Manufacturing equities hit by harsh business environment

The manufacturing sector was not isolated from the harsh operating environment as the bottom-line of the listed equities, especially in the last few years has remained susceptible to the challenges facing the agribusiness in Nigeria.

Indeed, the most hit were the share prices of companies on the Nigerian Stock Exchange (NSE) that have remained stagnated at nominal value year-to-date following negative sentiments that have enveloped their stocks’ demand.

Ranging from the parlous state of infrastructure, to poor access roads to the ports, with the associated traffic gridlock, as well as the activities of multiple government agencies at the terminals, all these have contributed to the current negative position of the manufacturing industry.

At the 58th yearly general meeting of FMN Plc (Flourmills) held in Lagos at the weekend, investors listed the pangs of the sector, urging government to adopt a holistic strategy that would help rev up commitment in ease of doing business in Nigeria and lower operational cost.

The investors linked the poor performance of the sector to the inability of manufacturers to pass on the increased cost incurred due to infrastructure deficits and demurrage arising from unnecessary delays at the ports.

According to them, more commitment to ease of doing business would help reverse the current negative position of the manufacturing industry and increase the sector’s contributions to the nation’s speedy recovery from recession.

The Publicity Secretary of Independence Shareholders Association, Moses Igbrude, said the cost of doing business in Nigeria is extremely high, ranging from raw materials procurement to logistics and issues associated with taxation.

Citing Flourmills, Igbrude said the company has been involved in the funding of Apapa road construction, noting that the company needed to be encouraged by a tax rebate.

“The manufacturing companies are really trying their best. They are really passing through difficult times and making very minute profit, largely due to harsh operating environment.

“For instance, FMN is currently involved in road construction. That is not how it is supposed to be, but because they are right there at the centre of the problem, they do not have choice than to do it.

“When their distributors are coming, their vehicles would queue up for days and they would be discouraged. So, logistic is one the major problems and when you look at the economy. When you look at their ranges of product, they have embarked on backward integration; they have palm oil and sugar cane farm.

The President of New Dimension Shareholders Association, Patrick Ajudua, said: “We have to appreciate what the private sector is doing trying to take some aspect of government duties. Government’s duty is to provide infrastructure, but they have been failing in their responsibility.

“Government, having seen what these companies are doing should give them a form of tax incentive, as a way of encouragement. Government must pay much attention to infrastructure to cushion the effect of harsh operations on manufacturers.”

The Chairman of FMN, John Coumantaros, said the Nigerian manufacturing sector is currently faced with monumental challenges and constraints that combined to lower productivity, output and increased cost of doing business.

According to him, this has continued to depress profit margins of many manufacturing companies and impede their growth.

“Some of the major constraints experienced by the manufactures include acute power shortage, deteriorating road infrastructure, intractable traffic gridlock in Apapa, soaring input costs, unrest in North East and general fears and uncertainties.

“These adverse conditions contributed to lower industrial capacity, utilisation, resulting in higher unemployment rate and a commensurate decline in purchasing power.”