Barring policy changes, the manufacturing sector’s upward swing in 2017 will most likely continue this year due to anticipated availability of more dollars and alternative energy system adopted by manufacturers.
“This year will be a better year. Oil price is nearly $70 per barrel and may go higher, which means more dollars for inputs. There may also be policy pronouncements this year on manufacturing by the government due to the upcoming elections,” said a manufacturer working in the food processing sub-sector, who does not want his name in print.
The foreign exchange market normalised in 2017 on the back of Central Bank of Nigeria (CBN)’s creation of Investors and Exporters (I & E) windows which made greenbacks available for the importation of raw materials, machinery and spare parts. The apex bank also created the SME window, allowing small businesses to access $20,000 per quarter.
This step helped to make dollars available for major economic players, returning Nigeria to growth after five consecutive quarters of recession.
“Our members have been able to source their raw materials and machinery, and foreign exchange has been readily available to them,” Frank Jacobs, president of the Manufacturers Association of Nigeria (MAN) said.
According to Bloomberg data, Brent for March settlement climbed as much as 44 cents, or 0.6 percent, to $69.26 a barrel on the London-based ICE Futures Europe exchange after advancing 1.5 percent two days ago to the highest since December 2014 as U.S Inventories fell by 11.2 million barrels last week. This shows that the issue of dollar scarcity may well be a thing of the past.
Last year, the Manufacturing Purchasing Managers Index (PMI) rose from 48.2 index points in January 2017 to 59.3 in December.
Fifteen of the 16 subsectors reported growth in the review month in the following order: petroleum & coal products; textile, apparel, leather and footwear; cement; transportation equipment; paper products; food, beverage and tobacco products, among others.
Another major factor that will determine the trajectory of the manufacturing sector in 2018 is alternative energy solutions adopted by MAN. Manufacturers have effectively formed a power development company which is already providing cheap energy to players in industrial clusters such as Henry Carr, Festac, and Ikorodu, among others.
MAN has signed an agreement with Tower Energy Solution & Systems Limited for the supply of six to 10 megawatts (MW) of electricity to Henry Carr Industrial Cluster in Ikeja, Lagos.
Negris Group is supplying up to 80 MW of electricity to Odogunyan in Ikorodu industrial cluster.
MAN is also talking with solar power supply firms in the northern Nigeria, where there is limited gas supply to enable clusters in Kaduna, Kano and other parts of the north to have incremental power at cheaper rates. Similarly, a negotiation is on the pipeline with Sahara Energy, Geogrid LighTec Limited and other companies for the supply of power to industrial clusters, according to Ibrahim Usman, chairman of MAN Power Development Company Limited
“The particular case works in Lagos because there is gas. We have Tower that is already producing 35MW and it is ready to deploy more on incremental basis. If we are going to the north where there is no gas, we will be talking of solar, biomass, wind or hydro. It is a case by case basis because what is happening in Lagos may not necessarily be what we need in Uyo, Aba, Kano or Kaduna,” said Ibrahim Usman, chairman of MAN Power Development Company Limited.
ODINAKA ANUDU
