Manufacturers intensify solutions for sustainable local sourcing

Notwithstanding the commitment by the Central Bank of Nigeria (CBN) to supply manufacturers with foreign exchange for importation of critical raw materials and machinery, local producers are exploring partnerships with research institutes , investors and engineers as part of measures to mitigate another crisis in the real sector.

According to the Manufacturers Association of Nigeria (MAN), local sourcing of raw materials remains the only sustainable option for them in ensuring that they operate optimally and reduce dependence on importation for raw materials.

In a chat with The Guardian, MAN President, Dr. Frank Jacobs affirmed that activities in the real sector have continued to expand noting that MAN data aligns with the position of the apex bank on the Manufacturing Purchasing Managers’ Index (PMI).

Since March the CBN has stepped up its sales of forex to importers, small and medium enterprises and retail (for invisibles). The consequences for the sector have been far greater availability of raw materials and naira appreciation on the parallel market, with the food and beverages segment being the main beneficiary.

Jacobs however noted that despite the intervention, local operators are intensifying their local sourcing agenda by exploring various sustainable solutions in terms of seedlings, import alternatives, local fabrication of machines among others.

According to latest PMI report by the Central Bank of Nigeria (CBN), the PMI, which increased to 52.9 index points in June 2017, is an indicator of the economic health of the manufacturing sector, and is based on five major indicators: new orders, inventory levels, production, supplier deliveries, and the employment environment.

A composite PMI above 50 points indicates that the manufacturing/non-manufacturing economy is generally expanding, 50 points indicates no change and below 50 points indicates that it is generally declining.

In his assessment, Jacobs said: “Based on MAN available data for first quarter of 2017 the manufacturing sector output growth was 1.36 per cent compared to 2.54 per cent at the end of fourth quarter of 2016.

“When compared to the same period in 2016, it was negative seven per cent; so there was a big improvement. The GDP growth for Q1 2017 was -1.54, an improvement from Q4 2016 figure of minus 1.7 per cent; and when compared to same period last year it was -0.67 percent. So generally there is an improvement.”

On backward integration, he said: “What is sustainable is backward integration and looking inward. The ban of 41 items from foreign exchange market has indeed helped our members to think seriously about looking inward. Presently, everybody is doing what they can to source raw materials locally. We are going into partnerships with research institutes, as well as tertiary institutions to see how we can develop the resources in those institutions to help in sourcing raw materials.

“There are a lot of collaborations going on. I just returned from a meeting with African Engineering Council and we had to see how we can partner and collaborate to see that engineering is truly helping the manufacturing sector and the economic development of the country. We are looking at manufacturing of machines, designing of machines that will make manufacturing easier rather than importing everything.”