Lingering challenges keeping manufacturing sector from optimal performance

Despite support from the Federal Government in terms of fiscal policy framework to the manufacturing sector, the performance of the sector remains at the potential stage, as lingering challenges continue to inhibit optimal performance.

According to the latest review of the Purchasing Managers’ Index (PMI), by the Manufacturers Association of Nigeria (MAN), performance across the sectoral groups analysed within the December period remains constrained by challenges that keep the manufacturing sector from attaining its full growth potential.

Specifically, MAN noted that for two consecutive months now, no sectoral group recorded below 50 points benchmark, which shows a reasonable level of improvement in the manufacturing sector performance and a pointer to a good outing in the last quarter of 2018.

In broad terms, MAN’s report revealed relative improvement in manufacturing sector performance, attributable to increasing support for manufacturing, fairly improved environment and the efficacy of the prevailing economic policies aimed at stabilizing the economy.

“Notwithstanding, the manufacturing sector is still faced with myriad of challenges, ranging from infrastructure deficit, multiplicity of taxes, policy contradictions, exorbitant cost of clearing and transporting raw materials from the ports to factories, poor access to Lagos Ports, weak port infrastructure to increasing incidences of smuggling and counterfeiting”, MAN added.

The report revealed improved performances across the sectorial groups except for Electrical & Electronics sectoral group.

Although the performance of Electrical & Electronics Sectoral Group recorded above 50 points benchmark, its basis point contracted by 6.7 points owing mainly to the menace of smuggling and counterfeiting that has continually plagued its performance.

MAN sought government’s intervention to support operators in the Group with policies that will discourage unbridled inflow of used and smuggled Electrical & Electronics products to the country.

The Textile Apparel & Footwear sectoral Group (TAFSG) recorded the most significant improvement with a positive change of 13.9 points.

The performance of this Group in recent times could be attributed to a number of factors, which include fiscal support, improved local patronage, and incentives for cotton growers, increasing access to development finance windows, and the recent approved concessional gas pricing mechanism.

In performance ranking, the TAFSG was followed closely by Motor Vehicle & Misc. Assembly Group (MVMAG) with 12.5 points increment.

This is however surprising because in real terms, the MVMAG was reported to have recorded increase in basis points without a virile auto component allied industry, with the prevailing low patronage of locally assembled automobiles and the obvious abuse of some provisions of the Automotive Policy by some portfolio investors, which indirectly aids importation of fully assembled automobiles to the detriment of locally assembled vehicles.

The 6Ps sectoral Group also recorded an increase of 9.1 points even though it is still high import dependent for vital raw materials.

“For the last two months of 2018, all indices used in measuring Purchasing Managers’ Index recorded improved performance; a development that indicates that the manufacturing sector is on the path of sustainable growth.

“Undoubtedly, the improved economic spending that characterizes the festive period and increasing tempo of patronage of Made in Nigeria product have spurred the performance of the sector in December”, MAN added.