Nigeria: Bleeding manufacturing sector, demand for government intervention


Stakeholders are calling for government intervention in policies that will boost the manufacturing sector, writes OLUSHOLA BELLO.

by Olushol Bello

The importance of a vibrant manufacturing sector in emerging economies cannot be overstated.

A functioning manufacturing base attracts increased research, productivity and exports. Moreover, due to its extended value chain, the sector is able to stimulate employment in different economic classes. Several factors can support the continued expansion of a country’s manufacturing sector. These factors trigger the demand and supply dynamics that are essential for a thriving manufacturing base. They include consumption patterns, monetary circulation, exchange liquidity, infrastructure (electricity, inclusive) and supply chain, among others.

In manufacturing, growth slowed to 2.3% year-on-year in the fourth quarter (Q4), from 4.3% year-on-year in the third quarter (Q3). For the whole of 2021, the sector grew by 3.5% year-on-year, compared to a contraction of -2.8% year-on-year recorded in 2020.

Additionally, following Russia’s invasion of Ukraine, oil prices jumped above $100 a barrel to their highest level since 2008. Unlike premium automotive gasoline (PMS ), diesel has been deregulated. Thus, the surge in world oil prices has led to an increase in the price of diesel.

According to the Manufacturers Association of Nigeria (MAN), the situation has led to a spike in operating costs as most businesses rely on diesel generators in the absence of a reliable power grid.

The proposed take-off of the Dangote refinery in the fourth quarter of 2022 is expected to help improve the supply of petroleum products in Nigeria. Russia and Ukraine are also major exporters of agricultural products, especially cereals. The Russian-Ukrainian crisis has halted shipments from the Black Sea, negatively impacting global trade activity.

The CEO of the Center for Promoting Private Enterprise (CPPE), Dr. Muda Yusuf, noted that “the main headwinds to economic growth and business performance in recent months include the deteriorating security situation in the country, the escalation in the cost of energy, the depreciation of the exchange rate, the liquidity crisis in the foreign exchange market and the rise in inflationary pressures.

According to Yusuf, the consequences have been the escalation of production and operating costs in all sectors. The cost of transport, especially the cost of transport, has also increased because most of the transport trucks are powered by diesel.

“Many businesses have been unable to pass on the rising cost of energy to their consumers. Many investors have scaled back operations, while several others have suspended operations.”

He also noted that the state of insecurity in the country has reached a frightening level deserving of a declaration of a state of emergency, saying that the omens are very bad.

“This trajectory portends serious negative consequences for economic growth prospects and investment performance. We cannot retain, increase or attract investment in an environment that is not secure. This is true of domestic and foreign investment. “, did he declare.

He added that leading macroeconomic indicators suggest that the Nigerian economy is floundering and further weakened by these headwinds, noting that a faltering economy cannot afford these multiple shocks. The government must therefore take urgent measures to pull the economy back from the brink.

A Coronation Merchant Bank report noted that the lack of constant power supply has contributed to the slowdown in Nigeria’s much-needed industrial take-off as self-production puts pressure on operating expenses.

He also noted that “the Central Bank of Nigeria (CBN) has disbursed N1.28 trillion to power sector players since 2017, under the Nigeria Bulk Electricity Trading Payment Assurance Facility (NBETPAF). , N232.9 billion has been released for distribution companies (DISCO) under the Nigeria Electricity Market Stabilization Facility-Phase 2 (NEMSF-2).

“These interventions are designed to improve access to capital and support the development of enabling infrastructure within the country’s electricity supply value chain.”

He further explained that the African Continental Free Trade Area (AfCFTA) agreement is expected to contribute significantly to the development of regional value chains, saying that “to maximize the benefits of the agreement, the Nigerian manufacturing sector needs to be strengthened through the provision of infrastructure, improved ports, transport and electricity.

“In addition, local manufacturers need to make significant improvements in terms of product standards and service delivery. This must be achieved if local manufacturers are to compete in an expanding intra-continental market.

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