Manufacturers link rising unsold inventory to low disposable income
With the exception of the fourth quarter where inventory increased in preparation for the festive period, manufacturers are worried about consumers’ ability to purchase already produced goods.
The Manufacturers Association of Nigeria (MAN) in its recent analysis of the PMI noted that the improved economic spending that characterizes the festive period and increasing tempo of patronage of Made in Nigeria product spurred the performance of the sector in December.
Though the PMI grew at a slower rate when compared to 58.5 index points recorded in January, the Central Bank of Nigeria (CBN) said the index stood at 57.1 index points as at February, indicating an expansion in the manufacturing sector for 23 consecutive months.
MAN’s Director-General, Segun Kadir said low capacity utilisation despite high PMI is one of the traditional issues where the country records growth that is not inclusive, while also pointing out that disposable income has continued to decline with warehouses stocked with unsold goods.
Kadir added: “Yes, we are improving our capacities and we are sourcing more raw materials locally and even those we are importing, we have foreign exchange to buy them, but after manufacturing what happens? If you are not able to sell, you will need to invest in warehouses and this makes it impossible for you to expand and to plan ahead for future growth.
“You can see the challenges at the port; you are bringing in raw materials, but you are bringing it into the country more than 700 per cent above the price, it will take about N900,000 to take your container to Agbara as against what used to be N150,000 and all these things go into your bottom line and they do not allow you to meet your projections”.
Asked about the association’s expectations from the government, he advised that the federal government must take stock of what it has achieved deploying the use of ERGP, ease of doing business and the executive orders.
“There has to be a conversation around how we have performed, what are the gaps that need to be filled, how to introduce a monitoring process that will be inclusive of the private and public sectors and also to a very large extent, setting timelines for accessing and renovating the system.
“The past few weeks have witnessed intense political activities and I think to a larger extent we are expecting some stability in terms of policy. We are not likely to experience any dramatic change and to that extent, there is a lot of comfort around building on the engagement process we have had before,” he averred.
The president, MAN, Mansur Ahmed, also advised that developmental priorities should be given towards improving the poor state of infrastructure, business environment and indeed favourable operating conditions for the manufacturing sector.
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