Manufacturing records negative growth in Q1 as economic challenges linger

All manufacturing indicators recorded negative changes in the first quarter majorly due to the prolonged foreign exchange (FX) crisis, escalated cost of energy, unstable import duty rate, high cost of borrowing and steady rise in inflation.

The indicators include production and distribution costs, capacity utilisation, production and investment volumes, employment, sales as well as the cost of shipment.

This was disclosed by the Manufacturers Association of Nigeria (MAN) CEO Confidence Index (MCCI) report for the first quarter of the year released yesterday.

The report, taken from 400 CEOs of MAN-member companies across the country, measures changes in the quarterly pulse of manufacturing activities concerning movement in the macroeconomic and government policies.

The factors, the report said, grossly escalated the cost of manufacturing operations, distorted the manufacturing value chain, discouraged investments, increased job losses and reduced sales volume.

Stressing the 230 per cent increase in electricity tariff, MAN said it is negatively affecting manufacturing, worsening the already high-cost operating environment and called for the immediate suspension of the tariff’s implementation.

Lamenting the effect of the macroeconomic environment on the sectoral groups, the report added that the food, beverages and tobacco, chemical and pharmaceuticals, electrical and electronics and motor vehicle and miscellaneous assembly sectoral groups were worst hit by the effects of the unstable macroeconomic environment on key performance indicators.

Bauchi/ Benue/Plateau (43.8); Kano (44); Rivers (44.3); Oyo/Ondo/Ekiti/Osun (47.1); Cross-River/Akwa Ibom (48) industrial zones recorded the lowest confidence in the economy with indices less than 50 points. Most of the operators within these zones were decimated by the volatility in the FX and custom duty rates and the surge in gas prices.

Manufacturers in Kwara/Kogi, Imo/Abia and Ikeja industrial zones also recorded waning business confidence due to FX instability, high cost of doing business, reduced patronage and tumultuous change in government policies.

The association urged the government to frontally address insecurity, improve electricity supply, promote fiscal sustainability and ensure policy consistency.

“Among other priorities, the fiscal authority must also lend supportive measures by incentivising the real and other productive sectors. This is very important to boost non-oil export earnings in addition to the increase in oil export proceeds occasioned by increased oil production and rising global oil prices,” it stated.