Stakeholders have stressed the need to focus on building a strong manufacturing base to strengthen local trade, avert companies’ collapse and stem the exit of companies from the local market this year.
The stockbrokers, apparently piqued by the huge losses and capital flight from last year’s delisting of manufacturing firms from the exchange and exit from the Nigerian market, said the country cannot achieve sustainable wealth creation and industrialisation without giving attention to making local manufacturers competitive.
They warned that if urgent steps are not taken to revive the sector, the country will witness massive companies collapse this year.
The stakeholders pointed out that the prevailing macroeconomic headwinds and divestment in the consumer goods space are currently weakening the country’s manufacturing base.
According to them, the reforms of the new administration have negatively impacted the sector’s performance.
Already, the Manufacturers Association of Nigeria (MAN) has projected a tough start to 2024 for the manufacturing sector but expects improvements towards the third quarter.
The stakeholders said that the way forward is for the government to expedite action in the implementation of policies that would accelerate commitment to ease of doing business on one hand and tackle issues leading to poverty and low purchasing power on the other hand.
Data from the National Bureau of Statistics (NBS) said the manufacturing sector contribution to GDP declined to just 10.13 per cent in Q1 2023, down from 10.2 per cent in Q1 2022.
Also, the value of its contribution to the gross domestic product (GDP) in real terms declined to N1.5 trillion in Q2 2023. This represents a 17.24 per cent quarter-on-quarter decline.
Also, in the third quarter of 2023, the real contribution of the manufacturing sector to the GDP dropped to 8.42.per cent, representing 0.2 per cent decline when compared to the 8.62 per cent contribution in the second quarter of 2023.
Head Equity, Planet Capital, Dr Paul Uzum, said companies under the sector have incurred huge losses on loans borrowed from the banks, noting that it may take up to two years before the losses are recovered.
He pointed out that the huge losses would ultimately hamper their ability to pay dividends in the current financial year.
“Nestle for example will likely not be paying dividends this year, which has never happened for several years the firm has operated in Nigeria and the few consumer goods firms that may pay will pay a depressed dividend.
“Again, in the consumer goods space, aside from Flour Mills, NASCON and BUA Foods which managed to sustain/maintain previous performance, the others (Nestle, Guinness, Nigerian Breweries, International Breweries, Honeywell, Dangsugar, Unilever, Cadbury, PZ Cussons, and Champion Breweries) has been struggling with significant fall in profit or outright losses. That of the brewery companies is made worse by the introduction of excise/sales tax on companies in that sector,” he said.
However, he expressed hope of a return to profitability for the sector as key reforms are implemented.
President of NewDimension Shareholders Association of Nigeria, Patrick Ajudua, said it is unlikely that most companies in the sector will declare dividends as they are currently struggling to survive.
