Despite growth, manufacturing sector’s contributions to GDP remain static
Despite the real Gross Domestic Product (GDP) growth recorded by the manufacturing sector for the fourth quarter of 2018, the sector’s contributions to the nation’s GDP during the period did not change from 2017 share (8.86%), as well as in the annual contribution, which rose only slightly from 9.18% in 2017 to 9.20% in 2018.
Indeed, challenges bordering on inability to derive many raw materials from the agricultural sector and lingering situation at the nation’s ports, with respect to movement of goods from the ports to factories continue to limit the performance of operators in the sector.
For instance, PZ Cussons said its global profits are being hurt by economic troubles in Nigeria, with wages lagging behind spiralling cost inflation in recent years, as well as an estimated £5.5 million from significant port disruption in the country.
Although the firm stated that it would not be leaving the country, it noted that its performance in Nigeria was being hit further by higher supply-chain costs and a lower exchange rate.
Real GDP growth in the Manufacturing sector was recorded at 2.35 per cent in Q4 2018, which is higher than the 0.14% recorded in the same quarter of 2017 and 1.92% recorded in the preceding quarter.
On a quarter-on-quarter basis, the sector growth rate stood at 5.46%, while the annual growth rate was 2.09% in 2018. The yearly growth rate was a significant improvement over the previous year’s growth rate of –0.21%.
Specifically, the Manufacturers Association of Nigeria (MAN), and the Lagos Chamber of commerce and Industry (LCCI), urged the government to look into the Nigeria Industrial Revolution Plan (NIRP), with emphasis on review of its backward integration policies to encourage local production and infrastructural gaps.
According to MAN, there is a need to reduce the cost of moving goods from ports to the factories. Indeed, budgeted capital allocation to the development of transportation infrastructure stands at N194.24 billion, indicating 26.2% reduction from N263.10 billion allocation in 2018.
“Global evidence has shown that no country in the world had ever fully industrialized without a robust railway system. No mention however is made of the need to dredge the various ports outside Lagos State to decongest Tin Can and Wharf ports and reduce the cost of moving goods from ports to the factories”, MAN noted.
Similarly, Team Lead, Research, United Capital, Wale Olusi, while reacting to the GDP report in a televised programme added that ports congestion at the ports need to be addressed.
According to him, if the nation is serious about driving growth, a lot needs to be done in investing in more ports across the country to avoid congestion at the ports.
With the challenges at the ports, the trade sector grew at 1.60% in year 2018, as against 4.34% in year 2017. Trade’s contribution to nominal GDP in the fourth quarter of 2018 was 17.24%, lower than its contribution in Q4 2017 (18.60%), but higher than the contribution in the preceding quarter (16.45%).
In real terms, Trade GDP growth rate stood at 1.02%, which is –1.05% points lower than the rate recorded one year prior, but 0.04% points higher than recorded in the preceding quarter.
Quarter on quarter growth stood at 9.93%. Slightly better than 2017, growth rate of real Trade GDP in 2018 remained negative at –0.63%.