MAN Advocates National Response, Sustainability Strategic Plan to Avert Economic Crisis
The Director General of the Manufacturers Association of Nigeria (MAN) Segun Ajayi-Kadir, mni has advocated for the crafting of a national response and sustainability strategic plan to avert the looming economic crisis and shortages that would arise from the full impact of the Russian- Ukrainian war, amongst others.
Ajayi-Kadir made this assertion at an annual workshop|awards of Individuals and Firms organized by the Commerce and Industry Correspondents Association of Nigeria (CICAN) on Thursday in Lagos.
The DG MAN recounted that there were four disturbing global occurrences in the last two decades that exacerbated global economic crisis which include the Asian Financial crisis of 1997; Global Financial Crisis that began in 2007;
COVID-19 pandemic of 2020 and Russian-Ukrainian war of 2022.
He stated further that the COVID-19 was the most devastating, when compared with the Asian and Global Financial crises, while the full impact of Russian-Ukrainian face-off is not fully determined as it is ongoing.
The impact of COVID-19 Pandemic, he said, is recorded in terms of the huge death toll of man power; slowed global supply and demand as well as economic lockdown.
According to him, the impact of the pandemic was debilitating as output growth plunged to -3.3% in 2020 from 2.6% of 2019.
He pointed out that there was ray of hope that the recovery achieved in 2021 will be advanced in 2022, even though the effect of the pandemic lingered, but this hope was eventually dashed.
“The Russian invasion of Ukraine in early 2022 dashed all economic projections for 2022 with negative impacts on supply chains, energy cost (cost diesel and gas), cost of agro-allied raw-materials (wheat, fertilizer and fertilizer inputs, etc), freight logistics, trade and global inflation.
“In particular, the increase in cost of energy pushed up global inflation which affected the cost of importation across the world, including Nigeria.
“With limited forex inflow from crude oil sales, forex demand pushed over the bounds of supply and contributed to the depreciation in Naira value.
”Manufacturing in Nigeria is heavily beset by these price developments and manufacturers are contending with these challenges while struggling to sustain production,” he said.
He lamented that from these critical developments, the industry was bisected by oscillatory growth; Low contribution to GDP
Sub-optimal capacity utilization; High inventory of unsold manufactured goods and declining investment.
“Truly there are Forex and Energy crises in the country,” he added.
Speaking on impact on the sector, he cited the manufacturing real output growth as follows: 3.5% -Q4 2021; 5.8% – Q1 2022; 3.0% – Q2 2022.
He noted that the Manufacturing contribution to GDP stood at 8.7% – Q2 2022, while the Capacity Utilization stood at 57.9% – 1st Half 2022; Inventory of unsold manufactured goods stood at N187.08 billion – 1st Half 2022; while the Manufacturing Investment stood at N23.5 billion – 1st Half 2022.
The Manufacturers, he said, 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.
Additionally, the DG said that the primary driving force for sustaining production is the patriotism and resilience that the Nigerian manufacturers possess, coupled with the optimism that these challenges would eventually be addressed.
“Manufacturers also have faith in the capacity of their Association, MAN, to engage Government and other stakeholders to ameliorate the challenges.
“Most manufacturers also embark on strategic measures to minimize the impact of the inclement operating environment on their activities such as: cost cutting; Product selection and prioritization; some manufacturers have suspended the production of certain products to concentrate on more competitive ones.
“ Expanding their investment in the development and production of raw materials locally, even as MAN collaborates with RMRDC to optimize localization; Increased resort to self-energy generation and energy mix to complement the inadequate electricity supply from the national grid as well as dissaving retained earning to support the current crippling condition,” he emphasized.
Ajayi-Kadir posited that Manufacturers have been confronted with an inclement operating environment that was compounded by the COVID-19 pandemic in 2020 down to the current Russian-Ukrainian war, while the forex and energy crises are frontline manifestations.
The crises, he stated, are responsible for the unfavourable movements in manufacturing indicators such as capacity utilization, contribution to real GDP, investment, employment, cost of production, competitiveness, etc.
In this vein, he said, it is important that forex and energy, as well as other manufacturing challenges, are adequately addressed to arrest further degeneration in the performance of the sector.
He mulled the following measures as critical to be considered: “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; suspension of the 15% levy on imported wheat; Address prevailing concerns of the beleaguered manufacturing sector; Non-implementation of the planned increase in excise duty on non-alcoholic and alcoholic beverages, tobacco, wine and spirits.”
The increase is in the excise duty, he stressed, is a violation of the roadmap set by the Government itself for the period 2022-2024.
He bemoaned that already, this increase is negatively impacting the performance of the sector and further increase will bring it to its knees and lead to divestment and closures, while the envisaged revenue boost by government will not be realized.
He called on the government that the manufacturing industries in the Harbour industrial sector in Onitsha that were devastated by the flood recently should be assisted to recover from their colossal losses and preventive measures taken to forestall future occurrences.
The DG MAN also argued that the committees of the National Assembly that extend their oversight functions to manufacturing industries and require their CEOs to produce tons of documents and evidence of compliance that are readily available with the relevant statutory regulatory agencies should be stopped.
“This is an unnecessary burden, diversion and very expensive venture,” he added.
He therefore called on the government for the resuscitation the existing national refineries to produce fuels locally; Review the gas price for domestic consumption to be in sync with export price as well as publish the list of approved harmonized taxes and levies for the manufacturing sector by the Joint Tax Board (JTB) to address the issues of multiples taxes and levies.
