCI) of the Manufacturers Association of Nigeria (MAN) as a benchmark for measuring changes in the pulse of operators and trends in the manufacturing sector quarterly, the local producers noted that these issues, among others, are principally responsible for the difficult operating environment and its declining implication on manufacturing activities in the country during the quarter under review.

Specifically, the Aggregate Index Score (AIS) of MCCI declined to 55.0 points in the fourth quarter of 2022 from 55.4 points obtained in the third quarter of the year.

The index score of the current quarter, though below that of the previous quarter, indicates that manufacturers generally still have confidence in the economy.

MCCI Index is computed using data generated on standard diffusion factors of current business condition, business condition for the next three months, current employment condition (rate of employment), and employment condition for the next three months and production level for the next three months.

The Index has a baseline score of 50 points and scores above the baseline indicate improvement of manufacturers confidence in the economy, while index score of less than the baseline suggests deterioration in the operating environment.

Among the standard diffusion factors, current business condition and business condition for the next three months, scored above 50 benchmark while increasing in the quarter; current employment condition (rate of employment) and production level in the next three months scored above the 50 benchmark points though with a decline in the period respectively; employment condition for the next three months dipped below the benchmark points to 48.8 points which is also below 49.2 points obtained in the preceding quarter.

The report noted that employment decisions by manufacturers are so difficult due to the unpredictability and difficulty in macroeconomic movement.

Across sectoral groups however, activities in the Pulp, Paper, Printing & Publishing with index score of 49.6 points and Motor Vehicle & Miscellaneous Assembly (48.4 points) are negatively affected by the harsh operating environment in the quarter under review as their index scores fell below the 50 base points.

Similarly, among industrial zones, activities in Rivers/Bayelsa (48.0 points) and Cross-Rivers/Akwa-Ibom (46.5 points) zones were depressed by high-cost of operating environment in the fourth quarter of 2022 as underlined by their index scores which fell below the benchmark points.

The local producers however urged the government to have a shift towards a better exchange rate management; and moderate the rising energy cost via better management of refined petroleum products imported into the country, noting that these, among other measures, would no doubt help to reduce the current high inflation, which is fast eating-up the working capitals of businesses including manufacturing in the economy.