The Last Three Months Were Full Of Uncertainties For Manufacturing Firms As The Economic Recession And Other Challenges Marred The Growth And Development Of The Sector. Taiwo Hassan Reports
Economic indices in the third quarter of the year showed that all was not well with the country’s real sector, especially manufacturing, which recorded low capacity utilisation, closure of companies/factories and massive unemployment.
At least, 13 activities in the manufacturing sector; including oil refining, cement production, food, beverages, tobacco, textile, apparel, footwear, wood and wood products, among others, faced utmost tests in the quarter under review, as economic challenges marred growth and development, especially relating to their output.
Specifically, nominal Gross Domestic Product (GDP) growth in the manufacturing sector during the quarter turned negative partly due to higher operating costs. For many private sector operators, manufacturers and Small and Medium scale Enterprises (SMEs) owners, the disclosure by the National Bureau of Statistics (NBS) that the country was in recession rattled them.
The drop in price of crude oil at the international market impaired global economic conditions of many countries especially members of Organisation of Petroleum Exporting Countries (OPEC), as they struggled to cope with dwindling oil revenues.
In Nigeria’s situation, it has been a very tough time for the country’s industrial sector, as firms have been groaning under harsh economic and business environment. The economic conditions that characterised slowdown in the quarter include uncertainty around economic policies, adverse external environment, security challenges in some parts of the country, which affecting production and distribution of agricultural produce, poor electricity supply, fuel shortage and foreign exchange crisis.
Ease of doing business
At the interactive forum organized by Federal Ministry of Industry, Trade and Investment with captains of industries and Small and Medium scale Enterprises (SMEs) operators in Lagos, the Federal Government and industry stakeholders met to chart a path towards ease of doing business in the country.
Speaking at the event, the Minister, FMITI, Okechukwu Enelamah, said that the forum was organised to brainstorm on ways of solving the numerous challenges in the industrial sector. Enelamah admitted that the government was aware of the problems in the industry and was ready to assist manufacturers and private sector operators operating in the country to introduce seamless ease of doing business in the country.
According to him, enumerating the challenges facing the sector would not achieve the desired results, rather, collaborating as a winning team and finding a lasting solution to the challenges is the objective of his ministry and the government.
He said: “We would be deceiving ourselves if we pretend there are no problems. In fact, each of these potential we have articulated has one obstacle or another confronting it. For example, we cannot talk of competitiveness out there in the world market if we allow substandard products global.
“There are no sentiments in business competition, and only the products that meet international standards specification, stand a chance of being patronised. And this is why we commend Standards Organisation of Nigeria (SON), which has not only relented in sanitising our country of substandard products.”
Also in the quarter under review, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) disclosed that it received fresh complaints from manufacturing firms of their intention to lay-off workers, shutdown production and relocate off-shore.
NACCIMA, which is the voice of the Organised Private Sector (OPS), said that these complaints from the affected companies bordered on continued foreign exchange scarcity, low production output, high energy cost and decline in turnover (profits).
In a report made available to New Telegraph, a top member of NACCIMA and President, Abuja Chamber of Commerce and Industry (ACCI), Tony Ejinkeonye, said majority of manufacturing companies and key blue chip companies were groaning, as economic recession took a dip cut on their businesses.
He said that the affected companies were groaning at the ways the Federal Government was handling the current economic situation in the country, saying that since they were not putting in much effort to get the country out of the economic recession, the investors might be forced to carry out restructuring exercise. His words: “Several members of the chamber have complained bitterly over difficulties in accessing foreign exchange to procure raw materials.
The situation is really quite pathetic for businesses especially those in the manufacturing sector. “Our members are groaning over low output occasioned by non-availability of forex to get raw materials for production, which in turn has affected their turnover drastically.
Just today, we received notice from different companies threatening to lay-off their workers or shut down production in the meantime if forex scarcity continues. “Others are making plans to relocate to neighbouring African countries.
Meanwhile, one only hopes that the government can come up with a strategy to address the current scarcity of foreign exchange so as to avert impending economic misfortune.” The ACCI president stated that about 70 per cent of SMEs in Abuja are at risk at the moment as they battle to remain in business.
Another talking point in the quarter under review was the Central Bank of Nigeria (CBN) plans to set aside N500 billion as loans to non-oil exporters in order to encourage them export their manufactured goods.
CBN said it would invest in a N500 billion debenture to be issued by Nigerian Export- Import Bank (NEXIM) as part of a bid to diversify the country’s revenue away from crude. According to the apex bank, it expects to nearly double its nonoil revenues this year to counter the effect of lost crude income.
The facility was essentially designed to redress the declining export credit and reposition the sector to increase its contribution to revenue generation and economic development. It will improve export financing, increase access of exporters to low interest credit and offer additional opportunities for them to upscale and expand their businesses, the apex bank added. It said loans for up to three years would be granted at a maximum all-in interest rate of 7.5 per cent a year.
Loans of more than three years will be granted at a maximum rate of nine per cent a year. Much of the hard currency Nigeria needs to finance imports evaporated, as the central bank burned dollars in an attempt to peg the naira at 197 to the dollar, which it gave up under new FX guidelines.
MAN lauds CBN
The pharmaceutical manufacturing companies under the auspices of Pharmaceutical Manufacturers Group-Manufacturers Association of Nigeria (PMGMAN), during the reveiw period, lauded the new directive by CBN to give 60 per cent of foreign exchange allocation to the real sector of the economy, saying the decision would assist local manufacturers to build capacity in the industry.
At the group’s forum in Lagos, PMG-MAN Chairman, Okey Akpa, said the apex bank’s decision to ensure that at least 60 per cent of forex sales are made to local manufacturers was timely intervention dedicated to boost local manufacturing.
He explained that since local pharmaceutical manufacturing was directly linked to national healthcare, a strong argument is also presented for the immediate prioritisation of the pharma sector, in order to maintain National Health and ensure the sanctity of human lives.
Akpa called on the government to urgently address the anomaly created by the ECOWAS Common External Tariff (CET) in the sector,whereby imported medicines attract zero duty, while raw and packaging materials for local manufacturing attract up to 20 per cent duty.
He commended the efforts being made so far in addressing the CET imbalance, but warned that the high attrition rate in the sector and the disastrous consequences of further delays in the implementation programme indicated the need for the government’s imminent intervention.
“Our view is that this policy will have positive impact on trade in the country. Specifically, the policy has the potential not only to increase Nigerians’ access to medicines, but also, support massive employment in the sector, improve the economy and facilitate export of Nigerian medicines to neighbouring countries. “These are cardinal objectives of the present administration,” he said.
Although the country is passing through a difficult period, industry stakeholders believe there is need to get the country’s economy out of recession in the fourth quarter