Nigerian manufacturers are heavily beset by the inclement operating environments, while struggling to sustain production.
They have listed increase in the cost of energy, acute shortage of forex and the depreciation in the value of naira as some of the challenges affecting productions and growth of the industry.
These are not the best of times for manufacturing firms in Nigeria. The prevailing circumstances in the domestic operating environment, especially high cost of diesel, poor access to foreign exchange, insecurity, delay in importing raw materials and exporting finished products among others are taking a toll on their productivity.
Manufacturers noted that increase in cost of energy pushed up global inflation which affected the cost of importation across the world, including Nigeria, saying with limited forex inflow from crude oil sales, forex demand pushed over the bounds of supply and contributed to the depreciation in naira value.
They said manufacturing in Nigeria is heavily beset by these price developments and manufacturers are contending with these challenges while struggling to sustain production.
Speaking on this, the director-general of Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, said manufacturers are concerned about the increase in the cost of energy, acute shortage of forex and the continuous depreciation in the value of naira, including other familiar challenges of the sector.
According to him, the primary driving force for sustaining production is the patriotism and resilience that the Nigerian manufacturers processes. The optimism that these challenges would eventually be addressed.
He noted that, most manufacturers embark on strategic measures to minimise the impact of the inclement operating environment on their activities such as: cost cutting; products selection and prioritisation; expanding their investment in the development and production of raw materials locally; increased resort to self-energy generation and energy mix to complement the inadequate electricity supply from the national grid; and dissaving retained earnings to support the current crippling condition.
CEO of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf said, the sharp depreciation of the naira exchange rate in the parallel market remains a cause for concern.
He stated that, “it is a trend that should not be allowed to continue and all necessary steps need to be taken and urgently too to stem the slide and volatility. These developments should not be ignored. It is as much of an issue to consumers as it is to producers and other stakeholders that create value in the economy. It calls for an urgent review of the current foreign exchange policy.”
Yusuf called for adoption of a flexible exchange rate policy regime, clarifying that this is not a devaluation proposition, rather is it is a pricing mechanism that reflects the demand and supply fundamentals in the foreign exchange market.
“It is a model that is sustainable, predictable and transparent. It is a policy regime that would reduce uncertainty and inspire the confidence of investors. It is a policy framework that would minimise discretion and arbitrage in the foreign exchange allocation mechanism,” he said.
He added that “the Nigerian economy has the capacity to weather the current turmoil if the policy contexts are right. We have the market, the people and natural resources. The opportunities that the present situation offers would only be realized if policy obstructions to resource flows are removed.”
The president of Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), Ide Udeagbala called on both the Federal and State governments to urgently prioritize the need to revitalize the industrial sector for more inclusive economic growth.
He suggested that government at the Federal and States levels should create and maintain enabling environment that is investment friendly as this will entail enunciating and maintaining policies that remove bottlenecks to business investments.
Udeagbala insisted on government to address the various factors that are capable of increasing cost of doing business in Nigeria, saying these are critical issues which if addressed urgently will help position the economy for foreign direct investment and encourage local investors into establishing industries that will enhance jobs creation and improved GDP.
On way forward, manufacturers under MAN called on allocation of significant proportion of available foreign exchange to the productive sector, particularly manufacturing; carrying out further investment in the electricity value chain and commit to adding 10000MW to the current electricity distributed in the country; embrace and support significant development of energy mix and renewable: the country has huge potentials for Solar and Wind; expanding the scope of Road Infrastructure, Development and Refurbishment Investment Tax Credit Scheme; incentivization of investment in local development of raw materials; and suspension of the 15 per cent levy on imported wheat.
