Nigeria’s industrial sector in perspective, by MAN

The Manufacturers Association of Nigeria (MAN), in its review of the nation’s industrial sector in the first half of last year, highlighted, in its just released report, activities that defined its members’ operational profile during the period.Excerpts. 

AT the end of the year 2013, capacity utilization in the factories surged up in the first half of the year which recorded an average of 46.3 per cent for 2013 to 51.96 per cent for the period review. The increase was largely due to the activities in the Non Metallic sector which spearhead by the Cement sub sector. Other sectors that contributed immensely to the improved performance were the food and beverages with major activities from the beer, noodles and pastas, the flour and confectionary groups. Pulp, paper, printing and publishing sector also put in an above average performance in raising the capacity utilization at the end of year 2013.

Result from industrial survey carried out for first half of the year, covering January to June, 2014 presented an interesting scenario. While the overall average capacity utilization fell behind the 2013 yearly average of 52.7 per cent at 51.96 per cent, the performance across the sectors showed some level of mixed performances.

 The non metallic sector that hitherto has been returning high performances through the activities in the cement and ceramic groups dropped suddenly from an average capacity of 69.9 per cent (70 per cent) at the end of 2013 to an average of 49.2 per cent. However, this might be due to cautious approach by people and governments in their approach to projects, some of which have not witnessed the same level of massive execution that were embarked upon in the last of year 2013.

  Same result was returned by Basic Metal and Steel group whose capacity fell from 52.3 per cent to 49.9 per cent (approx. 50 per cent). The food and beverage sector also has its fair share in the performance reduction as it moves down from an average of 61.5 per cent to 53.3 per cent within the period under review. Predictably, the Textile Apparel and Footwear sector still returned reduction in their performance as it further goes down from 44.9 per cent at the end of 2013 to 43.5 per cent in the first half of 2014.

  The chemical and pharmaceutical sector also returned some level of reduction in performance. But further analysis revealed that the reduction from average capacity of 53.6 per cent in 2013 to 49.0 per cent by June 2014 was as a result of some levels of minor reduction in performance by the Pharmaceutical group. However, the Paint group, within the Chemical and Pharmaceutical sector, put up an improved performance, moving from an average capacity of 19 per cent to 25 per cent, thereby shore up the performance of the entire sector.

  Despite some reduction in performance by some sectors mentioned above, other sectors within the industry put up improved performances thereby making the overall performance in the manufacturing sector still remain consolidated, notwithstanding the mixed environment as monitored from January to June, 2014. Leading among such sectors are, the wood and Wood Products (61.0 per cent). Pulp, paper, printing and publishing (PPPPS – 60.5 per cent) and surprisingly, the Electrical and Electronic (50.4 per cent) as well as Motor Vehicle and Miscellaneous Assembly, whose activities have been boosted recently by the major assembly plants, particularly the tri-cycle and motor parts assemblers. In this group is also the oil and lubricant group that are also putting up some level of appreciable performances.

  In all and from the figure in the table below, the capacity utilization, performance across the industry has been stable and the performance for the first half of 2014 is better than the first half of 2013 when compared across the sector and the industry.  

Performance by industrial zones

The responses received were also analyzed based on industrial zone areas in order to gauge the level of spread and economic activities as affect production, investments and job creation and sustenance. The result however revealed in terms of utilization of capacity. However, Ogun industrial zone, consisting of Otta, Shagamu, Ibese/Ilaro and the newly found area in Mowe/Ibafo axis, returned a higher percentage. This is in view of the high concentration of manufacturing concerns, couple with relocation of some factories from Lagos as well as access to land for the new manufacturing investments.

  From the table below, Ogun industrial zone led other zones with about 60 per cent, while it was closely followed by Oyo/Ondo/Osun/Ekiti and Kano (Sharada/Chalawa). The latter, being more populated by small and medium with pockets of large and multinationals are the major companies doing business in these areas.

 Coming in the rear is Bauchi/Plateau/Benue with an average of 43. 0 per cent, trailing behind Kaduna and Edo/Delta industrial areas with 45.3 per cent and 46.5 per cent were ahead of respectively. The situation in these zones could be understood given the unstable in the political environment which has affected production, sales and other logistics.

Manufacturing production value

At the end of 2013, the manufacturing production value was estimated at about N483.53 billion, while about N353.2 billion was estimated at the end of first half of the year. Whereas in 2012, the manufacturing production value was estimated at about N218.64 billion, thereby given an indication of increased production in 2013.

