The Manufacturers Association of Nigeria (MAN) said the total manufacturing production value in the first half of 2023 increased to N4.10 trillion from N3.9 trillion recorded in the corresponding year of 2022, thus, indicating N110.00 billion or 2.8 percent increase over the period. It also, increased by 1.42 trillion or 52.8 percent when compared with N2.68 trillion recorded in the preceding half.
“The 2.8 percent increase in the monetary value (not real output) of manufacturing sector production over the period of one year when inflation is at 24.08 percent at the same period indicates a struggling sector.
MAN in its half-year report for 2023 stated that the manufacturing sector faced myriad challenges in the first half of 2023.
“The residual effect of naira redesign and the removal of fuel subsidy towards the end of the period under review triggers inflationary pressure, cost of transportation, cost of production and other macroeconomics imbalances, thereby worsened the purchasing power of the households”
. “Key sectors like manufacturing and agriculture, which play a vital role in Nigeria’s economy, suffer as higher fuel costs drive up expenses related to machinery, irrigation, and transportation. These led to an increase in the prices of food and other products, impacting both productivity and social stability. The uncertainty stemming from this policy change has undermined investor confidence, hampering both domestic and foreign investments that are crucial for economic growth and job creation. “
Local Raw-Materials Sourcing: Manufacturing sector local raw materials sourcing increased to 55.3 percent in the first half of 2023 from 48.0 percent recorded in the corresponding half of 2022; thus, indicating 7.3 percentage points increase over the period. It also increased by 1.8 percentage points when compared with 53.5 percent recorded in the second half of 2022. The observed increase in the utilization of local raw materials within the sector can be attributed to the growing challenges associated with sourcing foreign exchange. This situation has compelled manufacturers to shift their focus towards obtaining raw materials domestically, despite the substantial cost implications involved.
Unsold Inventory of Finished Products: The inventory of unsold finished products in the manufacturing sector saw a significant increase to N271.96 billion during the first half of 2023, as compared to N187.08 billion recorded in the corresponding period of 2022. This indicates a substantial rise of N84.88 billion or 45.4 percent over this timeframe. However, there was an N11.64 billion or 4.1 percent decline when compared with the inventory value of N283.6 billion recorded in the second half of 2022. This increase in inventory can be attributed to a weakened purchasing power of the consumers, brought about by diminishing real household income resulting from the ongoing escalation of inflationary pressures, compounded by the scarcity of naira in the first quarter of the year and the aftermath of the subsidy removal.
“Manufacturing Investments: Manufacturing sector investment in naira value increased to N192.89 billion in the first half of 2023 from N178.39 billion recorded in the corresponding half of 2022; thus, indicating N14.50 billion or 8.1 percent increase over the period. It further increased by N47.3 billion or 32.50 percent when compared with N145.59 billion recorded in the second half of the year.
“The increase in investment in naira value was driven by the currency devaluation which saw naira depreciated to N901/$ or 65 percent depreciation at the Investor and Export Window from N462/$ before the devaluation policy of the CBN was announced. Hence, the increase recorded does not indicate physical investment by manufacturers but rather nominal which resulted from the devaluation of currency that has made the manufacturers pay more for plants and machinery importations”.
According to MAN survey, employment generation of the manufacturing sector declined to 6428 in the first half of 2023. This is an indication of a 32.8 percent reduction in employment generation capacity when compared with 9559 jobs generated in the first half of 2022. Also, the data showed a shed of 313 jobs when compared with 6741 jobs created in the second half of 2022.
The decline in the number of jobs created in the sector during the period further highlighted the unfriendly business environment resulting from the hasty policies and the residual effect of the currency redesign policy that led to the naira crunch. In the same vein, a total of 3567 jobs were lost in the first half of 2023, indicating 1855 more jobs lost when compared with the 1709 jobs lost in the corresponding half of 2022 and 850 more jobs lost when compared with 2708 jobs lost in the last half of 2022.