Investment in the manufacturing sector of the country for the second half of 2022 dipped by N15.25 billion or 10 percent from N160.88 billion recorded in 2021 to N145 billion
It further declined by N32.8 billion or 18 percent when compared with N178.39 billion recorded in the first half of the year.
According to the Executive Summary Bi- Annual Economic Review made available to the public by the Manufacturers Association of Nigeria (MAN) stated that manufacturing investment totaled N323.98 billion in 2022 as against N305.02 billion recorded in 2021.
“Investment in the period was affected by the high debt profile of the Government which particularly deters foreign investment, high cost of borrowing, high cost of energy, low consumption during the period and many more.”
Nigeria’s manufacturing capacity utilization in the second half of 2022, year-on-year, declined to 54.9 percent from 59 percent recorded in the corresponding half of 2021; thus, indicated 4.1 percentage points decline over the period. Quarter-on-quarter, it declined by 3 percentage points when compared with 57.9 percent recorded in the first half of the year.
Manufacturing capacity utilization averaged 56.4 percent in 2022 as against 55.9 percent average of 2021. The decline in manufacturing capacity utilization in the period is due to the adverse effect of high cost of energy and the Russian Ukrainian war, the grave effects of the Naira Redesigning policy and other perennial challenges such as acute shortage of Forex for importation of raw materials and machines, high cost of borrowing and many more.
Manufacturing sector factory output value declined to N2.68 trillion in the second half of 2022 from N3.73 trillion recorded in the corresponding half of 2021; thus, indicating N1.05 trillion or 28 percent declined over the period. It also declined N1.31 trillion or 32 percent when compared with N3.99 trillion recorded in the preceding half.
The value of manufacturing production totaled N6.67 trillion in 2022 as against N7.39 trillion recorded in 2021. Manufacturing production was severely affected in the second half of 2022 by the absence of implementation of new capital project by the government as they focused on the election.
Production in the sector was also negatively affected by limited purchases by households due to the Naira redesign policy, the high inflationary pressure in the country, high cost of energy, particularly diesel and gas, acute shortage of forex for importation of raw materials and machinery needs of the sector that are not locally manufactured in the time being and many more.
Unfortunately, the issues of the basic metal group whereby duty of Annealed Cold roll was reduced to 5 percent from the previous 45 percent; the suspension of motorcycles in some areas across States, the increase in the duty of paper from 5 percent to 20 percent and so on are still effective. These challenges, in addition to the perennial issues, contribute enormously to the dip in the production of the sector in the period under review.
As regards local raw materials sourcing in the sector, this increased to 53.5 percent in the second half of 2022 from 50 percent recorded in the corresponding half of 2022; thus, indicating 3.5 percentage points increase over the period. It also increased by 1.5 percentage points when compared with 52 percent recorded in the preceding half.
“Local raw materials utilization in the sector averaged 52.8 percent in 2022 as against 51.5 percent recorded in 2021. The increase in the local raw materials utilization in the sector during the period is due to increased difficulty in sourcing forex which compelled manufacturers to look more inward for raw materials notwithstanding the associated huge cost.”
MAN stated that it is therefore important for the Government to re-evaluate its role in local development and production of raw materials in terms of funding.
“For instance, the development and production of Active Pharmaceutical Ingredients (APIs) has continuously eluded due to limited funding of the Raw Materials Research and Development Council (RMRDC) by the Government. The absence of local production of APIs has been having dire consequences on the pharmaceutical production, particularly in the current situation of acute shortage of forex.”