  From the survey of factories activities conducted from the period of January-June (first half) 2014, the production value was estimated at about N270.86 billion, which is less than the figure recorded for the same period in 2013. This should not be entirely assumed to be a lull in activities but a reaction as a result of challenges as posed by some indices in the economy, particularly the problem of power outages, which has continued to produce greater effect on the small and medium-scale industries (SMIs). However, some of the multinationals were able to weather through notwithstanding the daunting power challenges. Also, the internal strife, linked to the religious uprising in the Northern parts of the country contributed to lowering production as markets were curtailed due to sales and movement challenges across some parts of the country.

  Indication from the survey, as well as interactions with the operators, has been the expression of an optimistic situation before the end of the year. Though members were cautious that once some of the issues that are impeding business environment are frontally and urgently addressed, these may be possibility that by the end of the year, the production performances  across the manufacturing sector may be heading for higher performance which may surpass the level achieved in 2013.

  The survey further examined performances across the Industrial Zones as delineated by MAN,  revealed that Ikeja Industrial Area had an estimated value of about N125.68 billion, which the highest production value of about 46 per cent when compared to the overall figure for the period. Ikeja was followed by Ogun Industrial Area which had N56.21 billion or about 22 per cent.

  Rivers Industrial zone returned an estimated value of N0.709 billion (N709 million) which is about 0.26 (approx. 3 per cent) and taking the rear from the list of the Industrial Zones. However, the performance can be linked to several constraints in the area, as well as the recent effort by the Federal Government which is galvanizing some companies, which had hitherto relocated, which are reconsidering coming back to Nigeria.

  Below are the tables, showing the figure  as collated and analyzed from the industrial sectors and the Industrial Zone/Areas as delineated by the Manufacturers Association of Nigeria (MAN). 

Raw material sourcing

In the last three years, manufactures in Nigeria have been responding positively to Government policy on backward integration, particularly with the Agricultural Transformation Agenda that has been targeted not only on achieving food sufficiency but to establish linkage with the industry. Same has been the effort at repositioning the Solid Mineral sector at complementing the manufacturing the opportunity that has largely been utilized by the non metallic  sector of the manufacturing as evidenced from the success in the cement industry.

  Subsequently editions of this report had alluded to the gradual movement from a wholly dependent imported input in manufacturing to embracing local inputs. This is confirmed by the survey as reported for the reviewed period where, the Non Metallic continued to lead the pack in sector’s continuous and gradual increase in the use local raw materials. Notable among the players in the sector are the cement group and ceramics. Tiles and others. While the activities in Food and Beverages are spearhead by the Beer group as well as the Flour producers and the Millers and those in the business of pastas and to some extent the non alcoholic drinks subsectors.

  Overall average on sectoral basis still gives a higher ratio to imported raw materials (52.4 per cent) over the locally produced inputs (47.6 per cent) while sub sector analysis indicated the locally produced input having non metallic sectoral group with higher usage of 69 .6 per cent  closely followed by the Food and Beverages with 63.4 per cent.

  On industrial zone basis, virtually all the zones maintain an average usage of local raw materials, with Rivers Industrial Area showing a higher local input preference. 

The activities and the turnaround in the usage of petro-chemical input is very conspicuous here. The zone alone rake up about 70 per cent while the least came from Ikeja zone with about 44 per cent.    

Unsold inventory of finished products

As much as manufacturers were very tactical and cautious about stock-piling finished products, recent survey revealed that consumers’ also reduced that level of consumption making the level of inventory to increase by about 30 per cent from N17.34 billion to N22.55 billion from the end of 2013 to June (end of first half) 2014. However, this figure is not too differ rent from what was obtained by the end of first half (June) 2013, wherein manufacturers’ level of unsold inventory was about N21.75 billion.

  Sector by sector analysis indicated that the basic Metal, iron and steel group led the pack by about N5.12 billion, followed by Non-Metalic group with about N5.07 billion and Textile group with about N4.07 billion. Food beverages and tobacco group recorded an estimated N3.21 billion against N389.53 million as at December 2014.

  Electrical and Electronic sector recorded the least as the sector turned in an estimated N47.7 million worth of unsold finished products, while Motor vehicle and miscellaneous group recorded an estimated N189.59 million as against N3.46 billion recorded as December 2013. The implication of these figures is the reflection of consumers who have to some extent lower their consumption rate and the impact of smuggling and faking of Nigerian products which manufacturers have been complaining at every given occasion.

