Stories by Tunde Oso
Listing the far-reaching consequences of the Russian invasion of Ukraine, the Manufacturers Association of Nigeria (MAN), has said prolonging the war will continue to have negative spiral effects on every sector of the country’s economy, if not halted as soon as possible.
According to MAN, in its quarterly research and advocacy publication tagged Manufacturers CEO’s Confidence Index (MCCI) sent to Vanguard, the implication of allowing the invasion to continue for the manufacturing sector will include an enormous decrease in capacity utilization (as factories begin to experience stock-out situations), inflation, dwindling sales, lower productivity, unemployment and heightened insecurity.
“Certainly, all of these would also have severe implications for the economic and social well being of over 200 million Nigerians,” the report said.
“Although the first quarter 2022 MCCI index score of 53.9 points fell below that of the last quarter 2021, the overall result shows that even though the economy recorded positive improvement despite unstable macroeconomic fundamentals, the manufacturing sector is still largely under severe pressure, its health very well in the fringes and below the desired performance threshold.
“In addition, feed-backs 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 our out of the challenges limiting the performance of the manufacturing sector in the period under review.
MAN explained, “As customary, MAN will include findings in the advocacy submissions to the Government-backed with detailed recommendations on measures to address identified challenges inhibiting scale and competitive production in the sector.
According to the MCCI, “Contributory factors to the decline in the Index score for the First Quarter, 2022 include eroding disposable income of consumers, high-interest rate, excessive drive for revenue by Government, obvious neglect of the economy for politics, the persistent acute shortage of forex; insecurity, the immediate impact of the Russian Invasion of Ukraine as seen in the hike in the price of Diesel, wheat and other imported manufacturing inputs.”
“Although, the overall, the score suggests fairly stable confidence in the economy driven primarily by improvement in current business conditions. Although the performance was affected by declining employment and production conditions arising from familiar supply-side constraints.
“The general decline in the index point and the dimmed outlook for the second quarter evidenced by expectations of lower production, employment and unfriendly business conditions, is a cause for concern.
The MAN report continued: Analysis based on Industrials Zones shows that out of the 13 Industrial Zones in Nigeria, Bauchi/Benue/Plateau, Abuja and Rivers struggled in the First Quarter of 2022. The performance of the aforementioned zones was clearly depicted by the Index scores of 48.3, 44.8 and 46.0 points respectively, in the period under review which fell below the 50 neutral points threshold Index score.
“In broad terms, the lacklustre performance recorded in Bauchi/Benue/Plateau, Abuja and Rivers industrial zones is attributed to the unbridled disruption of manufacturing activities by high-level insecurity, rising operating cost and the general manufacturing unfriendly environment. In specific terms, peculiar contributory factors for Rivers State include the prevailing low interest in the productive sector evidenced by the shrinking industrial landscape, low support for the manufacturing sector and the excessive concentration on trade and services.
“Undoubtedly, the precarious situation that the manufacturing sector is currently in and the looming dangers ahead calls for a national response and sustainability strategy to guarantee the survival of the sector and avoid further de-industrialization,” the MCCI concluded.
Vanguard News Nigeria