‘Why manufacturing sector under-performed in H1 2018’

Weak demand occasioned by low disposable income, high cost of production and over-regulation have been attributed as key reasons responsible for the weak performance of the nation’s manufacturing sector in the first half of 2018.

According to the Manufacturers Association of Nigeria (MAN), over-regulation and the attendant multiple charges, and non-synchronic commercial policies affected activities in the sector negatively within the review period.

Indeed, MAN noted that consumption continued to dampen due to high commodity prices strongly induced by unfavourable exchange rate parity, its impact on cost of production and the general consumer real disposable income.

To spike demand and rise in local patronage, the operators urged the Federal Government to encourage the State and Local Governments to embrace patronage of made in Nigerian products by toeing the footsteps of the Federal Government.The operators mentioned the need for government to sustain, monitor and enforce the 40 percent Micro, Small and Medium Enterprises’ preferential participation rate in public procurement as recommended in the Executive Order 003.

It would be recalled that the latest consumer price index (CPI), otherwise referred to as the inflation rate for goods and services, rose to 11.28 per cent in November, driven by higher prices for bread and cereals, milk, cheese and yam, the National Bureau of Statistic (NBS) has said.

The statistics agency, in its latest CPI report published recently, said the new rate rose from 11.26 per cent recorded in October, its highest value since May.The CPI measures the average change in prices of goods and services consumed by people for day-to-day living over time. The change is about 0.0006 per cent points higher than the rate recorded in October 2018 (0.74) per cent.

“The percentage change in the average composite CPI for the twelve months period ending November 2018 over the average of the CPI for the previous twelve months period was 12.41 per cent, showing 0.37 per cent point decline from 12.78 per cent recorded in October 2018,” it says.

According to Bloomberg, inflation is expected to accelerate partly due to election-related spending with Nigeria scheduled to vote in February, and an increase in national budget disbursements.

Central Bank Governor Godwin Emefiele sees the rate remaining above the 9 percent upper end of the target, and only starting to moderate after mid-2019

It is also expected that price risks should force policy makers to maintain a tight monetary stance that’s kept the benchmark interest rate at a record 14 percent for more than two years despite weak economic growth. The policy-formulating committee reconvenes in January to review rates.