• Says monetary tightening will destroy real sector
The Manufacturers Association of Nigeria (MAN) has urged regulators to engender an atmosphere that promotes fairness while safeguarding the interest of the consumers and protecting local manufacturers.

Director General of the Association, Segun Ajayi-Kadir, stressed the need for deliberate steps to protect manufacturers from the adverse effects of social media trial and defamation and ensure fairness for all stakeholders.

He said social media trials could significantly affect businesses and even threaten their existence. He stressed the need for measures that recognise the challenges faced by manufacturers in Nigeria and encourage consumer patronage and empathy.

While acknowledging and encouraging consumers’ right to voice legitimate complaints, he sought the support of local manufacturers to elevate their perception of locally-made products. He further called for a shift in consumer behavior towards patronising domestic goods and showcasing their quality to the global market.

Ajayi-Kadir said MAN’s advocacy underscored the importance of balanced regulatory policies that protect manufacturers while upholding consumer rights, ultimately aiming to foster a conducive environment for sustainable business growth and the well-being of Nigerians.

Also related to development, Ajayi-Kadir has expressed worry over the recent decision of the Monetary Policy Committee (MPC) to raise the monetary policy rate (MPR) by 200 basis points to 24.75 per cent from 22.75 per cent.

To further tighten monetary policy, the cash reserve ratio (CRR) of deposit money banks was retained at 45 per cent and liquidity ratio at 30 percent.

The MAN DG regretted that the current monetary phase would further limit credit interventions, increase the cost of loans, increase production cost, reduce access to funds and make local businesses uncompetitive.

Acknowledging the fact that the economy has encountered a series of challenges in recent times, such as forex instability, escalated energy prices and food insecurity that have heightened the inflationary pressures and grossly eroded the consumers’ purchasing power, he said the issues have had negative impacts on the manufacturing sector, leading to decreased production and reduced competitiveness.

“In broad terms, the implications of maintaining the same trend of monetary policy decisions in the last two years are evident in the continuous macroeconomic instability prevalent in the economy with an overwhelming impact on the manufacturing sector in Nigeria. This is worsened by the multidimensional binding constraints responsible for the lackluster performance of the manufacturingsector.Undoubtedly, macroeconomic instability will continue to disrupt production plans, jeopardise investments and cloud the sector’s prospects,” he said.

He added that the higher cost of doing business will be further exacerbated, thereby worsening the competitiveness of Nigerian products in the global market, which is evident in the drastic reduction in global demand for these products.

According to him, data provided by the World Trade Organisation (WTO), revealed that South African manufacturing export value was $46 billion, while that of Nigeria was $3 billion in 2022.

“This is over 15 times greater than our manufacturing export value in that year. The reduction in global demand for Nigerian products was further buttressed by the NBS report that confirmed that the manufacturing export value of Nigeria plummeted by 166 percent from N2.07 trillion in 2019 to N778.44 billion in 2023.”

“In addition, the exorbitant lending rate of over 30 per cent has contributed largely to a drop in the share of manufacturing export to non-oil export from 82.4 per cent to 24.8 per cent in 2019 and 2023 respectively,” he said.

He noted that the resultant increase in the cost of servicing loans is a threat to the financial stability of manufacturing companies, as the increase will destabilise manufacturers through the disruption of production plans, avoidable stock-out situations and decreased capacity utilisation.

“The increase in merchant banks’ CRR and narrowing of the asymmetric corridor will further reduce the capacity of banks to lend to the productive sector. These, in addition to the high interest rates, will limit backward integration, research and development and innovation needed to enhance productivity and rapid industrial-led economic growth,” he said.

Ajayi-Kadir said that while the body recognised the rationale behind the CBN’s decision, it is essential for the committee to consider the potential impact of the manufacturing decisions and collaborate with fiscal authorities to support the sector to play its traditional role as a critical driver of meaningful employment, improved productivity, steady FX proceeds inflow and sustained economic growth.

He further noted that this approach of increasing MPR has been adopted for almost two years without positive results and tasked the CBN to consider other measures to combat the pressure particularly addressing the causes of the increase which are major cost-push factors.

Recommending some policy measures, he urged the CBN to ensure adequate security in farming areas and business environment by fast-tracking passage of the Police Reform Bill and investing significantly in data platforms, surveillance systems and community policing.

“Stabilise the value of the naira by managing the floating exchange rate within a business-friendly threshold and intensify ongoing reforms to boost the level of liquidity and degree of transparency in the official forex window. Prioritise FX and credit allocation to manufacturers and fast track the proposed recapitalisation of the banking sector,” he said.