Addressing Challenges Facing Businesses In 2024

As we enter 2024, businesses in Nigeria face significant headwinds that threaten to stifle growth and progress.

The director-general of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, projected that 2024 will be challenging for manufacturers as the outlook for the sector may not be positive, especially in the first half of the year.

Their outlook stems from an analysis of troubling macroeconomic trends and the impact of global dynamics on our local economy.

In particular, MAN highlights declining manufacturing growth rates, from 2.4% in 2021 to just 0.48% in Q3 2023.

This downward trajectory aligns with struggles seen in manufacturing powerhouses like China and the US, indicating Nigeria is not immune to the global forces hampering industry.

It is instructive to note that contributing factors locally include foreign exchange instability, high interest rates, and average capacity utilization stuck around 50%.

We also recall that six multinational companies have left the country in the last six months – consumer goods giant Procter & Gamble, Unilever, GlaxoSmithKline Consumer Nigeria Plc, Sanofi, a French pharmaceutical multinational, Bolt Food and Jubilee Syringe Manufacturing.

In our view, the Central Bank’s policies in recent years have failed to provide the stimulus needed to empower entrepreneurs and grow the economy.

The Naira’s true value remains obscured by artificial exchange rates, while high benchmark interest rates make borrowing prohibitive for many firms.

Exporters face uncertainty with limited access to foreign exchange, undermining their competitiveness.

Sadly, policies intended to manage inflation have constrained productivity for both small ventures and large corporations.

In this climate, businesses understandably lack confidence in the outlook, reflected in MAN’s manufacturers CEO confidence index remaining below ideal levels.

The association expects this challenging environment to persist for the first two quarters, with only subtle recovery prospects thereafter. Their projections show sector growth struggling to reach 3.2% this year, while the manufacturing contribution to GDP fails to exceed 10%.

To change this narrative, the fiscal and monetary authorities need a reset focused squarely on enabling business productivity.

We strongly suggest that the CBN must allow market dynamics to determine the Naira’s exchange value. Policies around forex allocation should shift in favour of manufacturers and exporters, providing them reliable access rather than arbitrarily rationing supply.

Benchmark rates must be reduced to promote reasonable access to credit, enabling businesses to borrow at interest rates not detrimental to their capital investments.

Improving electricity supply through reforms in the power sector also remains critical. Resolving these constraints is essential for Nigerian enterprises to thrive and maximize their much-needed contribution to broad-based economic growth.

The Tinubu administration meanwhile needs to prioritise support for local industry in its 2024 budget provisions. Disbursing capital allocations to ongoing and new infrastructure projects should favor locally manufactured inputs.

We strongly suggest that patronising Nigerian-made goods for public procurement generally needs to become standard practice.

The private sector on its part must keep engaging policymakers, providing vital feedback to inform a more business-friendly economic environment.

If implemented vigorously, the newly enacted Electricity Act can be pivotal by driving investment in renewable energy and improving power access.

Ongoing reforms to unify exchange rates and boost domestic refining capacity also hold promise if executed transparently and effectively. With global oil prices recovering, shoring up foreign reserves through enhanced exports will provide vital breathing room.

The nation can only overcome its forex woes if it makes Nigeria a manufacturing hub on the scale of China.

If executed prudently over the next decade, Nigeria could emulate China’s industrialisation.

Manufacturing could generate hundreds of billions in export earnings, alleviate forex shortages and create lasting jobs. Moving up the value chain, Nigeria can also transition from basic processing to sophisticated manufacturing.

Furthermore, the government’s commitment to domestic production and judicious implementation of recommended reforms will determine whether we end the year on an optimistic note.

The calamity of COVID-19 devastated Nigerian enterprises, from which many are still recovering.

We cannot afford to further hinder their growth and productivity. The present challenges, as starkly outlined by MAN, require urgent mitigation to restore business confidence.

With carefully targeted stimulus and reforms, we can energise this indispensable engine of economic growth.

The new year offers an opportunity to correct course and set the economy on an upward trajectory.

All stakeholders must play their role proactively. Businesses should continue highlighting impediments and proposing policy solutions, refusing to be discouraged by tough conditions.

Workers should impress upon politicians the need for reforms that spur enterprise. Leaders must summon the courage to abandon failed approaches and implement vital changes.

But action must begin now before deteriorating economic conditions become irreversible. We cannot afford to waste another year of stalled growth and unrealized potential. The time for resolute measures to empower Nigerian businesses is upon us.