Nigeria @ 65: Manufacturers highlight major pain points

Nigeria @ 65: Manufacturers highlight major pain points

At the backdrop of Nigeria’s 65th independence anniversary celebrations, manufacturers in the country have lamented their dwindling fortunes occasioned by high interest rates, energy costs, regulatory uncertainties and infrastructure deficits, among other binding constraints.

Available statistics indicate a declining trend in the manufacturing sector’s contribution to the nation’s Gross Domestic Product (GDP). For instance, data from the National Bureau of Statistics (NBS) shows that the sector’s contribution to the economy in 2020 stood at 8.99 percent; 8.99 percent in 2021; 8.91 percent in 2022; 8.64 percent in 2023; and 8.41 percent in 2024.

The data also shows that average annual growth rate of the manufacturing sector between 2019 and 2024 is negative at -0.76 percent, which means that Nigeria’s manufacturing sector has been shrinking in real terms over the last five years.  

The manufacturers have attributed the dwindling fortunes to many of the challenges they have had to battle over the years in order to stay afloat. These, they noted, include energy cost escalations, unstable power supply, import dependency for critical inputs, volatility in the Naira, and rising interest rates, multiple taxation, logistics and insecurity, among others.

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They also noted that high inflation rates have eroded purchasing power leading consumer demand lags, and rising inventory levels which reveal mismatches between supply and what the market can absorb.

Speaking to Vanguard, Director General of the Manufacturers  Association of Nigeria (MAN), Segun Ajayi-Kadir, said: “Manufacturers have endured high borrowing costs driven by an aggressive tightening policy stance of the Central Bank of Nigeria (CBN). The situation has place the manufacturing sector at a competitive disadvantage against other countries of the world.

“Also, unstable power supply, high infrastructure gaps, erratic government policies have continued to undermine efficient production and competitiveness.”

Ajayi-Kadir expressed optimism that the recent 50 basis points reduction in MPR by the apex bank will pave the way for deeper cuts in lending rates to boost the struggling manufacturing sector in the country.

“With recent reforms moderating inflation, stabilizing the exchange rate, and improving investor confidence, the timing is right for CBN to gradually relax rates.“We are definitely looking forward to further reduction. If you give a manufacturer anything more than 5% to pay as interest, competitiveness is compromised, as our rivals are borrowing at much lower rates. You are not going to get anything out of it because those with whom you compete are not borrowing at that rate,” he stated.

Ajayi-Kadir also reiterated the need for a special financing window for manufacturers to enable them access loans at rates below the MPR.  

“Such a concession is pivotal for driving industrial growth. CBN have to make an intentional decision to create conditions that make commercial banks more willing to lend to manufacturers and thus contribute significantly to economic growth,” he stated.

On his part, Sunday Okpe, Executive Secretary of the Apapa Branch of MAN, said: “The most challenging issue right now is Customs related, ranging from system failure, with “B’Odogwu” unable to step into Nigeria Integrated Customs Information System (NICIS) shoes, resulting in huge demurrage for manufacturers. This is in addition to unfriendly policies from all government agencies, multiple taxation and lots more.”

NICIS is a computerized system used by the Nigeria Customs Service for harmonizing customs procedures, meant to facilitate trade, Customs clearance, and management through a single window system.  

In the same vein, Chairman, Export Group of MAN (MANEG), Odiri Erewa-Meggison, said, “Manufacturing exporters have faced declining competitiveness in the global market due to high exchange rates, energy costs, multiple levies, port congestion, and infrastructure shortages. We urge the Federal Government to revisit policies designed to assist manufacturers and to reform the export expansion framework.”

Also commenting, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, highlighted the continued pressure of high production costs, logistics inefficiencies, FX volatility, and competition from cheaper imports that bedeviled the manufacturing sector.

On the way forward, he called on the government to: “Reduce energy and logistics costs to improve competitiveness of manufacturers and agro-processors; accelerate infrastructure investment to unlock value chains in agriculture and industry; expand affordable credit access for MSMEs and farmers to boost production; promote local content and import substitution to strengthen domestic capacity and reduce vulnerability to external shocks; and enhance policy consistency and investment climate to sustain private sector confidence and attract long-term capital.”

Nigeria @ 65: Manufacturers highlight major pain points - Vanguard News