New Year, same challenges for local manufacturers  

Manufacturing

 

Every year, for many forward-looking businesses, declarations and resolutions are made on how to make the New Year better than the previous years.

In Nigeria, it is often times, business as usual, with government policies and environmental factors determining the pace of growth of the economy as driven by the private sector.

As 2020 begins, set goals will be achieved only if challenges are addressed. FEMI ADEKOYA writes.

For local manufacturers, inadequate and epileptic power supply, high taxes, poor infrastructure, and supply variability of rain-dependent agricultural inputs are familiar challenges they have had to deal with, year after year.

To many of them, being innovative and exploring cost-cutting measures is not enough, without considering shocks from the business environment and regulators.

While it is not all gloomy, there are some strengths, as the National Bureau of Statistics (NBS) observes that in Nigeria, labour is cheap, domestic demand is buoyant, and some inputs are available and cheaper domestically.

These advantages notwithstanding are presently being eroded by high inflation, competition from foreign products and weak consumer purchasing power.

 

 

Latest NBS data showed that the manufacturing sector grew marginally by 1.1% in the third quarter, up from -0.13% in the previous three months, bringing average growth between January and September at 0.59%.

Between July and September, growth in the sector was buoyed by rapid expansion in the cement industry, which grew 6.87%. Unpacking the components, growth in the sector was not broad-based as only four of 14 sub-sectors including cement and paper industry saw growth printed higher quarter-on-quarter.

The manufacturing sector has been the biggest beneficiary of CBN’s aggressive credit push to the real sector, receiving N459.69 billion out of N1.17 trillion disbursed by deposit money banks between May and October.

According to the Lagos Chamber of Commerce Industry (LCCI) research, local manufacturers still find the business environment unsupportive given the myriads of challenges such as epileptic power supply, poor road network, high cost of borrowing, over-regulations, multiplicity of levies, weak demand, sluggish economic recovery, port-related challenges -delay in clearance of imported raw materials, heavy congestion, among others.

The chamber noted that these constraints make local manufacturers produce at higher costs, making their products less competitive compared with cheap foreign ones, the reason local producers operate below full capacity as capacity utilization is some 55% as of December 2018.

The Director-General, Manufacturers Association of Nigeria (MAN), Segun Kadir, added that traffic gridlock makes manufacturers more susceptible to miscreants who take advantage of the situation.

Culled from The Guardian Nigeria

Read more: https://guardian.ng/business-services/new-year-same-challenges-for-local-manufacturers/

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