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Will challenged manufacturing sector get reprieve from pandemic?

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A manufacturing plant. Source: BusinessToday

For some local manufacturers, the lockdown from the coronavirus pandemic is an opportunity to increase capacity and maximise opportunities in the local market that was hitherto shared with foreign products, but others in the non-essential products space, this year may be worse than the former, especially as countries enter another round of recession. FEMI ADEKOYA writes.

For countries exploring the lockdown option to flatten the curve of the coronavirus spread, producers of food and essential items were exempted from the action in order to ensure that people have access to items needed for survival.

In Nigeria, the already challenged manufacturing sector is grappling with disruptions to their businesses due to the COVID-19 outbreak, with many anticipating financial and operational consequences—even before some of the developments.

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For operators in the food, beverage and tobacco products; chemical and pharmaceutical products, among others, the lockdown presents an opportunity to expand local market reach, after the border closure last year August limited their export capacities.

One of the operators present at a recently held stakeholders’ meeting held with the Federal Government to address the issues affecting local production, stated that operators have been tasked to explore measures to address shortages in production that may arise from the pandemic.

Some of the sectors identified for intervention according to information made available to The Guardian include, paper products; textile, apparel, leather and footwear; food, beverage and tobacco products; fabricated metal products; chemical and pharmaceutical products.

The Guardian learnt that a case was equally made for the packaging industry as many products will eventually need to be packaged.

Already, the production level index for the manufacturing sector grew for the thirty-seventh consecutive month in March 2020.

The index however indicated slower growth in the current month, when compared to its level in February 2020. Seven of the 14 manufacturing subsectors recorded increased production level, while 7 subsectors recorded declines in production.

With global supply chains being disrupted, the manufacturing sector’s inventories index contracted for the first time in March 2020.
Though it would appear that the food segment of the food and beverage sector experienced a surge in demand for their products following the outbreak of the pandemic.

The challenge, however, would be in the area of replenishment of their stocks because of the disruptions in the global supply chains.

However, industries that depend more on local raw materials will benefit much more at this time. They will generally be more competitive given the exchange rate depreciation.

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At 49.4 points, the index dipped when compared to its level in February 2020. Three of the 14 subsectors recorded growth, 3 subsectors reported unchanged inventories, while 8 subsectors reported lower raw material inventories in the review month.

Trade organisations, in their notes, observe that global supply chains are set for a major reshuffle as the coronavirus pandemic exposes the vulnerability of countries and companies that rely heavily on a limited number of trading partners.

To help manufacturers, the Minister of Trade and Investment, Richard Adeniyi Adebayo said government will continue to do everything possible to support industries to sustain their operations, and where necessary, even stimulate a surge in the production of essential commodities especially medicines and sanitary products.

He advised all Nigerians not to indulge in any fear-induced behaviour such as panic buying, adulteration, hoarding or price hiking, as government, manufacturers and other stakeholders are working closely to minimise the impact of COVID-19 on the populace.

However, manufacturers have raised concerns that some security agents are disobeying the directive of the Nigeria Governors’ Forum (NGF) to grant certain products free movement in some states as the lockdown to contain the spread of coronavirus continues.

The NGF and President Muhammadu Buhari had granted manufacturers of drugs, food and beverages the permission to move around to forestall shortage of essential items during the lockdown.

According to MAN, the directive of the NGF has yielded good outcomes in some states but adds that security operatives in some other states do not allow manufacturers unhindered movement. No state or security organ is mentioned in the statement.

Lagos and Ogun states, including the Federal Capital Territory, are on lockdown. There have been restrictions in states such as Anambra, Osun, Oyo and a few others. Coronavirus cases have been on the rise in Africa’s most populous nation with over 190 cases.

“Since the decision to lock down economic activities by different states and the eventual national declaration by the President of Nigeria, the Manufacturers Association of Nigeria has maintained consistent talks with relevant government stakeholders on the survival and sustenance of livelihood of Nigerians via the operation of critical manufacturing sector and has indeed yielded positive results,” MAN says.

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“The food, beverage, pharmaceutical and other complementing sectors that make the value chain of essential products available are very critical and the association is glad that government recognised this critical role in its directive for 14days lockdown,” MAN adds.

“Let me add that the directive of the NGF has yielded good outcomes in some states as our members have testified to unhindered operations in the face of the lockdown. But notwithstanding, some security operatives in other states are not yielding particularly, the rank and file officers on the field.”

The association says it is in talks with the NGF to give the necessary directives for adequate sensitisation of security officers to enable them allow unhindered movement by manufacturers’ vehicles.

“While the Manufacturers Association of Nigeria continues to play its role as an advocacy body committed to creating friendly business environment for manufacturers, we can only rely on the government to reciprocate by implementing the suggestions of MAN on the support for the sector during this era of Corona virus pandemic,” MAN further says.

Though manufacturers are able to sustain production within the pandemic and expand local market, there are worries that the effect of the pandemic on the economy is yet to be felt, especially as global value-chains are getting disrupted and purchasing capacity drops.

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