Business Report: Nigeria's Manufacturing Sector Still Wobbling Despite Positive Signs, Says Report

Amid the prevailing excruciating business environment in the country, the manufacturing sector registered improved performance in 2018, in terms of capacity utilisation, production and investments, the annual report of the Manufacturing Association of Nigeria (MAN), which was released last week revealed.

The sector achieved a small growth of 2.1 percent in the year under review, representing 2.22 percent increase from -0.12 per cent achieved in 2017, the report added.

According to the report, the growth was positive across all quarters of 2018. In the first quarter, the sector registered 3.4 per cent just as it achieved 0.7 per cent in the second quarter, while the results in the third and fourth quarters were 1.9 per cent and 2.4 per cent respectively.

Although, the report which was made available to reporters at the weekend showed that the performance presented a better scenario than what was obtained in 2017, not all the groups  within the sector  registered significant growth as  most of the challenges that have been hobbling the  manufacturing  industry sub-sector in the country have remained.

 

The report showed that capacity utilisation increased to 61 per cent in the second half of 2018, representing an increase of 1.76 per cent point from 59.24 per cent in 2017.  Similarly, it rose by 6.5 percentage point growth when compared with the 54.5 per cent achieved in the first half of 2018.

On the whole, according to the report, capacity utilisation in the sector averaged 57.8 per cent in 2018, representing an increase of 0.66 percentage point from 57.14 per cent average achieved in 2017, a performance, which was attributed to “the general improvement in the macro-economy and the sustained stability in the forex market.”

Similarly, the report stated that the estimated cumulative manufacturing investment from 2013 to 2018 reached N4.55 trillion based on the date based on the study conducted by MAN over the period. 

Hence, in 2018, manufacturing investment stood at N247.08 billion, representing an increase of N70.39 billion or 39.8 per cent achieved in the second half of 2017. It however declined by N58.48 billion (19.1 per cent) when compared with N305.56 billion in the first half of 2018, the report noted.

On annual basis, manufacturing investment stood at N552.64 billion in 2018 as against N505.97 billion achieved in 2017.

The report revealed that among the manufacturing subheads, Plant and Machinery ranked first with investment worth N72.98 billion followed by  Land and Building which generated investment worth N56.5 billion just as  Asset Under Construction was N54.32 billion and Motor (vehicle) was N43.23 billion.

 

However, according MAN report,  inventory  of unsold manufactured goods remained high, and stood at N225.89 billion in the second half of 2018, representing an increase of N64.36 billion  (or 39.8 per cent )  and N76.66 billion  (or 51. 14  per cent ) from N161.53 billion  of  2017, and the first half of 2018. On aggregate, it totaled N375.42 billion in 2018 and N321.12 billion in 2017.

The report attributed the high inventory of unsold finished manufactured goods in the period to weak demand fueled by lack of patronage, smuggling, and counterfeiting of Nigerian manufactured products. Weak infrastructure (especially electricity) and rising cost of funds also affected manufacturing activities during the year under review. The president of the association had in his speech at the just concluded 47th Annual General Meeting noted that “the manufacturing sector is beset with poor electricity supply and high cost of energy,” adding that “the cost of self-generated power is as high as N93.1 billion (2018).”

For the economy and the manufacturing sector to experience significant improvement in the years ahead, MAN said it was imperative that the “various challenges limiting manufacturing performance and growth are adequately addressed taking into consideration,” infrastructure, funding and high interest rate, level of local patronage, development of local raw materials and tax issues as well as export incentives and trade malpractices.  

On infrastructure, the association urged the government to resuscitate domestic refining of crude oil in the country; operationalise the Independent Power Producers (IPP) initiative; rehabilitate existing key road network across the country and show more commitment to the development of the rail system.