‘Infrastructure, forex undermining real sector interventions’

Improvement in local manufacturers’ confidence in the economy as well as sectoral recovery, remains challenged by parlous state of infrastructure and poor implementation of policies, especially those related to the palliative given to the manufacturing sector in the form of reduced interest rate, operators have said.

With the manufacturing sector’s contributions to the latest Gross Domestic Product (GDP) remaining very low, despite acclaimed interventions from the Central Bank of Nigeria (CBN), local producers noted that the inability to control input costs and poor infrastructure affect productive output as well as confidence in the economy.

The Director-General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, noted that while manufacturers are optimistic that 2021 will help them witness better outcomes, implementation of policies that seek to aid real sector support remains challenging.

According to members of the private sector, increased inflation and recessed growth in the industrial sector in the last quarter of 2020 pose serious threat to the recovery of the manufacturing sector.

For LCCI, the jump in inflation rate wasn’t surprising, as all the factors that had been responsible for inflation were still very much at play. Its Director-General Muda Yusuf said, for instance, the exchange rate depreciation was affecting the price of imports and raw materials.

He also said foreign exchange liquidity problem was affecting production in many manufacturing outfits; it was also affecting the importation of finished goods.

MAN added that the combined effect of COVID-19, deteriorating infrastructure, high regulatory compliance cost and tax obligations; rising inflation, perennially high interest rates and scarce/high rate of forex compounded the downturn in the sector.

“For instance, the government should intensify efforts at stabilizing the consumer price level through growth in agricultural output and diversification of the Nigerian economy in other to guarantee stable prices in both agricultural and manufactured goods,” Ajayi-Kadir recommended.

He also said there are quite a number of moribund industries in the country that should be resuscitated to boost output and thereby reduce prices, adding that the government should also partner with MAN to accelerate success in the association’s resource-based industrialisation initiative.

“It is evident that there is a strong relationship between manufacturing sector growth and inflation rate, just like exchange and interest rates. Therefore, for this moment and in the immediate future, government should assist manufacturing productivity with credit at competitive price,” the MAN DG said.

According to him, this could be in the form of concessions and enhancing existing special credit windows or creating additional ones for this important sector of the Nigerian economy.

“Deliberate policy to stimulate domestic production and thereby increase domestic, as well as foreign demands for goods would, in the long run, lower inflation and enhance exchange rate appreciations,” he added.

Director-General of the Nigeria Employers’ Consultative Association (NECA), Dr Olawale Timothy, noted that the fiscal and monetary policy makers should address the macroeconomic stability, of which almost all indicators still heading northward- high inflation, unemployment, foreign exchange, external reserves and interest rate, among others.

“Fundamentals in achieving real economic recovery should address some low hanging fruits like the lingering farmers-herder clashes, banditry and high rising kidnapping and other related crimes, reduction in Foreign Direct Investment, and ease of doing business- porous port administration and high handedness of regulatory agencies”, he added.