Anxiety mounts over lingering low capacity utilisation

Average utilisation hovers at 51 percent
While the Federal Government may have sustained its campaign for diversification through investment in agriculture and manufacturing, Nigerian manufacturers have expressed concerns on lingering low capacity utilisation in the country.

According to the manufacturers, capacity utilisation in the manufacturing sector has been on the decline with activities slowing down in the sector to 50.69 per cent in the second half of 2015.

In its economic review for 2015, the Manufacturers Association of Nigeria (MAN) noted that capacity utilisation fell to 50.69 per cent in the second half of 2015 from 51.95 recorded in the corresponding period of 2014 following inability to cope with access to raw materials due to government’s monetary policy and perennial challenges of poor infrastructure.

Indeed, MAN had warned of continued rise in consumer prices within the first quarter of the year as a result of imminent decline in their stocked raw materials, arising from inability to access some imported raw materials used for local production.

MAN explained that many industrialists may run out of stock of some raw materials used for production by the end of first quarter of 2016, as access to foreign exchange remains limited.

In terms of performance for 2015, MAN noted that performances across the sectoral groups were mixed, as some groups were able to improve on their capacity utilization while some experienced drop in the utilization.

“The observed variations in capacity utilization among the sectoral groups were attributable to the relative impact of the harsh business environment on the sectors during the period. A major challenge experienced by the manufacturing sector resulting from the policy actions of the Government to address the erosions in the value of Naira in period of review, was shortage of raw materials especially the imported ones; some sectors may have stronger buffer in terms of availability of raw materials while the others may have less strength to contain the shocks.

“For instance, Food, Beverage and Tobacco, Chemical and Pharmaceutical, Electrical and Electronics, and Basic Metal, Iron and Steel sectoral groups witnessed increase in their capacity utilization in the period under review. Conversely, Textile Apparel and footwear, Wood and Woods products, the pulp, paper, printing and Publishing, Non-Metalic mineral products, Domestic/Industrial plastics and Rubber, and Motor Vehicle and miscellaneous assembly sectoral groups saw decrease in capacity utilisation.

“Capacity utilization in food, beverage and tobacco increased to 54.4 percent in the first half of 2015 from 53.3 percent recorded in the corresponding period of 2014; thus indicating 1.1 percentage point increase over the period. The sectoral group also increased it capacity utilization by 1.99 percentage point when compared with 52.41 percent position in the second half of 2014.

“Also in chemical and pharmaceutical sectoral group, capacity utilization edged up to 49.8 percent in the first half of 2015 as against 49.0 per cent position in the corresponding period of 2014; thus showing an increase of 0.9 percentage point over the period. However, when compared with the 43.88 percent of the second half of 2014, it increased by 5.92 percentage point”, the report showed.