The confidence of manufacturers in the Nigerian economy has dropped as pressures from the Ukraine-Russia crisis, high production cost, low product order intensify thereby altering productivity and profitability plans, the Manufacturers Association of Nigeria (MAN) has revealed.
The association released on Thursday its MAN CEOs Confidence Index (MCCI) for the first quarter of 2022 which measures changes in the pulse of operators and trends.
The index declined to 53.9 points from 55.4 points in the fourth quarter of 2022.
“Contributory factors to the decline in the index score for the first quarter of 2022 include eroding disposable income of consumers, the immediate impact of the Russian invasion of Ukraine as seen in the hike in price of diesel, wheat and other imported manufacturing inputs, the persistent acute shortage of forex, insecurity, high interest rate, excessive drive for revenue by government,” MAN said.
It said although the MCCI decline was marginal and the index was above the 50 points benchmark, the manufacturing sector “is still largely under severe pressure, its health very well in the fringes and below the desired performance threshold.”
“Feedbacks from manufacturers identified limited supply of electricity, high cost of local and imported raw materials, persisting acute shortage of forex for importation of machine, raw materials not available locally and persisting insecurity in the country as the first out of the challenges limiting the performance of the manufacturing sector in the period under review,” the association added.
Since Russia’s invasion of Ukraine in February, manufacturers in Africa’s largest economy have suffered production hiccups as the supply of raw materials like wheat became limited and the price of diesel, a major source of electricity, surged by over 92 percent, causing the cost of production to jump.
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Nigeria is unable to supply sufficient electricity, leaving manufacturers at the mercy of alternative energy sources such as the use of petrol and diesel generators.
MAN said that the situation intensified lingering challenges in the unfriendly business environment as well as the disruptions caused by the outbreak of the COVID-19 pandemic.
The association said the outlook for the second quarter had been dimmed as the Russia-Ukraine crisis had shown no sign of abating.
“The implication of allowing the invasion to continue for the manufacturing sector will include enormous decrease in capacity utilisation (as factories begin to experience stock-out situations), inflation, dwindling sales, lower productivity, unemployment and heightened insecurity,” MAN said.
Michael Olawale-Cole, president, Lagos Chamber of Commerce and Industry, said at a recent briefing that in the second quarter, the manufacturing sector would likely suffer some shocks from the rising cost of diesel, logistics, foreign exchange illiquidity, domestic inflationary pressure, weakening purchasing power, poor public infrastructure, and port-related challenges.
MAN recommended that a National Response and Sustainability Strategic Plan be implemented to guarantee the survival of the sector and avoid further de-industrialisation.