  Further analysis by industrial zones revealed that Ikeja factories top the list with a bout N7.76 billion worth of finished products, while this was followed by Oyo/Ondo/Ekiti and Osun industrial areas recording an estimated amount valued at about N3.32 billion. The two industrial areas of Kano (Kano Bompai and Kano Sharad/Challawa) both recorded estimated N2.52 billion and N2.02 billion respectively, in terms of stock  of finished products. However, Apapa industrial area recorded the least with an estimated amount of about N105 million.

 The increase in the level of inventory of finished products as estimated from this study is nothing to worry about, considering Government effort at addressing the issue of adulterated and fake product through the Standard Organisation of Nigeria (SON). Manufacturers at the individual industrial levels are also employing various strategic inventory management, to reduce their inventory of finished products. 

Manufacturing investments

Manufacturers have continued to demonstrate their belief and confidence in the economy through their continued investment in the sector. Major areas of investments include; plants and machinery/spare part, land and building vehicles, furniture and fittings as well as new construction of other infrastructures.

 As at the end of last year (2013), an estimated total of about N1.43 trillion was invested which cut across all the assets listed about as well as new entrance by some new companies. In the last six months (January-June 2014), an estimated total of about N483.01 billion was invested across the sectors, industrial zones and on various assets meant to increase manufacturing contribution to the economy. 

  From the survey of members manufacturing active ties, it was revealed that most of the companies placed more priority on investing in Plants and Machines and Spare Parts for retooling, with the overall objective of increasing and improving their productive capacities. The result from the analysis indicated about 71 per cent share of investment was expended on plant and machineries and spares, leaving the rest 29 being shared on other areas of assets.

  On sector basis, the Chemical and Pharmaceutical group is leading the pack with about 37 per cent share of investment. The sector is being followed by the Basic Metal, Iron and Steel group that has taking about 23 per cent (22.96 per cent) of the total investment in the sector during the period under review. As usual, the food beverages and tobacco group took about 19 per cent of the total share, with the group activities highly driven by the beer and flour mills as well as the confectionary sub sectors.

  On the lower ladder are the pulp, paper and publishing ( 6Ps) with about 1.97 per cent followed by textile group with 1.96 wood and wood products with 0.94 and the motor vehicle and miscellaneous group taking the rare at about 0.6 per cent. Two cases are distinct here. The packaging industry which is one of the performing  sub sectors in the 6Ps, is currently facing challenges because of some investors who are undermining the business of the sector through their activities at the export Procesing zones. Relevant authorities are already looking into these and MAN is of the opinion that issues be quickly address as its already taking its toll on the current and future investment in the industry. The other sub sector that presented a notable case is the Motor Vehicle and Miscellaneous Assembly. In as much as the activities of the assemblage of Tricycle operators is given an investment in the sector, having started taking advantage of Government’s new automotive  policy. It is being projected that by time one or two of the plants that indicated their willingness to key in to the policy comes on ground, the sector may be heading towards one of the growth driver sector in manufacturing in Nigeria with all the attendant value addition to the industries as well as the entire economy.

Investment by industrial zones

Much as the report has treid to established activities across manufacturing groups and sub sectors, it has further examined the trend of flow of manufacturing investments across the  industrial zones. This has revealed that majority of manufacturing investments were directed towards Ogun industrial axis. Which consisted of Otta, Agbara, Ibafo/Mowe and Shagamu industrial areas. The zone’s new investment was estimated at N376.57 billion, which is about 78 per cent of total  investment in manufacturing for the first half of 2014. This is followed by Kano Sharada/Challawa and Oyo/Ondo/Ekiti/Osun zones with about N19.8 per cent trillion and N19.2 billion respectively. River industrial zone had the least of about N72.3 million or about 0.1 per cent of the total investment for the period.

Manufacturing employment

The survey on manufacturing sector as usual, tries to capture  the addition to usual tries to capture the addition to employment by the sector to the overall job creation in the economy. In line with the objective of evaluating the level of job creation by manufacturing sector, the study across the sectors and industrial zones revealed that in the first six months of the year, an estimated 5.521 new jobs were created by manufacturers. At the end of 2013, a total of 53,340 were added, making the sector as one of the growth driver in the economy.