… says the meager growth highlighted by NBS is being choked by interest rate hikes, high exchange rates, and escalated energy costs.
The Manufacturers Association of Nigeria (MAN) has made recommendations that will help to address the challenges and unlock the potential of the manufacturing sector, just as it urges the government to take decisive action.
MAN said this while reacting to the latest report of the National Bureau of Statistics which declared that Nigeria’s economy recorded a significant improvement in the third quarter of 2024, with a growth rate of 3.46% compared to 2.54% in the same period of 2023 and 3.19% in the previous quarter. This growth rate was attributed primarily to the performance of the Services sector.
It stated that a vibrant Manufacturing Sector is essential for economic growth and prosperity. However, the sector faces numerous challenges, including multiple taxation, limited access to credit, an unstable foreign exchange market, infrastructure deficits, and energy insecurity.
It urged the government to do the following if Nigeria must record any significant growth in the economy
• Create special windows for providing single-digit interest rates to productive sectors and relax stringent conditions for SMEs to access funding.
• Recapitalize the Bank of Industry (BOI) to meet the growing credit demand of industries.
• Enhance credit information systems and broaden the scope of assets for collateral.
• Implement the recommendations of the Presidential Fiscal Policy and Tax Reforms Committee.
• Reduce the excessive increase in Environmental Impact Assessment (EIA) and Effluent Discharge (EMP) fees imposed by NESREA.
• Retain the current excise duty of N10 per liter on non-alcoholic beverages to avoid shutting down the industry.
• Direct the Central Bank of Nigeria to clear $2.4 billion outstanding dollar obligations on FX forward contracts to support manufacturers.
• Review import duty rates for production inputs, particularly those unavailable locally, and consider pegging the rate at N800.
• Implement measures to streamline customs procedures, including increased use of technology and decentralization of seaports.
• Prioritize budgetary allocation for infrastructure development, especially along strategic economic hubs.
• Encourage public-private partnerships for infrastructure development, including roads, railways, and port access roads.
• Direct the Nigerian Electricity Regulatory Commission (NERC) to review the excessive increase in electricity tariffs for Band A customers.
• Prioritize domestic gas supply to manufacturers and enforce Naira-denominated pricing.
• Ensure transparency in electricity tariff charges, invest in infrastructure and efficiency improvements by Distribution Companies, and introduce outage compensation mechanisms.
According to MAN, while the higher growth recorded in the reviewed period is laudable, it is still relatively modest. Given the prevalence of high unemployment and poverty, a double-digit GDP growth rate is necessary to achieve inclusive growth that benefits all segments of society.
It lamented that the decline in the real growth of the Manufacturing Sector is a clear indication of the detrimental impact of the prevailing macroeconomic policies. “This is further evidenced by the significant drop in nominal growth from 36.59 percent to 32.97 percent year-on-year, driven by high inflationary pressure and the exit of major multinational manufacturing companies. It is evident that inflation has been a significant factor in undermining the growth of the manufacturing sector, as the sector has been particularly vulnerable to the unstable macroeconomic environment, exacerbated by recent economic reforms.”
Agriculture, it stated, plays a crucial role in fueling the growth of the manufacturing sector by ensuring a steady supply of affordable local raw materials. However, both the Agricultural and Manufacturing sectors failed to rank among the top five growing sectors during this period, primarily due to security challenges in farming areas and their subsequent negative impact on agro-allied industries.
It warned that the limited growth in these sectors will lead to:
• The deteriorating state of the agricultural sector has led to increased costs for local raw materials.
The limited growth in these sectors will lead to:
• The deteriorating state of the agricultural sector has led to increased costs for local raw materials.
